07th December 2006 |
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Budget 2007: Principal Changes in Relation to Property and Farming |
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| Mortgage Interest Relief | |
| The current annual ceiling on the amount of interest that can be allowed on a mortgage is being doubled for first-time buyers from €4,000/€8,000 single/married to €8,000/€16,000 single/married. The increased relief will be available to all first-time buyers who are in the first seven years of their mortgage. | |
| The ceiling for non-first-time buyers is also being increased, from €2,540/€5,080 single/married to €3,000/€6,000 single/married. | |
| The cost of these measures is estimated to be €50 million in 2007 and €70 million in a full year. | |
| Allowance for Rent Paid by Certain Tenants | |
| The maximum level of rent paid for private rented accommodation on which tax relief can be claimed, at the standard rate of tax, is being increased for those aged under 55 years of age, from €1,650 to €1,800 per annum for a single person and from €3,300 to €3,600 per annum for widowed and married persons. This equates to a tax credit of €360 per annum for single persons and €720 for widowed and married persons. For those aged 55 years and over, the maximum level of rent paid on which tax relief can be claimed is being increased from €3,300 to €3,600 per annum for a single person and from €6,600 to €7,200 per annum for widowed and married persons. This equates to a tax credit of €720 per annum for a single person and €1,440 per annum for widowed and married persons. | |
| This measure is estimated to cost €2.5 million in 2007 and €3.5 million in a full year. | |
| Rent-a-Room Scheme | |
| From 1 January 2007, it is proposed to close off use of the Rent-a-Room Scheme where the rent received is from connected persons who in turn are claiming rent relief. | |
| It is estimated that this measure will yield €0.2 million in 2007 and €0.2 million in a full year. | |
| Increase in the Specified Rates for Preferential Home Loans and Other Loans | |
An employee in receipt of a preferential loan is charged income tax on the difference between the interest actually paid and the amount which would have been payable at the “specified” rates of interest for the loans. To reflect increases in interest rates, the specified rate in respect of home loans is being increased from 3.5% to 4.5% and the specified rate in respect of other loans is being increased from 11% to 12%. These changes will take effect from 1 January 2007. |
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| The expected yield from this measure is €3 million in 2007 and €4 million in a full year. | |
| Review of VAT on Property Transactions - Public Consultation | |
| The Revenue Commissioners, over the last two years, have carried out a review of the current system of applying VAT on property transactions. The review recommends significant changes to the system. The complexity of this area of taxation needs to be addressed, but given its importance, it is planned to engage in a wide consultation process with interested parties before deciding on any changes which might appropriately be implemented in the 2008 Finance Act. Further information, including an invitation for submissions from interested parties, will be made available by mid-December on the Department of Finance’s website, www.finance.gov.ie and on the Revenue Commissioner’s website, www.revenue.ie. | |
| STAMP DUTY | |
| Stamp Duty on Mortgage Deeds | |
| Mortgage deeds, as with many legal documents, are liable to stamp duty (this is a separate stamp duty from that which is applied to the conveyance of property). Primary mortgages are currently exempt up to the value of €254,000, and those at higher values are subject to stamp duty of 0.1% subject to a maximum duty of €630 whether in respect of residential or non-residential property. The duty currently applied to collateral or additional mortgages is generally a €12.50 fixed duty and in the case of equitable mortgages and transfers of mortgages, generally 0.05%, subject to a maximum of €630. The stamp duty head of charge for mortgages is being abolished for mortgage deeds executed on or after 7 December 2006. | |
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| The cost of abolishing the mortgage head of charge is estimated at €20m in 2007 and in a full year. | |
| FARMER TAXATION | |
| Farmers’ VAT Flat-Rate Addition | |
| The farmers’ VAT flat-rate addition is being increased from 4.8% to 5.2% with effect from 1 January 2007. The flat-rate is designed to recoup non-VAT registered farmers for the VAT they incur on their inputs. | |
| The cost of this measure is estimated to be €13.5 million in 2007, and €16 million in a full year. | |
| Livestock VAT Rate | |
| The rate of VAT charged by registered farmers and other businesses on the supply of livestock, live greyhounds and the hire of horses remains unchanged at 4.8%. | |
| Farmer Stock Relief | |
| The existing general 25 per cent stock relief for farmers and the special incentive stock relief of 100 per cent for certain young trained farmers are being extended from 1 January 2007 for a further two years subject to clearance with the European Commission under State aid rules. |
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| The cost of this measure is estimated to be approximately €2 million in 2007 and in a full year. | |
| Leased Land Exemption | |
| Certain tax exemptions apply for income derived from certain leases of farmland. From 1 January 2007, a new exemption of €20,000 per annum will be introduced for leases of 10 years or more duration. This measure is subject to clearance with the European Commission under State aid rules. | |
