Budget 2014

The Government designed the budget with a focus on growing the economy, creating jobs and preparing the way to exit the bail-out programme.  To keep Ireland on the path to sustainable public finances and economic growth the government is targeting a general government deficit of 4.8% for 2014 and will achieve this by an adjustment of €3.1 billion, €2.5 billion of which will consist of expenditure cuts and tax increases. 

The tax measures that support job creation:

• The 9% rate of VAT for tourism related services is being retained.
• Home Renovation Incentive (HRI): this will provide an income tax credit to homeowners who carry out renovation and improvement works on their principal private residence in 2014 and 2015.  The credit will be calculated at a rate of 13.5% of all qualifying expenditure over €5,000 up to a maximum of €30,000 and the credit will be payable over the two years following the year in which the work is carried out.  The work must be carried out by tax compliant builders.
• Start Your Own Business (SYOB): An exemption from Income tax up to a maximum of €40,000 per annum will be provided for a period of two years, to individuals who set up a qualifying, un-incorporated business, having been unemployed for a period of at least 15 months prior to establishing the business.

Capital Gains Tax (CGT)

• The incentive that exempted property purchased by the end of 2013 from capital gains tax  if held for at least 7 years has been extended to property purchased by the end of 2014
• CGT entrepreneurial relief: a new CGT incentive is being introduced to encourage entrepreneurs to invest and re-invest in assets used in new productive trading activities.

Income Tax

• No change to income tax rates, tax bands or income tax standard credits
• From 16th October 2013 Tax Relief for Medical Insurance premiums will be restricted to the first €1,000 per adult insured and the first €500 per child insured.  This will generate €94m for 2014.

Corporation Tax

• No change to the 12.5% corporation tax rate applicable to trading income

Deposit Interest Retention Tax (DIRT)

• The rate of retention tax that applies to deposit interest, together with rates of exit tax that apply to life assurance policies and investment funds, is being increased and will be 41% from 1st January 2014. This will generate €105m for 2014.

Stamp Duty

• The 0.6% stamp duty levy on pension fund assets is to increase to 0.75% for the year 2014.  The levy will then be reduced to 0.15% for 2015.  The pension levy for 2014 will generate €135m.

VAT

• The annual VAT cash receipts basis threshold for small to medium businesses is being increased from €1.25 million to €2 million with effect from 1 May 2014.

Excise Duties

• Extra 10c on a packet of cigarettes (this will generate €15m for 2014)
• Extra 10c on beer, cider and spirits and extra 50c on a bottle of wine (this will generate €145m for 2014)
• Reduce Air Travel Tax to zero from 1st April 2014
• No increase in excise duty on petrol or diesel
• No increase in motor tax

By the time the measures become law on the first of January next year, the government is confident that Ireland will have left the EU/IMF programme and will have been handed back her purse.   The recovery is well underway and there are many opportunities that must be embraced.

Imelda Prendergast is Director in OSK and head of OSK Small Business Support and OSK Contracting.