BUDGET CHANGES TO BE ENACTED

THE Finance Bill is expected to become law on Christmas Day when signed by the President. Last year he also signed it on Christmas Day.

A drastic proposal for small employers is a major change in the PAYE system. From January 1, the system of forms known as P60, P45 and P35 etc. are gone and are being replaced by what is called a real-time system. Every time that you wish to pay wages as an employer you send an email to Revenue and their automated reply tells you what PAYE, PRSI and USC should be deducted. It is hard to believe but Revenue is attempting to introduce it next month – there may be exemptions if you don’t have broadband, or cannot us a computer, etc.

A welcome improvement for self-employed people and company directors is that the Earned Income Relief credit will be €1,150 in 2018. It is to compensate people who are not eligible for the PAYE credit.

For people who are lucky enough to have a company car, they suffer high tax on the benefit. Each year they are treated as earning a notional amount equal to 30 per cent of the new cost of the car. For 2018, if their company gives them an electric car they will suffer no additional tax, i.e. no Benefit-in-Kind on an electric car. It has to be a pure electric car and a hybrid is not eligible. The motor trade will gear up for this in the new year, although the range achieved without recharging of the cars available at the moment is very limited.

For farmers, a welcome clarification in the Finance Bill related to solar energy panels on farmland. Agricultural Relief which reduces the value of the farm for Inheritance and Gift Tax will be available for land with solar panels, provided it occupies less than half of the total area of the farm. Typically this land will be let long-term to a solar energy operator. Also, Capital Gains Tax Retirement Relief will be available for the land under solar panels, again as long as it is less than half of the farm.

For employees, generally a new development is that they can obtain shares in their employers’ company with no charge to tax on acquisition and Capital Gains Tax treatment on sale. The system is known as KEEP and the intention is that employers can retain key staff by giving them an incentive to remain with a growing business.

The rate bands for Income Tax are slightly increased for 2018. A single person can earn €34,550 or €664 per week at the 20 per cent rate and a married couple with one earner can earn €43,550 at the 20 per cent rate. Where both spouses work, they can earn a combined income of €69,100 at the 20 per cent rate. For the stay-at-home spouse, the home carer tax credit is increased to €1,200 from January next.

The Income Tax exemption for the Christmas Gift to staff remains at €500. It is a very tax-efficient way of providing a staff benefit and the employer gets a tax deduction for the cost of it. The cost of a staff Christmas party is also tax deductible for an employer and confers no taxable benefit on the staff.