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Finance Bill 2014: Second Stage (Continued)

Tuesday, 4 November 2014

Dáil Éireann Debate
Vol. 856 No. 1

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(Speaker Continuing)

[Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan]   Section 20 provides for refunds of deposit interest retention tax deducted from interest earned by a first-time purchaser of a house or an apartment on deposits of up to 20% of the purchase price of such a house or an apartment in the 48 months prior to the purchase. The provision will apply to purchases made up to the end of 2017.

  Section 23 deals with the research and development tax credit and provides that the base year restriction will be removed fully for accounting periods commencing on or after 1 January 2015.

  Section 24 makes a number of amendments to the legislation providing for the employment and investment incentive. First, the rate of relief is being aligned with the revised income tax rates from 1 January 2015. Second, the minimum required holding period for shares is being increased from three to four years. Third, the limits on the amount of finance that can be raised by a company annually and in a lifetime are being increased to €5 million and €15 million, respectively. Fourth, the incentive is being amended to include medium-sized enterprises in non-assisted areas, the management and operation of nursing homes and internationally traded financial services where they are certified by Enterprise Ireland.

  Section 27 provides for the end of the 80% rate of income tax on windfall profits attributable to certain planning decisions and the equivalent rate of capital gains tax on any gain from disposals of land also attributable to certain planning decisions. Normal rates of income tax, corporation tax and capital gains tax, as appropriate, will apply to such profits or gains from 1 January 2015.

  Section 28 makes changes to the living city initiative. It provides for an expenditure cap on the amount that can be claimed under the commercial element of the initiative. The cap will be €1.6 million of expenditure for companies and €400,000 of expenditure for individuals who invest in eligible commercial properties under the initiative. This change means that the initiative comes under EU de minimis state aid rules. There will be no expenditure cap on the residential element of the initiative.

  Section 33 extends to the end of 2017 a scheme of accelerated capital allowances contained in section 285A of the Taxes Consolidation Act 1997 which has been designed to encourage companies to invest in energy efficient equipment.

  Section 34 extends to the end of 2015 a measure that provides relief from corporation tax on trading income and certain capital gains of new start-up companies in the first three years of trading. This will allow for a review of the operation of the measure to take place in 2015, with a view to ensuring it meets its policy objective of encouraging start-up businesses and creating employment.

  Section 35 provides for additional enhancements to section 291A of the Taxes Consolidation Act 1997 which provides capital allowances for expenditure incurred on the provision of certain intangible assets for use in an Irish trade. It removes the current cap on the aggregate amount of allowances and related interest expenses that may be claimed and amends the definition of intangible assets which may qualify for the relief to specifically include certain customer lists.

  Section 38 will amend Ireland's company tax residence rules to provide that all companies incorporated in Ireland will be automatically tax resident here, unless otherwise determined under a bilateral tax treaty which supersedes domestic law. The change will come into effect for new companies from 1 January 2015, while a transition period will apply until the end of 2020 for existing companies. This change will bring Ireland's rules into line with the rest of the OECD jurisdictions and should address the reputational damage arising from the use of a corporate structure commonly referred to as the "double Irish". I have always been clear that the double Irish is not part of the Irish tax offering. It is just one example of the many international tax planning arrangements which have been designed and developed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries. It is not claimed that this change will bring an end to international tax planning, as this requires co-ordinated action by many countries working together. However, the change will address the reality that Ireland's company tax residence rules have not kept pace with international developments and being associated with the double Irish is damaging Ireland's reputation.

  Section 42 deals with the return of value made by Vodafone plc to its Irish shareholders earlier this year. Where the return is for an amount of €1,000 or less, it will be treated as a capital receipt for tax purposes, unless shareholders specifically opt to have the payment treated as income. This will mean that those Vodafone shareholders who are shareholders on foot of an original investment in eircom will have no tax liability on the capital receipt as the amount received is less than the cost of the original investment.

  Section 43 extends the period within which the first transaction, that is, a sale, purchase or exchange of farmland in a farm restructuring, is to take place for the purposes of the capital gains tax relief from the end of 2015 to the end of 2016.

  Section 44 amends capital gains tax retirement relief for farmers in a number of respects arising from the agri-taxation review. The amendments provide, respectively, for an increase in the total period for which land can be let immediately prior to disposal from 15 years to 25 and, in the case of disposals of farmland outside the family, that land let under conacre arrangements and disposed of on or before 31 December 2016 or which is leased for a minimum period of five years before that date can qualify for capital gains tax retirement relief on disposal, provided the lands were farmed by the farmer for a minimum of ten years prior to letting.

  Section 45 gives effect to the commitment I made earlier this year to provide for an exemption from capital gains tax on any chargeable gain arising on foot of the disposal by farmers of payment entitlements under the single farm payment scheme, where these entitlements were fully leased out and the farmers concerned had no choice but to sell their payment entitlements due to changes in Common Agricultural Policy regulations.

