Among the many proposed expenditure measures impacting allowances, credits and reliefs, the most notable was the recommendation that child benefit should be subject to income tax with a corresponding child tax credit. Others also include the discontinuance of a number of tax reliefs and a proposal to limit tax for ex-gratia termination payments to €200,000. The Commission also proposes that capital gains tax and stamp duty exemptions on the disposal of a site to a child be discontinued and that the business relief and agricultural relief for CAT be limited by reducing the discount on market value from 90% to 75%. Notable proposals relating to enterprise tax expenditures include the discontinuation of: tax exemption for patent royalties, stock relief for farming businesses and tax relief for the purchase of milk quotas.

Relating to Children

The report proposes that child benefit should be treated as taxable income, or alternatively, as indicated by the Government, subject to means testing. It adds that a child tax credit be introduced to offset the additional tax payable in respect of child benefit for those in the lower half of the income scale.

Further changes proposed include discontinuation of a number of child care reliefs such as:

• Capital allowances for childcare facilities.
• Income tax exemption for childcare service providers.
• Exemption of employer-provided childcare from benefit-in-kind charge.

Relating to Housing

The Commission considers that the original rationale for rent-a-room relief no longer applies and that it is inappropriate to distinguish between income from renting out a room and other taxable income. On this basis, it is proposed that the rent-a-room relief should be discontinued. Further proposals on housing expenditure include the discontinuation of income tax relief for rent paid and relief for service charges.

The Commission reports that capital gains tax and stamp duty exemption on disposal of a site to a child confers an advantage on individuals who are in possession of an asset which they are in a position to dispose of with a resultant gain. Therefore it is recommended such exemption should be discontinued.

Relating to Employment

Considering the role termination payments have played in facilitating business rationalisation as well as assisting employees to meet financial commitments, the Commission is of the view that some level of termination relief should continue. The report proposes that income tax relief for ex-gratia termination payments should be limited to €200,000 and the reliefs for Standard Capital Superannuation Benefit and top-slicing relief should be simplified.

It is recommended that the artist's exemption be discontinued however income averaging may be applied to those who derive their income solely or predominantly from creative work.

Relating to Enterprise

The report proposes that business relief and agricultural relief for CAT be limited by reducing the discount on market value from 90% to 75%. It adds that the amount by which the value of the business or property be reduced be subject to an overall monetary limit of €3 million. Capital gains tax will apply as normal to any excess over €3 million. The report further proposes that business relief and agricultural relief should be amalgamated into a single relief.

The Commission favours the R&D tax credit scheme over the patent royalty scheme and recommends that the patent income exemption be discontinued. This should allow available resources focus on the preferred R&D scheme.