Mazars Budget 2024 Digest

Backdrop
Minister Paschal Donohoe and Minister Michael McGrath highlighted the good shape of Ireland’s public finances and how this has ensured the Budgetary measures and once-off measures announced today can be implemented. The war in Ukraine has led to energy price inflation, and we are now seeing headline inflation rates of 8.5% forecast for 2022 and just over 7% for 2023, rates not seen for 40 years.
 
The forecast rate of growth in the economy, due to reduced spending power caused by mounting inflationary pressures and the expectation that firms will hold back on investment given the backdrop of tighter financial conditions and heightened economic uncertainty, is now 1.25% for 2023, based on Modified Domestic Demand.  

One-off measures  

• Three credits to assist with energy bills of €150 each between the end of 2023 and April 2024.
• €300 lump sum payment to recipients of the fuel allowance to be paid in the last quarter of 2023.
• Additional €200 to be paid this year to recipients of the Living Alone Allowance.
• The Christmas Bonus will be paid in early December.
• To support those in receipt of a weekly social welfare payment, a once-off double-week cost of living support payment will be paid in January 2024 to all qualifying Social Protection recipients including pensioners, carers, people on disability payments and jobseekers.
• A special once-off payment of €400 will be made pre-Christmas to those who receive the Carer’s Support Grant, Disability Allowance, Blind Pension, Invalidity Pension and Domiciliary Care Allowance.
• A double payment of child payment, an additional payment of €140 per child, will be made to all qualifying households before Christmas, as will a double payment of the Foster Care allowance.
• The fee waiver on school transport services has been extended for a further year and the fee waiver for students sitting state exams has also been extended.
• A once-off reduction of the student contribution fee by €1,000 for free fees students has been announced, in addition to a once-off reduction of approximately 33% in the contribution fee for apprentices in higher education.
• An increase in the Post Graduate Tuition fee contribution by €1,000 for student grant recipients was also announced.

Income tax 
The income tax package, having a value of €1.3bn, comprises of:

• Increase in the Standard Rate Cut-Off Point by €2,000 to €42,000.
• Increases to main tax credits – personal, Employee PAYE, and earned income by €100.
• Reduction in the 4.5% rate of USC to 4%.
• In line with an increase in the national minimum wage by €1.40 to €12.70 per hour, the entry threshold to the 4% rate of USC is being increased to €25,760.
• Increase in the home carer tax credit and single-person child carer credit by €100.
• Increase in the incapacitated child tax credit by €200.
• Extension of the USC concession applying to those who have a medical card and earn less than €60,000 per year for a further two years until the end of 2025.
• Increase in the Rent Tax Credit from €500 to €750 per year from 2024 and the introduction, for parents who pay for their student children in “Rent a Room” or “digs” accommodation, to claim the Rent Tax Credit, backdated to allow parents to claim for 2022 and 2023.
• A one-year Mortgage Interest Tax Relief for homeowners with an outstanding mortgage balance on their primary dwelling house of between €80,000 and €500,000 at 31 December 2022 is to be introduced.
• A temporary tax relief to primarily benefit small landlords is being introduced. Where the necessary conditions are met, rental income of €3,000 for 2024, €4,000 for 2025 and €5,000 for the years 2026 and 2027 will be disregarded at the standard rate of income tax. A condition for this to apply is that the properties on which the income is earned must remain in the rental market for the four years.
• The tax disregard for personal income for households who sell electricity from micro-generation back to the national grid is being doubled to €400.

Other tax measures
The temporary universal relief of €10,000 to the Original Market Value of company cars is being extended, as is the tapering of the preferential BIK relief for electric vehicles.

The detail on the introduction of the 15% minimum corporation tax rate is to be announced in next week’s Finance Bill. 

The VRT relief on battery electric vehicles with a value of up to €50,000 is being extended for a further two years up to the end of 2025.

Foster children can avail of the Group B Capital Acquisitions Tax threshold. 

Housing 
The liability to Residential Zoned Land Tax (RZLT) is being postponed for one year.  

The Help-To-Buy Scheme is being extended to the end of 2025 and is being amended to ensure that applicants of the local authority affordable purchase scheme can avail of Help-to-Buy. The change will take effect form 11 October and will run until the revised end of the scheme in 2025.

