The Government has today (Thursday) published Finance Bill 2017. Adhering to the process of Budget reform, it continues the practice of publishing the Bill as soon as possible after Budget Day. This follows the publication of the Tax Strategy Group Reports last July to help inform the discussion on options in the area of tax policy as part of the preparations for the Budget.
Finance Bill 2017 contains 78 sections, the majority of which implement the changes announced on Budget Day together with a limited number of additional anti-avoidance measures and largely technical changes which are deemed to be important for the effective care and maintenance of the tax system.
The Bill provides for the reductions in the USC and an increase to the ceiling of the band on which the reduced 2% rate of USC will be payable, increases in the income rate standard rate bands, the increases in the home carer tax credit and the earned income tax credit. The Bill also contains details of the tapered extension to the mortgage interest relief as well as a tax measure to encourage owners of vacant residential property to bring that property into the rental market. It also provides for the increase in the excise duty on cigarettes by 50 cent as well as the introduction of a tax on sugar-sweetened drinks.
Aligned with the Budget Day announcement, the Bill also provides for a broader housing supply measure through amending the seven-year Capital Gains Tax exemption so as to allow the owners of land and buildings purchased between 7 December 2011 and 31 December 2014 to enjoy a full CGT relief if they have owned the land for at least four years and for no more than seven.
A new share based remuneration scheme aimed at SMEs is included in the Bill. Under the KEEP incentive (Key Employee Engagement Programme), gains arising to the employee on the exercise of the share options will only be subject to tax when the employee subsequently disposes of the shares and will be subject to Capital Gains Tax, currently at 33%. In the absence of this incentive, the share-option gain would be liable to income tax, USC and PRSI at the time of the exercise of the option. The measure will make available an important instrument to our SME sector to allow them to attract and retain the best available talent in order to develop and grow their businesses and maintain competitiveness, particularly at this time of challenge as they prepare for the post-Brexit scenario.
The Bill also details the provisions necessary to give effect to the Budget Day announcement regarding an increase in stamp duty on non-residential property transactions, including agricultural land. In tandem, consanguinity relief is being extended for another three years and the stamp duty rate applying under that scheme will be fixed at 1%. To protect the position of transfers of family farm holdings, the Bill removes the qualifying age limit for consanguinity relief.
In addition the Bill provides for transitional arrangements to apply for transactions for non-residential properties where binding contracts have been entered into prior to 11 October 2017. Details on the rebate from stamp duty on development land announced on Budget Day will be introduced by way of a Committee Stage amendment and therefore are not included in the Bill as published today.
The Bill provides for the Budget Day announcement regarding an 80% limit on the quantum of relevant income against which capital allowances for intangible assets and any related interest expense may be deducted in a tax year. This will ensure some smoothing of corporation tax receipts over time.
The Bill also provides for certain anti-avoidance measures across the tax code and provides for amendments to begin the process of implementing the OECD BEPS Multilateral instrument which will update Ireland’s tax treaties to be in line with international best practice.
To help ensure that appropriate preparations can be made in a timely way by all concerned, the Bill includes a range of legislative changes required to give effect to the significant PAYE Modernisation project being undertaken by Revenue and which will result in the move to a real-time PAYE system from January 2019.
Commenting on the publication of the Finance Bill today, Paschal Donohoe TD, Minister for Finance and Public Expenditure & Reform stated that: ‘Today’s publication of the Finance Bill 2017 provides the necessary legislative foundation for implementing the tax measures announced on Budget Day. In line with our commitment to Budgetary reform, it has been published as soon as possible after Budget Day. It now moves forward to be debated in the Dáil and Seanad and I anticipate a constructive discussion on the Bill over the coming weeks with my parliamentary colleagues’.
Finance Bill 2017 – Explanatory Memo
Finance Bill 2017 – Appendix: List of Items
Finance Bill 2017 – Notes for Editors
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