TaxSource Total

Here you can access summary of the key current tax developments in Ireland, the UK and internationally as reported by Chartered Accountants Ireland

The report of key tax developments are displayed per year, per month, by Ireland, the UK or International and by report title

Income Tax

Mortgage Interest Relief

Mortgage interest relief increases to 30% for first time buyers who took out their first mortgage in the period 2004 to 2008.

Mortgage interest relief will also be available at 25% for first time buyers who purchase in 2012 and at 15% for non-first time buyers who purchase in 2012.

A first time buyer means an individual who has not previously been entitled to relief in respect of interest paid on loans used for the purchase, repair, development or improvement of an individual's sole or main residence. According to the Revenue's information leaflet on key definitions for mortgage interest relief, in the case of joint loans it is possible that one of the parties is a first time buyer and the other is not.

Special Assignee Relief Programme

A new special assignee relief programme (SARP) is introduced which provides an exemption from income tax on 30% of salary between €75,000 and €500,000. It applies to employees assigned from abroad to take up a position in an Irish based operation for at least one year up to a maximum of five years.

The new SARP applies for the duration of the qualifying assignment i.e. relief is not claimed on a refund basis as was the case with old SARP.

The definition of qualifying employees is expanded to include employees of companies associated with an Irish resident company and the employee must not have been tax-resident in the five years before the year of arrival.

Relief under SARP will not apply to PRSI or the Universal Social Charge. While the threshold to operate SARP is now lower at €75,000, the old SARP provided a higher rate of tax relief of 50% on earnings in excess of €100,000. Therefore, SARP under the new rules is less advantageous than formerly provided for, except of course for those individuals who did not previously qualify. It's certainly not a sweeping innovation, and will not make us competitive with other EU States in this area. It's more an object lesson in being careful for what you wish for. Protestations that an assignee tax framework remains a work in progress are no longer appropriate; urgent and effective remedies, not bureaucratic experiments, are required. SARP will bring in new tax – it is not a tax break for the privileged few.

The new SARP regime is effective from 1 January 2012 and is set to apply for a three year period up to 31 December 2014. The old SARP system appears to be abolished from 1 January 2012; however Chartered Accountants Ireland will be seeking clarification through TALC on transitional measures necessary to ensure the fair application of SARP to employees working in Ireland prior to 1 January 2012.

Foreign Earnings Deduction

A foreign earnings deduction will be available to employees who spend time working in the so called BRICS countries (Brazil, Russia, India, China and South Africa). The maximum amount of income which can be deducted under the scheme is €35,000. In order to qualify, the individual must be Irish tax-resident and spend 60 qualifying days working outside Ireland in a BRICS country in a continuous 12-month period. The deduction will take effect from 1 January 2012 and will operate until 2014.

Domicile Levy

The definition of who may be subject to the levy is amended to remove the condition of Irish citizenship. For the tax year 2012 onwards non-Irish citizens who are Irish domicile and fulfill the other conditions will be subject to the levy.

Restriction on Property Based Tax Reliefs

A surcharge is introduced with effect from 1 January 2012 on individuals claiming property based tax reliefs with gross income over €100,000. The surcharge, which is a higher rate of USC, will apply at a rate of 5% on the amount of income sheltered by property reliefs, such as Section 23 relief, claimed in a given tax year. For example if Section 23 relief of €50,000 is claimed in a tax year, then the surcharge will amount to €2,500.

Gross income is calculated as income before a deduction for tax based reliefs such as BES, film relief and Section 23 type reliefs.

Individuals claiming owner occupier relief will not be subject to this surcharge. Investors in accelerated capital allowances schemes will no longer be able to use capital allowances beyond the tax life of the scheme where that tax life ends after 1 January 2015. In cases where the tax life of the scheme ends before 1 January 2015, no carry-forward of allowances will be permitted into 2015 and thereafter.

The original proposals made no distinction between investors of relatively modest means and investors with far higher income. Chartered Accountant Ireland in its submission to the Department of Finance's Economic Impact Assessment, proposed that the restrictions on property based tax reliefs should be based on the taxpayer's income rather than a blanket restriction of relief as suggested in feedback from our members.

The Finance Bill also amends an anomaly whereby a clawback of tax based property reliefs such as Section 23 relief resulted in a high income earner restriction. It is now permitted to offset related losses forward against the clawback.