Supports for Business 

• The Research and Development (R&D) Tax Credit is to be increased from 25% to 30%, which will maintain the net value of the credit for those companies within the scope of the new 15% minimum corporation tax rate and will deliver a real increase in the credit for the majority of businesses who will remain outside the scope of the 15% rate.
• The first year payment threshold is to be increased from €25,000 to €50,000, to provide cash flow support to companies engaged in smaller R&D projects, in order to improve take-up of the regime.
• A new targeted capital gains tax relief for angel investors in innovative start-up SMEs was announced, together with enhancements to the Employment Investment Incentive scheme (EII), which provides SMEs with an alternative source of funding.
• The new relief for angel investors will enable them to benefit from a reduced rate of CGT when they dispose of a qualifying investment they have held for a period of at least three years, for gains up to twice the value of the investment. The reduced rate of CGT that will apply is 16% or 18% if investing through a partnership, subject to a lifetime limit on gains of €3 million to which the reduced rate will apply. To qualify for the scheme, the start-up company that is the object of the investment by the angel investor will need to be certified by Enterprise Ireland to ensure the relief is targeted at innovative SMEs that are financially viable.
• The enhancements to the EII regime comprise standardising the investment period to four years for all investments and doubling the amount on which an investor can claim relief for four year investments from €250,000 to €500,000.
• Changes to the retirement relief regime were also announced, with the upper age limit for the relief to be extended from 65 to 70. There will be a new limit of €10 million on the relief available for disposals to a child, where the disposal or transfer takes place by the time the transferor is 70. These changes take effect from 1 January 2025.
• EU State aid approval has now been obtained for outstanding elements of amendments to the Key Employee Engagement Programme (KEEP), including the extension of the scheme to the end of 2025 and a doubling of the limit for the total market value of issued but unexercised qualifying share options from €3 million to €6 million.
• An increase in the current project cap on qualifying expenditure in the Section 481 Film Tax Credit regime – applying to certain audio visual productions - from €70 million to €125 million was announced, subject to State aid approval. The corporation tax credit is calculated at 32% on the qualifying expenditure, subject to the project cap.
• The accelerated capital allowances scheme applying to energy efficient equipment is being extended for a further two years.
• An additional €35 million is being allocated to the Department of Enterprise, Trade and Employment to allow for measures including the provision of €9 million to Local Enterprise Offices, to enable them extend their financial supports and mentoring programmes and an increase in the IDA’s capital allocation of €27 million to allow it accelerate its Regional Property Grants Programme, to ensure balanced regional inward investments.

VAT and excise duty  

• The 9% reduced rate of VAT for gas and electricity is to be extended for a further 12 months. 
• The VAT registration threshold is to increase from €75,000 to €80,000 for goods and from €37,500 to €40,000 for services.
• The zero % VAT rate applying to the supply and installation of solar panels for private houses in place from May 2023 is being extended to schools with effect from 1 January 2024.
• eBooks and audio books are to be zero rated for VAT from 1 January 2024, to bring them in line with the zero rating applying to printed books.
• Excise duty on a pack of 20 cigarettes to be increased by 75 cents, with a pro-rata increase on other tobacco products.

Agricultural reliefs

• Consanguinity relief applying to the transfer of farms from one generation to the next – reducing the rate of stamp duty from 7.5% to 1% - is to be extended for a further five years to 31 December 2028 and various reliefs have been enhanced, including the Young Trained Farmer Stamp Duty relief, Stock relief for Young trained farmers, and the relief for succession farm partnerships.
• Accelerated capital allowances applying to farm safety equipment, at a rate of 50% per annum for eligible equipment, have been extended to 31 December 2026.

Mazars Budget Briefing 

Join us for our upcoming live webcast Budget 2024 Briefing on 11 October 2023 9.00 am – 10.00 am for an in-depth discussion on the key announcements made in the budget and their impact on you and your business.

This year we are delighted to welcome Professor Alan Barrett, CEO of the Economic and Social Research Institute (ESRI) as guest speaker. Alan will share his perspective on Budget 2024 and the broader economic landscape.