The Minister for Finance, Paschal Donohoe TD, has today (Thursday) published the Finance Bill 2022 following approval by Government earlier this week.
The Finance Bill 2022, which runs to 93 sections and over 200 pages, implements the taxation changes announced on Budget Day as well as introducing some necessary administrative and technical changes to the tax code.
The Bill will transpose recent EU and OECD agreements in respect to important new tax transparency rules for digital platforms.
The Bill provides for the income tax changes, the Temporary Business Energy Support Scheme (TBESS), the rent tax credit and the Defective concrete blocks levy which were announced on Budget Day. It also contains a number of additional taxation measures that were not announced on Budget Day such as the increase in the threshold for cargo bikes under the cycle to work scheme and changes to the Key Employee Engagement Programme (KEEP).
Commenting on the publication of the Finance Bill, Minister Donohoe stated:
“The Finance Bill 2022 sets out the legislative provisions to bring effect to the tax measures announced in Budget 2023. This is a ‘Cost of Living’ Budget that underlines the Government’s commitment to help individuals, families and businesses to deal with the challenge of rising prices.
The Finance Bill implements a range of targeted tax changes including specific measures to support families, businesses and to address climate change. The Bill also contains a number of administrative changes to the tax code, reflects recent international developments, and seeks to protect and enhance the integrity of our tax code.
One of the key policies announced in the Budget was the Temporary Business Energy Support Scheme. The Finance Bill today outlines further detail to the scheme which will be available to trading and professional businesses who are experiencing significant increases in their energy costs. Revenue will publish the guidance on the scheme in the coming days and it will be open for claims in November.
I look forward to bringing the Finance Bill, which is an important legislative instrument through the Oireachtas over the coming weeks.”
Income Tax Package
The Finance Bill includes provisions to legislate for the 2023 income tax package announced by the Minister for Finance on Budget Day, which will cost almost €1.13 billion next year and €1.3 billion in a full year.
The key elements of the personal income tax package, will see the main personal tax credits (personal credit, PAYE credit and Earned Income credit) being increased by €75 each to €1,775, broadly a 4.4% increase, and the standard rate cut-off point for a single person being increased by €3,200 to €40,000 (8.7% increase), with commensurate increases in the bands applying to married persons and persons in civil partnerships. The home carer tax credit will also be increased by €100 to €1,700, which represents a 6.3% increase.
Regarding the USC, the Bill provides that the 2% rate band ceiling will be increased by €1,625 or 7.6% to €22,920 to take account of the National Minimum Wage increase that will apply from 1 January 2023. This will ensure that the 2% rate remains the highest rate of USC that is charged on the income of full-time workers on the minimum wage.
Furthermore, the reduced rate of USC for medical card holders will also be extended for a further year until the end of 2023.
Rent Tax Credit
The Bill introduces a new €500 tax credit for renters, with each tax-paying tenant in a particular property being eligible for the credit in their own right. The credit is aimed at, and will be only available to, renters who do not receive State housing supports. The credit will also be available in certain circumstances to parents who pay rent on behalf of their student child who is in third-level education.
Tax Exemption for Covid-19 Related Lay-Off Payments
The Covid-19 Related Lay-Off Payment is intended to “plug the gap” for employees who lost the opportunity to accrue reckonable service due to lay-offs caused by the Covid-19 public health restrictions. Statutory redundancy payments are exempt from income tax and therefore these payments will also be exempt from income tax.
Small Benefit Exemption
The Finance Bill provides for the increase in the Small Benefit exemption to €1,000 and the increase in the number of permissible benefits (e.g. vouchers) from one to two.
This measure was introduced by Financial Resolution on Budget Night to give it effect in the current tax year.
Cargo Bikes under the cycle to work scheme
The Finance Bill provides for an increase in the threshold for cargo bikes under the cycle to work scheme.
Cargo bikes can be considerably more expensive than ordinary bikes and even electric bikes and therefore the threshold for cargo bikes is being increased to €3,000 to reflect this. The change will apply from 1 January 2023.
The measure incentivises cycling for shorter journeys, including as means for families to transport children to crèche/school as an alternative to the car.
Temporary Business Energy Support Scheme
The new Temporary Business Energy Support Scheme (TBESS) will provide support for businesses that have experienced a significant increase in their electricity and natural gas costs, is being introduced. The scheme falls under the European Commission Temporary Crisis Framework (TCF) and is subject to State Aid approval. It will apply to tax compliant businesses carrying out a trade or profession (Case I and Case II). It will also apply to new businesses. A monthly cap on relief of €10,000 per trade or profession will apply. However, where a qualifying business operates across more than one location increased relief may be available subject to a monthly cap of €30,000. The scheme will be administered by the Revenue Commissioners on a self-assessment basis. The scheme will run from 1 September 2022 to 31 December 2022, with the intention to extend it to 28 February 2023 subject to the anticipated extension of the TCF.
