News

Porter and Co. Chartered Accountants...

Keeping our clients up to date on real issues of interest to them and their business

• Budget 2012
• eRCT - Changes to Relevant Contracts Tax system
• Extension to State Deposit Guarantee Scheme
• New companies legislation
• Audit exemption limits

For more detailed information on these, or any other matter affecting your business, please contact us by email info@porter.ie or phone +353 71 9140480

Budget 2012

Budget 2012 was announced over 5th and 6th December 2011 by the Minister for Public Expenditure and Reform and by the Minister for Finance.

The key points of the Budget are as follows:

• An additional €1.6 billion to be raised by way of taxation, with €2.2 billion to be saved by spending cuts.

• No changes to Income Tax rates, bands or credits.

• An increase in the standard VAT rate to 23% from 21%.

• Increases in the rates of Capital Gains Tax (25% to 30%), Capital Acquisitions Tax (25% to 30%) and DIRT (27% to 30%).

• A reduction in the CAT tax-free threshold for gifts and inheritances from parents to children from €332,084 to €250,000.

• Reductions in Retirement Relief from CGT on transfers by individuals over 66 years of age, subject to a transitional period to 31 December 2013.

• To encourage investment in property, CGT exemption will apply to gains made on properties acquired before 31 December 2013 which are disposed of after more than 7 years.

• Plans announced in Budget 2011 to abolish Property Related Reliefs have been dropped, with the introduction of a 5% surcharge on such reliefs claimed by those with gross income over €100,000. The claiming of accelerated capital allowances will be curtailed from 1 January 2015 so as to apply only to those schemes whose tax lives extend beyond that date.

• A reduction in Stamp Duty on non-residential property to a flat 2% rate from the existing sliding scale of up to 6% for transfer executed after 6 December 2011.

• An increase in the exemption threshold for USC to an income level of €10,036.

• The three-year exemption from Corporation Tax for start-up companies is extended to those companies who commence trading at any time up to 31 December 2014.

• The R&D tax credit regime has been made more accessible to those who outsource their R&D acivities.

• In general, no changes were made to weekly or monthly Social Welfare Payments other than a reduction in the level of Children’s Allowance paid to the third and subsequent children.

• A raft of changes were made to the eligibility criteria for a number of Social Welfare benefits.

Some more details of the main taxation changes and selected social welfare payments are attached.

Attached file(s):

• Budget 2012 Main Taxation Changes
• Budget 2012 Selected Social Welfare Payments

eRCT - Changes to Relevant Contracts Tax system

Important and fundamental changes are being introduced to the administration of Relevant Contracts Tax which come into effect on 1 January 2012.

With effect from 1 January next, the following changes to the operation of RCT will apply:

• All communication regarding RCT will be electronic, through ROS. There will no longer be any paper forms in relation to RCT.

• Principals must notify Revenue on ROS of all relevant contracts. The new eRCT system on ROS will enable all on-going contracts to be notified to Revenue from 5 December 2011 onwards. To assist Principals, Revenue will pre-populate the system with details of contracts for 2010 from Revenue records, but this will obviously not include any more recent contracts.

• It is critical that prior to 1 January 2012, all Principals ensure that their current relevant contracts with sub-contractors have been entered on the eRCT system on ROS.

• From 1 January 2012, Principal contractors must notify Revenue on-line immediately before making a payment to a Sub-contractor. A payment will not be allowed if the contract has not been notified to Revenue.

• On notifying Revenue of the payment being made, Revenue will issue the Principal with a Deduction Authorisation. The Deduction Authorisation will specify the rate of RCT to be deducted. A copy of the Deduction Authorisation must be given to the sub-contractor.

• A Deduction Summary (‘DS’) will issue to the Principal from Revenue monthly or quarterly identifying the payments notified by the Principal in that period. If the details are correct, the DS will be deemed to be the RCT return for the period. If details are incorrect, changes can be made to it by the Principal.