  Section 46 amends the capital gains tax entrepreneur relief which I introduced in last year's budget and the subsequent Finance Act and allows for the commencement of the relief from the beginning of 2014. The section also includes amendments to allow the relief to operate more effectively on the ground.

  Part 2 of the Bill deals with excise. Section 48 provides for a deferral of the collection of excise on mineral oil, bringing it into line with the other excisable products. This amendment is subject to a commencement order.

  Section 49 provides for the application of mineral oil tax, including carbon tax, to natural gas and biogas when used as a transport fuel and sets the excise rate at the minimum rate allowable under the EU energy tax directive.

  Section 50 provides that to apply for or hold a mineral oil trader's licence the applicant or holder must comply with excise law in respect of all aspects of operating a business in the area of mineral oil trading.

  Section 52 provides for the budget day announcement of the increase in the annual excise relief production ceiling for micro-breweries from 20,000 to 30,000 hectolitres.

  Section 54 removes the requirement that, in respect of a disabled passenger, the cost of vehicle adaptation must consist of not less than 10% of the value of the vehicle, excluding tax and excise duty.

  Section 55 provides for the extension of vehicle registration tax reliefs available for electric and hybrid electric vehicles to 31 December 2016.

  Part 3 of the Bill deals with value added tax. Section 60 increases the farmer's flat-rate addition from 5% to 5.2% with effect from 1 January 2015, as announced in the budget.

  Section 63 extends the VAT exemption to the management of defined contribution pension funds and green fees charged by member owned golf clubs, both changes resulting from decisions of the European Court of Justice. The section also extends the VAT exemption to all fostering services and the zero rate of VAT on unprepared tea to include herbal and fruit teas.

  Part 4 of the Bill deals with stamp duties. Section 66 provides relief from stamp duty on a lease of land for a term not less than five years and not exceeding 35 that is used exclusively for farming carried on by the lessee on a commercial basis and with a view to the realisation of profits. Section 69 provides that, for a period of three years, consanguinity relief will be available in respect of transfers or conveyances of farmland where the person by whom the land is transferred or conveyed is not over 65 years of age and the party to whom the land is transferred or conveyed is a farmer who farms the land on a commercial basis and with a view to the realisation of profits for a period of not less than five years and for not less than 50% of the farmer's normal working time. Sections 66 and 69 arise from recommendations in the agri-taxation review.

  Section 70 adds an additional qualification for the purposes of the young trained farmer relief, the BSc (Honours) in sustainable agriculture.

  Part 5 of the Bill deals with capital acquisitions tax. Section 73 relates to the exemption from capital acquisitions tax of normal and reasonable payments made for the support, maintenance or education of children by their parents. The section restricts the exemption for payments made by living persons for these purposes to children up to the age of 25 years if in full-time education and also extends the exemption in the case of payments made from a trust set up by deceased persons to orphaned children up to the age of 25 years if in full-time education, where such payments were up to now exempt only if made to minor orphaned children.

  Section 74 also arises from the agri-taxation review. It amends the definition of "farmer" for the purposes of the relief from capital acquisitions tax on gifts or inheritances of agricultural property in order to target the relief at individuals who will actively farm agricultural property themselves or who will lease such property on a long-term basis to active farmers.

  Section 75 amends the relief from capital acquisitions tax applying to the gift or inheritance of business assets which is intended to encourage the inter-generational transfer of businesses.

  Part 6, the final part of the Bill, covers miscellaneous provisions. Section 79 and Schedule 1 amend the general anti-avoidance legislation in the Taxes Consolidation Act 1997. As a transitional measure, it also provides that a person who entered into a tax avoidance transaction on or before 23 October 2014 and who, before 30 June 2015, makes a full disclosure and full payment of all tax due to the Revenue Commissioners, will not be subject to the surcharge provided for in section 811A. Also, any interest payable in cases covered by the transitional measures will be capped at 80% of the interest otherwise payable.

  Section 80 and Schedule 2 introduce a number of changes to the mandatory disclosure regime. Among these is a provision that where the appeal commissioner makes a determination relating to a tax avoidance transaction under section 811C in relation to one of the specific anti-avoidance provisions or in relation to a transaction that was a disclosable transaction under the mandatory disclosure regime, the Revenue Commissioners may issue a payment notice to that taxpayer requiring payment of tax due on foot of the determination of the appeal commissioners.

  Section 88 sets out additions to the list of double taxation agreements and protocols to double taxation agreements between Ireland and other jurisdictions.

  At this stage, there is still a small number of matters under consideration for inclusion in the Finance Bill that I may bring forward on Committee Stage. I will, of course, also give consideration to the constructive suggestions put forward during our debate this week. I commend the Bill to the House.

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