What's in store in this year's budget?

There were few surprises in this year's budget but accountants generally welcomed the pro-business thrust of the measures announced.

While accountants generally welcomed the pro-business thrust of the measures announced, tax experts highlighted opportunities to do more to support indigenous businesses.

Measures that will affect payroll include changes to the Universal Social Charge (USC), global mobility payments, earned income and home carer tax credits and the national minimum wage.

The headline measure was the reduction of the lower USC rates of 1%, 3% and 5.5% – each by 0.5%. Unfortunately, the higher rate of 8% remains in place, which means that the marginal tax rate remains at 52%.

This leaves us much less competitive than our main rivals in attracting talent, and does nothing to encourage the Irish abroad to move home.” - Daryl Hanberry, Tax Partner with Deloitte.

The deadlines for the Special Assignee Relief Programme and Foreign Earnings Deduction (FED) have been extended to 2020. In relation to FED, the minimum number of days the applicant is required to spend abroad is reduced from 40 to 30 days.

The earned income tax credit is going up from €550 to €950. While lower than predicted, this €400 increase narrows the tax gap between the self-employed and those in the PAYE system.

Improvements to the PRSI regime, announced by Minister Varadkar, will benefit the self-employed. For the first time, they will have access without a means test to state income supports in the event of a serious illness or injury that prevents them from working.

The Home Carers’ Credit is going up by €100 to €1,100 while the minimum wage will increase from €9.15 per hour to €9.25.

As expected, Minister Noonan announced the introduction of a ‘Help to Buy’ scheme for first-time purchasers of new homes. Other property-related measures include the restoration on a phased basis of full interest deductibility for landlords.

Welcoming the introduction of a Single Affordable Childcare Scheme announced by Minister Paschal Donohoe, Ian Talbot, Chief Executive at Chambers Ireland said that this:

will have a positive impact on female labour market participation and job activation and is a welcome support for working parents.”

Other pro-business measures announced in the Budget include:

  • Commitment to develop an SME-focused, share-based incentive scheme to be introduced in Budget 2018.
  • Reduction in Capital Gains Tax for entrepreneurs from 20% to 10% on disposals of qualifying assets up to a limit of €1 million in chargeable gains.
  • Retention of the 9% VAT rate on tourism-related activities.
  • Extension of the ‘start your own business’ relief to the end of 2018.
  • A package of measures to support the farming and agri-food sector.
  • Introduction of a €1,270 income tax credit for fishermen.

Minister Noonan indicated that the Finance Bill will include amendments to Section 110 of the TCA 1997 and measures to tackle offshore tax evasion.

Finally, employers should note that Revenue is planning a fundamental redesign and modernisation of the PAYE system. A consultation paper has been published and Revenue will engage with employers and other stakeholders between now and the end of the year.

The Finance Bill will be published on 20 October. Measures included may be subject to amendment as the Bill makes its way through the Oireachtas.