• The rate of RCT which will be specified by Revenue will be either 0%, 20% or 35%. In general, the 0% rate will apply to sub-contractors who currently hold a C2 card and whose tax affairs are up to date. The 20% rate will apply to those sub-contractors who Revenue claim to be ‘substantially compliant’. The 35% rate will apply to sub-contractors who are unknown to Revenue or who have serious compliance issues.

• A subcontractor can request Revenue to review the rate of RCT that is being applied to payments made to him. However, Revenue have stated that no changes will be made to the rate of RCT being applied for the first 3 months of the new system up to 31 March 2012.

• Subcontractors will no longer be able to obtain a refund of RCT withheld. Instead all RCT deducted will be applied by Revenue towards other tax liabilities of the subcontractor.

Please do not hesitate to contact us for any assistance that you may require.

Extension to State Deposit Guarantee Scheme

On 28 June 2010, an extension to the Credit Institutions (Eligible Liabilities Guarantee) Scheme 2009 (“ELG Scheme”) was announced. Since 30 September 2008, the government has guaranteed all deposits with the six Irish Regulated banks, (Anglo Irish Bank, Allied Irish Bank, Bank of Ireland, Irish Life & Permanent, Irish Nationwide and EBS) for the period up to 28 September 2010. The extended ELG Scheme does not apply to Postbank Ireland, who joined the initial scheme subsequent to the other participants.

The extension announced to the ELG Scheme applies the 100% State Guarantee to all retail deposits made with participating banks up to 31 December 2010. In respect of fixed term deposits made with participating banks up to 31 December 2010, the guarantee applies for the duration of the term, up to a maximum period of 5 years. The ELG Scheme applies to corporate deposits in the same way as for retail deposits until 29 September 2010. Thereafter, only corporate deposits with a maturity of 3 months or more that are made with participating banks up to 31 December 2010 will be covered by the ELG Scheme. Thus, on-demand corporate deposits will not be covered by the ELG Scheme post 29 September 2010.

In respect of deposits made with any other banks, e.g. NIB, ACC and Rabobank, or in respect of non-qualifying deposits made with participating banks, the Deposit Guarantee Scheme limit of €100,000 introduced on 20 September 2008 will continue to apply.

It has also been announced that the phasing out of the State Guarantee will be achieved over time consistent with the funding requirements of the participating banks and with the requirement to maintain financial stability.

New companies legislation

The Companies (Amendment) Act 2009 was signed into law on 12 July 2009. The main changes introduced by the Act are as follows:

• The Companies legislation is now to be referred to as “Companies ACts 1963 to 2009”.

• The requirement for companies to have an Irish resident director is now amended to having a director resident in the European Economic Area.

• If directors are in breach of section 31 of Companies Act 1990 regarding loans to Directors and Connected Persons, they are now open to prosecution. The new Act removes the requirement for the ODCE to prove that the Directors are “knowlingly and willfully in breach of section 31”.

• Increased powers of investigation have been given to the Director of Corporate Enforcement regarding the power of search and seizure, power to require the produciton of books and records from a third party and right to access information.

The single largest review and reform of Irish Company Law is now not proposed to be enactment of the legislation in 2010.

The is expected that the proposed legislation will include significant changes to the administration of companies, such as:

• the creation of Single Director Companies,
• the creation of a new Company Constitution to replace the existing Articles and Memorandum of Association,
• minors will not be allowed to act as directors of companies,
• the discarding of the requirement for companies to hold AGMs, and
• the amendment of certain directors and secretaries duties.

Audit exemption limits

Companies should be aware that the audit exemption limits for turnover (€7.3m) and gross assets (€3.65m) apply for accounting periods ending on or after 24 February 2007.

For many companies with calendar year ends, the new rules will be first apply to accounts for the year ended 31 December 2007.

It should be noted that the employee test in determining if audit exemption applies to a company (i.e. an average of less than 50 employees) remains unchanged.

As was previously the case, each of the 3 conditions must be met for the accounting period, and for the preceding accounting period, in order for the exemption to apply.

Companies should also be aware that their filing obligations with the CRO must be satisfied in order to qualify for the exemption.

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