Highlights for you and your business
Budget 2022 was announced by the Minister for Finance and the Minister for Public Expenditure and Reform yesterday afternoon. The focus of this year’s budget is to balance the need for continued supports for businesses as we emerge from the pandemic and also to continue to restore public services, living standards and the public finances from the heavy toll taken over the last 18 months.
Changes for you and your family
Increase in bands & credits
As anticipated, the following modest changes to personal tax bands and credits will come into effect from 1 January 2022, i.e.;
As a result of the above, the average tax saving for a single person earning €45,000 or more per annum would be circa €400.
In addition, it was announced that the reduced rate of USC of 2% that currently applies to medical card holders and those aged over 70, whose aggregate income does not exceed €60,000, will be extended for one year to the end of 2022.
- An increase of €1,500 to the standard rate income tax band,
- An increase of €50 to the personal, employee and earned income tax credits, and
- An increase of €608 in the ceiling for the second-rate band of USC of 2%.
In order to support those who continue to work remotely, tax relief for remote workers is to be formalised and improved with a tax credit available for 30% of the cost of vouched expenses for heat, electricity and broadband. The allowable cost is to be apportioned based on the number of days spent working from home. Official estimates indicate that this relief could be worth circa €100 a year for an individual paying the highest rates of tax and working remotely for 100 days a year, with average utility costs.
The Help to Buy Scheme
The Help to Buy scheme which was due to expire at the end of this year has been extended to 2022 at the current enhanced rates that were introduced in the July Stimulus Package last year. The maximum credit is 10% of the house price, up to a maximum of €30,000.
Changes for employers
Employment Wage Subsidy Scheme
The Employment Wage Subsidy Scheme (EWSS) will continue until 30 April 2022, with the subsidy rates gradually decreasing over this period.
The current rates will be unchanged for October and November. However, for the period from December 2021 to February 2022, a reduced two-rate structure of €151.50 and €203 per employee will apply. In the final two months of the scheme, a flat rate subsidy of €100 per employee will be paid and the reduced rate of employer’s PRSI will no longer apply.
Benefit in kind (BIK) extension for electric vehicles
The BIK exemption on employers providing company cars to employees is being extended to 2025. Employees provided with an electric vehicle with an original market value (OMV) of €50,000 or less will be exempt from a BIK charge. If the OMV is greater than €50,000 then only the excess over this amount is liable to a BIK charge. From 2023 the exemption threshold will be reduced to €35,000. It will be further reduced to €20,000 for 2024 and €10,000 for 2025.
Effective 1 January 2022, the threshold for employer’s PRSI will increase from €398 per week to €410 per week. This will mean that for an employee on the national minimum wage, the employer will pay the reduced rate of 8.8%.
Changes for your business
Relief from corporation tax for certain start-up companies
Certain companies commencing operations can reduce corporation tax payable in the first three years of trading. The amount of relief available is linked to employers PRSI paid during the year and is capped at €40,000 per annum. This relief was due to expire at the end of December 2021 but has now been extended to the 31 December 2026. In addition to the extension of the scheme the relief will now be available for the first five years of trading instead of three years.
Energy-efficient accelerated capital allowances
The scheme for accelerated capital allowances in respect of certain energy-efficient equipment is being extended until the 31st of December 2024. Under this scheme businesses can claim 100% of the capital allowance in the first year rather than over eight years. However, equipment operated by fossil fuels will no longer qualify for the accelerated allowances.
VAT rate for the tourism industry
The temporary reduction in the VAT rate to 9% previously introduced as a result of the pandemic will be extended until the 31st of August 2022.
Employment & investment incentive scheme (EIIS)
The minister announced a number of changes in relation to the scheme. Further details will be announced as part of the Finance Bill, but it is expected that the requirement that a company must spend at least 30% of the funds raised under the scheme before the relief can be claimed should be abolished. The rules of the scheme should also be relaxed around capital redemptions making the scheme more attractive for investors. The scheme is also expected to be extended until the 31st of December 2024.
Tax credit for digital gaming sector
Companies involved in the design, production and testing of digital games may be able to claim a refundable corporation tax credit of 32% in respect of expenditure incurred, under a new scheme announced by the minister. The scheme will be subject to a minimum spend of €100,000 and a maximum spend of €25 million.
Farming & agricultural reliefs
The following measures were also announced to support the Irish agricultural sector;
Disappointingly, there was no change to the planned decrease in the flat rate addition from 5.6% to 5.5% which the IFA estimates could cost farmers circa €7m a year.
- General stock relief is extended for a further three years to the end of 2024,
- Enhanced stock relief is also extended for a further year until 2022, and
- Stamp duty relief for young-trained farmers is extended for a further year until 2022.
The following new and previously signalled measures were also confirmed by the Minister;
- The previously announced annual increment of €7.50 in the Carbon Tax will take effect from midnight on 12 October 2021 for auto fuels and from 1 May 2022 for other fuels. This increases the current rate of Carbon Tax from €33.50 to €41 per tonne/CO2. This measure is to be offset by a “modest tax disregard” for personal income received by households selling surplus electricity back to the grid.
- Further increases in VRT for higher-emission vehicles (i.e. those in bands 9 to 20) have been announced with effect from January 2022. This measure is offset by the extension of the current €5,000 relief for Battery Electric Vehicles to the end of 2023.
- Similar to previous years, Excise Duty on a pack of 20 cigarettes has been increased by 50c, with a pro-rata increase on other tobacco products.
- It was confirmed that certain anti-avoidance tax measures which had previously been agreed upon will be reflected in the Finance Bill. These include anti-reverse hybrid rules and new interest limitation rules.
- The Minister also announced the introduction of a new Zoned Land Tax at a rate of 3%. The tax will apply to land which is zoned suitable for residential development and is serviced but has not been developed for housing and will replace the current vacant site levy. The new tax is intended to come into effect from 2024 for land zoned prior to January 2022 and 2025 for land zoned after January 2022.
- The Minister also referred to Ireland’s recent signature to the OECD BEPS 2.0 plan which commits Ireland to an effective rate of tax of 15% for multinational groups with turnover in excess of €750m. This change is expected to be implemented by 2023 but will not impact the vast majority of Irish businesses which will remain subject to the current 12.5% rate.
How can we help?
We are here to support you and your business in making a better decision. We would encourage you to reach out to us if you would like to discuss any to the matters referred to above. Equally feel free to call if you would like to discuss matters generally.
For any queries relating to the tax measures announced in Budget 2022, please contact a member of our tax team on (01) 677 9000.