Pensions – 2020 Programme for Government

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State Pension

To protect the State Pension and keep it as the bedrock of the Irish pension system, it is proposed to establish a Commission on Pensions to examine the sustainability and eligibility issues with State Pensions and the Social Insurance Fund. The Commission will outline options for Government to address issues including qualifying age, contribution rates, total contributions and eligibility requirements.

Proposals include:

  • 65 year olds who are required to or choose to retire early can receive an “Early Retirement Allowance or Pension” at the same rate as jobseekers benefit without the requirement to sign on or to be available for work
  • Pending the Commission Report, the State Pension age will remain at 66 years
  • Introduce a Total Contributions approach, aligning a person’s contributory pension more closely with the contributions they make
  • Introduce a system to enable people to defer receipt of their State Contributory Pension
  • Facilitate making PRSI payments beyond retirement age to increase underfunded pensions
  • Examine pension options for carers
  • Maintain Free Travel Scheme for those aged over 66, and extend it to all publicly licenced bus services

Auto-enrolment Pension System

Introduction of a pension auto-enrolment system over time, based on the following principles:

  • Matching contributions to be made by both workers and employers and the State will top up contributions
  • There will be a phased roll-out, over a decade, of the contributions made by workers
  • There will be an opt-out provision
  • Workers will have a range of retirement savings products to choose from
  • There will be a charges cap imposed on pension providers

WHAT QUESTIONS DO YOU HAVE?

We are happy to help. Please contact our Taxation Department on 01 677 9000 who would be delighted to assist you. Alternatively, you can send us an email: info@cooneycarey.ie.

To keep in touch, connect with us on LinkedIn.

Posted on July 6, 2020 by Cooney Carey

Taxation and the 2020 Programme for Government

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The Programme for Government runs to 126 pages and this paper is considering the main tax references in the document.

Income Tax and Universal Social Charge (USC)

There will be no change to income tax credit or bands in Budget 2021. It is intended that credits and rate bands will be indexed linked to earnings from Budget 2022, finances allowing.

The earned income tax credit (self-employed) will be equalised with the employee tax credit.

The 3% USC surcharge applied to self-employed income will be abolished over time.

PRSI

Consideration is to be given to increasing all classes of PRSI over time to replenish the Social Insurance Fund to help pay for the state pension, improved short-term sick pay benefits, parental leave benefits, pay-related jobseekers benefit and treatment benefits (medical, dental, optical, hearing).

Corporation Tax

There is a strong commitment to retaining the 12.5% Corporation Tax rate.

The implementation of the Roadmap on Corporation Tax Reform will continue. The Roadmap was published in September 2018 and sets out the steps required at EU level under Anti-Tax Avoidance Directives and OECD’s Base Erosion and Profit Shifting project. The key changes in the Roadmap include:

  • Controlled foreign company rules
  • General anti-abuse rules
  • Interest limitation rules
  • Anti-hybrid rules
  • Exit tax

Small Business Taxes

A review of CGT is proposed in each Budget over the next 5 years with the objective of supporting driven enterprises that will help with the transition to a low-carbon economy.

The take up of R&D Tax Credit by small domestic companies will be encouraged.

Local Property Tax (LPT)

New legislation will be brought forward to make LPT fairer and to ensure that most homeowners will face no increase.

New homes, which are currently exempt, will be brought into the LPT charge.

Carbon Tax

The Carbon Tax will increase to €100 per ton by 2030. The increase is to be achieved by an annual increase of €7.50 per annum to 2029 and €6.50 in 2023.

Commission on Welfare and Taxation

A Commission on Welfare and Taxation is to be established to independently consider how best the tax system can support economic activity and promote increased employment and prosperity.

Flexible Working

It is intended to increase remote, flexible and hub-working arrangements to support employees and enterprise. No detail is given on this.

Other Business Supports

  • Support venture capital by ensuring a stable, long-term funding landscape
  • Support the development of sustainable plans to manage corporate and SME debt
  • Drive early relaunch of exporting efforts
  • Enhance the Strategic Banking Corporation of Ireland (SBCI) to get low cost finance to SMEs
  • Enable Credit Union movement to grow

National Development Plan (NDP)

The planned review of the NDP will be brought forward and an updated NDP will issue for the period to 2031.

Conclusion

While the Programme for Government is a long and wide-reaching document, it is light on detail.

However, the suggestion of increases in PRSI across the board is concerning. Also, Corporation Tax Reform will in some cases drive up taxation paid by corporates with restrictions on interest deductions and transfer pricing changes likely to be the main drivers.

The review of CGT in each of the next 5 Budgets will hopefully bring some reduction in the 33% rate, which is high by international standards.

WHAT QUESTIONS DO YOU HAVE?

We are happy to help. Please contact our Taxation Department on 01 677 9000 who would be delighted to assist you. Alternatively, you can send us an email: info@cooneycarey.ie.

To keep in touch, connect with us on LinkedIn.

Posted on July 1, 2020 by Cooney Carey

The Start-up Capital Incentive (“SCI”)

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“In time of recession there are massive opportunities and fortunes to be made, so for new up and coming entrepreneurs, this is the time to go and start a business.”

Richard Branson

Did you know that some of the world’s most successful companies were started in a recession? IBM, Microsoft, Airbnb are just some of the household names for which the idea sparked in challenging times. Given the unprecedented economic impact of the coronavirus pandemic, its timely to consider the tax reliefs which may be of assistance to budding entrepreneurs.

The Start-Up Capital Incentive (“SCI”) scheme was introduced with effect from 1 January 2019 and is available to “micro-enterprises”, i.e. businesses with less than 10 employees and an annual turnover/annual balance sheet total of less than €2m.

Broadly, the SCI provides tax relief for investments made in qualifying companies, similar to the well-known Employment Incentive & Investment Scheme (“EIIS”) but with the added benefit of being available for investments made by family members. The maximum amount of funding which may be raised under the scheme is €500,000.

The conditions which apply to the SCI are quite stringent. For example, in order to qualify for the relief, the company in which the investment is made must solely exist for the carrying on of a “qualifying new venture” and the shares must be issued to the investor within two years of the incorporation of the company. In addition, the company in which the investment is made must not have any partner or linked businesses.

If available, the tax relief is available to the investor in two tranches. The first being available in the year of investment and is equal to 75% of the investment made, up to a maximum investment of €150k. The balance of the relief may be available after four years, provided that the company has either increased its number of employees or increased spending on R&D.

WHAT QUESTIONS DO YOU HAVE?

We are happy to help. Please contact our tax department on 01 677 9000 who would be delighted to assist you. Alternatively, send us an email: info@cooneycarey.ie.  To keep in touch, connect with us on LinkedIn.

Posted on July 1, 2020 by Cooney Carey

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