| The cost of this measure is estimated to be about €0.5 million in 2007 and €1 million in a full year. | |
| Scheme of Capital Allowances for Milk Quota | |
| The scheme of capital allowances for milk quota is being amended to ensure this relief is available for quota purchased under the new Milk Quota Trading System. | |
| This measure is expected to be broadly Exchequer neutral. | |
| Extension of Stamp Duty Relief for Farm Consolidation | |
| Stamp duty relief for exchanges of farmland between two farmers for the purposes of consolidating each farmer’s holdings was introduced on 1 July 2005 for a period of two years. The relief is being extended for a further two years to 30 June 2009. The relief will also be extended to qualifying exchanges of land where only one farmer is consolidating his/her holding. In such cases both farmers can qualify for relief, provided both farmers meet all other conditions of the relief. These changes will be included in the 2007 Finance Bill. However, commencement of these changes will be dependent on State Aid approval from the European Commission. | |
| The cost of extending this relief is estimated to be €0.4m in 2007 and €0.6m in subsequent years. | |
| Changes to the Stamp Duty Relief for Young Trained Farmers | |
| Stamp duty relief is available for farmers acquiring land, who are aged under 35 and have specific agricultural training. Amendments are now being made to the education criteria and refunds procedure in this relief. Firstly, the FETAC Level 6 Advanced Certificate in Agriculture will become the new minimum education requirement from 31 March 2008; secondly, the qualifying third-level course titles are being updated; and finally, the refunds procedure is being simplified. The changes being made to the refunds procedure are as follows: | |
| the time limit within which young trained farmers can complete their education following the transfer is being extended from 3 to 4 years | |
| the current requirement for specific minimum education attainments at the date of transfer is being abolished | |
| the requirement that the refund claim be made within 6 months of qualification is also being abolished | |
| the 5 year period during which a young trained farmer is required to retain and farm the land will commence from the date of the claim for refund | |
These changes will be included in the 2007 Finance Bill. |
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| The costs of these changes are not expected to be significant. | |
| Capital Gains Tax Retirement Relief – Disposals of Leased Land | |
| An exemption from CGT applies in the case of individuals aged 55 and over who dispose of qualifying business or farming assets. In order for a farming asset to qualify under the relief it must have been owned and used for farming purposes for at least ten years prior to disposal. The relief is now being extended, in certain circumstances, to disposals of land where the land had been leased prior to disposal. In order for such disposals to qualify under the relief, the following three conditions must be met: (a) the land in question must have been leased for no longer than 5 years prior to disposal, (b) the land must have been owned and used by the farmer for ten years prior to the initial letting of the land and (c) the land must be disposed of to the person who was leasing the land. These changes will be included in the 2007 Finance Bill. | |
| It is not possible to estimate the cost of this measure but the cost should not be significant. | |
| Capital Acquisitions Tax Agricultural Relief – Off-farm Principal Private Residences | |
| CAT agricultural relief provides relief from CAT on 90% of the value of a gift or inheritance. In order to qualify for the relief, 80% of a farmer’s total assets (after receipt of the gift/inheritance) must consist of qualifying agricultural assets. Off-farm principal private residences are not considered such assets for the purposes of this relief. This provision is now being amended so that an individual may off-set borrowings on an off-farm principal private residence against the property’s value, for the purpose of the 80% test. These changes will be included in the 2007 Finance Bill. | |
| It is not possible to estimate the cost of this measure but the cost should not be significant. | |
| OTHER MEASURES | |
| VAT | |
| VAT Registration Thresholds for SMEs | |
| The VAT registration thresholds for small businesses are being increased from €27,500 to €35,000 in the case of services, and from €55,000 to €70,000 in the case of goods. These increases will take effect from 1 March 2007. This will reduce the administrative burden for small businesses and the Revenue authorities. It could remove some 8,000 companies from the VAT net. | |
| The cost of this measure is estimated to be €35 million in 2007 and €53 million in a full year. | |
| VAT Cash Accounting Threshold | |
| The annual VAT cash accounting threshold for small firms is being increased from €635,000 to €1,000,000 with effect from 1 March 2007. This will simplify administration and reduce working capital requirements. | |
| This measure will result in an estimated once-off cash flow cost of €35 million in 2007. | |
| Less Frequent VAT Returns for Small Businesses | |
| The frequency of VAT payments, currently six per year, for smaller businesses is being reduced with effect from July 2007. For businesses with a yearly liability of €3,000 or less, the option of filing returns on a half-yearly basis will be available. For businesses with a yearly liability between €3,001 and €14,400, the option of filing returns every four months will be available. This will reduce compliance costs for the firms in question. | |
| This measure will result in an estimated once-off cash flow cost of €49 million in 2007. | |
| Ends. | |