Budget 2020 – Saving for a Rainy Brexit

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It’s that magical time of the year once again as the days get shorter, the nights get longer, and we wonder what awaits us in the year ahead as the Budget announcements are made. Does Budget 2020 hold more tricks or treats for us? With the possibility of a Hard Brexit facing us, there is quite a lot resting on this budget in order to safeguard our country’s finances. As always, we here at EcovisDCA are here to break down this year’s budget announcements into ‘treat size’ chunks.
As expected, Brexit is something that has been discussed for Budget 2020 with Minister for Finance Paschal Donohoe stating that “Brexit is the most pressing and immediate risk to our economy.” With this in mind, the Government have decided to create a €1.2billion package in 2 parts with €200million immediate investment into Ireland regardless of the outcome of Brexit, which we will discuss separately in the coming weeks.

Budget 2020 has already come under fire for seemingly not supporting the general public by offering no cuts to personal tax or across the board increases to social welfare payments in favour of a focus on the overall safeguarding of the country in the looming shadow of Brexit.So, what changes await in Budget 2020?

Personal Tax:
  • There are no changes to your Income Tax Credits & Bands.
  • The Home Carer Tax Credit has been Increase from €1,500 to €1,600.
  • The Earned Income Tax Credit of €1,350 increases to €1,500.
  • A further 1 Year Extension to the reduced rate of USC for medical card holders.
  • The Help to Buy (HTB) scheme has been extended in its present format until 31 December 2021.
  • A new Carbon Tax will see petrol and diesel prices rise by 2c with immediate effect. This increase will not apply to home heating fuels until 2020.
  • €2 increase in weekly fuel allowance
  • €10 increase in the income threshold for the working family payment for families with up to 3 children.
  • €15 increase in the one-parent family payment.
  • €5 increase in the living alone allowance.
  • Free GP care extended to under 8s with free dental care for under 6s.
Corporation and Capital Gains Tax/Business Tax
  • Key Employee Engagement Programme (KEEP)
    • Details of further enhancement to the existing programme to be announced.
  • Employment and Investment (EII)
    • Details of further enhancement to the existing programme to be announced.
  • Special Assignee Relief Programme (SARP)
    • Extension of the relief in its present format until 31 December 2022.
  • Foreign Earnings Deduction
    • Extension in its present format until 31 December 2022.
  • Research and Development Tax credit
    • Enhancements to credit for small and micro-companies.
    • Increase in third level outsourcing limit.
  • Microbrewery relief
    • Production ceiling for qualification, raised from 40,000hl to 50,000hl.
  • Diesel Rebate Scheme
    • Relief for users of the scheme from the increase in carbon tax.
  • Living City Initiative
    • Extension in its present format until 31 December 2022.
  • Dividend Withholding Tax
    • The rate of DWT is being increased from 20% to 25% with effect from 1/1/2020
    • From 1/1/2021 it is intended that a “real-time” modified system of DWT will be introduced similar to the new PAYE modernization system that will reflect each individual taxpayer’s current rate of tax at the time of the dividend. This should result in a cash flow boost to the exchequer.
  • Capital Gains Tax
    • Extension of Section 604B Capital Gains Tax Relief for Farm Restructuring.
  • Further Levy on Certain Financial Institutions (Bank Levy)
    • Bank Levy is to be increased from 59% of DIRT in the base year 2015 to 170% of DIRT in the base year 2017
Anti-Avoidance
  • Scientific research: In relation to the allowance for capital expenditure on scientific research there is to be a correction to an unintended additional relief.
  • Collective Property Investment Compliance Measures:
  • Irish Real Estate Funds (IREFs) and Section 110 anti-avoidance.
  • Real Estate Investment Trusts (REITs) /capital disposals.
  • BEPS Implementation
    • Introduction of Anti-Hybrid Rules.
    • EU Anti-Tax Avoidance Directive – ATAD.
    • Modernisation of Transfer Pricing rules.
Climate and Environmental measures
  • Carbon Tax: Increase the rate by €6 to €26 per tonne.
  • Electricity Tax: Equalise the rate for businesses with that of non-business.
  • Vehicle Registration Tax
  • VRT Environmental Health (NOx) Surcharge.
  • Extension of VRT relief for hybrids and plug-in hybrid electric vehicles
VAT:
  • No Changes
Capital Acquisition Tax:
The tax-free threshold on gifts and inheritances passing from parents to children is being increased from €320,000 to €335,000. Applicable to gifts and inheritances received on or after 9/10/2019Stamp Duty:
  • Stamp Duty on Non-Residential Property is being increased from 6 % to 7.5% from 8th October 2020. The Duty will be reduced back to the residential rate of 2% (with a resulting refund due) where the land is subsequently used for residential development.
  • A new charge of 1% is to be introduced where a “scheme of arrangement” (Part 9 of the companies Act) is used for the acquisition of a company.

 Excise Duties:

  • Tobacco: 20 cigarettes increased by 50 cents (including VAT) with a pro-rata increase on the other tobacco products.
  • Betting Duty: Introduction of a relief from betting duty and betting intermediary duty up to a limit of €50,000 per calendar year.  This relief only applies to single undertakings.
These are the main changes announced, and this is certainly a more cautious budget than we have seen in recent years which is understandable given the atmosphere of uncertainty we currently exist in. It remains to be seen what effect Brexit will have on our shores going forward, but it is hoped that enough will have been done in this budget for our small island to have some wiggle room to get situated in this new business landscape.

Should you have any queries on any business or financial matters, please don’t hesitate to contact us here at EcovisDCA where we are always happy to assist.

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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY