Individual taxation
Finance Bill 2013
Insight from Niall Glynn, Tax Partner
T: +353 1 417 2206
E: nglynn@deloitte.ie
For individuals Finance Bill 2013 affirmed the various budgetary measures and made no other broad sweeping changes to rates or reliefs which would impact the vast majority of taxpayers.
For those involved in the property sector, while the Real Estate Investment Trust (REITs) regime may be a welcome introduction, legislation taxing the write off of loans advanced for acquiring land as part of a property development trade has been introduced, with the write off of such loans being treated as a trading receipt for the year in question.
In addition, for certain individuals, loss restrictions relating to development activities will now also apply. The restrictions will apply to trading deductions on foot of interest payable on loans and to any loss on the write down of the underlying value of the land which will, in future, only be allowed where the loss has been realised by way of a disposal of that land.
In addition, for those holding foreign rental property that was loss making, the loss will not be available for offset against other foreign source income taxable under Schedule D Case III such as interest or dividends received from abroad, although Revenue practice will be to continue to allow the rental loss on one foreign property to be allowed as a deduction against the rental profits on other foreign properties.
Not to be totally negative, where individuals are in receipt of foreign source income that is liable to foreign income tax, that tax will now be available as a credit for Universal Social Charge (USC) purposes in addition to income tax which affirms how it was being treated under existing double tax agreements.
Given the Irish experience of the recent past the whole issue of debt arrangements, debt forgiveness and personal insolvency arise and the Finance Bill provides for certain provisions to facilitate the personal insolvency legislation. These include the write off of debts not being treated as gifts; rental income arising to the personal insolvency trustee will for tax purposes still be treated as income assessable on the debtor - yet any gain arising on disposal of the underlying assets of the insolvent individual will be assessed and charged on a personal insolvency practitioner dealing with that individual’s case.
On a positive note, there are some further provisions to support the farming sector such as a capital gains tax relief to facilitate the restructuring of farm holdings, in addition to some of the measures announced in the Budget for which legislation has been introduced.
While the Budget introduced increases in capital taxation, a property tax and increased rates of tax on most types of investment product, the Finance Bill contains no further direct increases in taxation but measures reflective of the hangover from the property excesses of the past and the debt overhang that faces many individuals.