Vacant Homes Tax
The Bill provides for a new Vacant Homes Tax (VHT) to be introduced in 2023. The measure aims to increase the supply of homes for rent or purchase, rather than raise revenue. The VHT will be self-assessed and administered by the Revenue Commissioners, and will apply to long-term habitable vacant residential property that is subject to Local Property Tax (LPT). The VHT will be paid by property owners. A property will be considered vacant for the purposes of the tax if it is occupied for less than 30 days in a 12-month period. The first chargeable period will commence on 1 November 2022, and owners of vacant properties will be required to file a return in November 2023. Payment of the tax will be due on 1 January 2024, at a rate equal to three times the property’s base LPT rate. The VHT will be paid in addition to the LPT.
The Bill also provides for a number of exemptions to ensure property owners are not unfairly charged for temporary vacancy arising from genuine reasons. This will include properties recently sold or currently listed for sale or rent; properties vacant due to the occupier’s illness or long-term care; and properties vacant as a result of significant refurbishment work.
This measure seeks to achieve an appropriate balance between incentivising owners of vacant homes to bring their properties back into use and not penalising home-owners for normal, temporary vacancy, with the primary objective of the tax being to change behaviour rather than raise revenue.
Mineral Oil Tax Excise
The Bill provides for the extension of the existing Mineral Oil Tax reductions on petrol, diesel and Marked Gas Oil. These reductions were first introduced in March 2022 and were due to be reversed from 12 October 2022. The reversal of these reductions will now be implemented from 1 March 2023.
Extension of 9% VAT rate for Gas and Electricity
The 9% VAT rate reduction for gas and electricity will be extended for an additional 4 months, until 28 February 2023.
VAT on Newspapers
The VAT on newspapers will be reduced from 9% to zero from 1 January 2023.
This is in line with the Government’s commitment to support an independent press and the Future of Media Commission’s recommendation that a zero VAT rate for newspapers and digital publications be considered.
Newspapers and periodicals were previously brought to 9% in 2011 in recognition of the important role they play within society and the challenges facing the industry at that time. The 9% rate was extended to digital editions in 2019.
Other products which will be zero-rated are Automatic External Defibrillators (AEDs), some period products, non-oral Hormone Replacement Therapy and Nicotine Replacement Therapy.
Extension of Bank Levy
The Finance (No.2) Act 2013 introduced the Financial Institutions Levy for the three-year period 2014 to 2016 with the purpose of enabling the banking sector to contribute to economic recovery. The annual yield of this levy had been approximately €150 million. Finance Act 2016 extended the levy to 2021, and Finance Act 2021 extended it for one further year, while excluding Ulster Bank and KBC as they are in the process of ceasing operations in the State.
As was announced in Budget 2023 the bank levy will be extended for a further year and will again apply only to those banks that will continue to operate in the Irish market going forward. This means that the levy is again expected to generate in the region of €87 million in 2023.
Defective Concrete Products Levy
As was announced in Budget 2023, Finance Bill 2022 includes provision for a new levy to apply to a focussed range of concrete types/products.
Following its announcement on Budget day, and in light of subsequent comment from industry participants and others, the Minister for Finance has determined that the rate at which the levy will apply will be halved from the planned 10% to 5%, will come into effect on 1 September 2023, as opposed to 3 April 2023 (so as to allow all parties more time to prepare for its introduction), and to reduce the range of products to which the levy will apply. Finance Bill 2022 provides that the levy will apply to pouring concrete (aka ready-mix) and concrete blocks under two harmonised EU standards. It will not apply to precast concrete products.
The new levy remains unchanged on what was announced at Budget time in all other respects.
Additional Reliefs from the 10% rate of stamp duty on the bulk acquisition of houses
The 10% rate of stamp duty which was introduced in 2021 in order to dis-incentivise the bulk acquisition of houses (10 or more in any 12-month period) and has contributed to a significant reduction in such activities.
However, it has subsequently came to the attention of the Minister for Finance that it has given rise to unintended effects on the acquisition of houses to be used for the provision of accommodation in the community for people with intellectual disabilities and for children in care.
A measure is therefore included in Finance Bill 2022 which is designed to ensure that where houses are acquired for such purposes, and fall within the scope of the 10% rate, the person or body acquiring those can claim a refund of any stamp duty paid above the standard rate (1% on values up to €1 million and 2% on any value above that).
An exemption is also provided for home reversion agreements where these are provided by a Home Reversion Firm which is authorised by the Central Bank of Ireland.
Certain measures to be provided for at Committee or Report Stage
Due to the nature and extent of issues for which provision is being made in the Finance Bill, and the very complex nature of certain drafting requirements, and the need to align certain provisions with EU legislation, the draft legislative provisions relating to a number of issues are being held over for introduction at Committee Stage of the Bill.
These include the provisions relating to the Key Employee Engagement Programme; the introduction of the provision for Accelerated Capital Allowances for the construction of slurry storage; and the extension of a number of agricultural tax measures due to expire at end December 2022 which are dependent on the outcome of negotiations at a European Level on the Agricultural Block Exemption Regulation (ABER).
As indicated at Budget time, the clear intention remains to provide for the buy-back of KEEP shares by the company from the relevant employee and to raise the lifetime company limit for KEEP shares from €3 million to €6 million.
As also mentioned at Budget time, changes to broaden out the relief to allow for group structures and more flexible arrangements as regards employees are also being brought into effect.