Finance Bill 2013 was published on Wednesday 13 February. As has been the case in recent Finance Bills, the Bill confirms the various Budgetary measures and introduces a number of new measures.

USC

Revenue's recently published USC manual clarifies that balancing charges are “relevant income” for USC purposes where the capital allowances to which the charge relates were deductible for USC purposes. Where such capital allowances were not deductible, the balancing charge will not be subject to the USC. Section 2 of the Bill provides for USC in cases where a balancing charge arises on disposal of an asset in respect of which capital allowances were allowable for calculation of USC.

Section 25 amends Schedule 24 TCA 1997 to provide for a credit for unrelieved foreign tax paid against USC on the foreign income. Chartered Accountants Ireland has been engaging with Revenue under the TALC Technical committee on the method of granting foreign credit against the USC and will continue to engage with Revenue on the ROS developments to facilitate this relief.

Certain administrative provisions are also included in relation to the USC and the obligation to make returns, Revenue's right to make enquiries and the PAYE system.

Ex-Gratia Payments

Foreign Service Relief (section 201 TCA 1997) is abolished in respect of ex-gratia payment made on retirement or removal from office. This measure, according to Finance documents, will ensure that Ireland does not become a retirement tax haven and there will be identical tax treatment of all ex-gratia payments.

The maximum lifetime tax free limit of €200,000 (section 201 TCA 1997) is extended to cover ex-gratia payments made on account of death or disability.

Civil Partnership

New measures in the Bill provide for amendments to income tax, capital gains tax (TCA 1997) and capital acquisitions tax (CATCA 2003). The amendments address anomalies between the tax treatment of civil partners and married couples.

Foreign Rental Loss

The Bill amends section 70 TCA 1997 to clarify that losses on foreign rental income which are taxable under Schedule D Case III cannot be used to reduce other Case III sources such as foreign trading income or foreign dividends. Revenue's practice to allow foreign rental losses to be used against other foreign rental profits will continue.

Dealing in or Developing Land

Two new sections are inserted into the TCA 1997, section 87B and section 381A.

Section 87B will treat the release of debt incurred in respect of money borrowed to purchase or develop land held as trading stock as an income receipt subject to tax. Where the debt is realised after the trade is discontinued, it will be regarded as a post-cessation receipt.

Where losses arise in a trade of dealing in or developing land and the individual is not actively engaged in such a trade, section 381A will restrict the use of certain losses so that they can only be used against income of the same trade - section 381 loss relief will not apply. Effectively this means that such losses cannot be used against the individual's other income in the same year.

Anti-Avoidance & Remittance Basis of Assessment

Section 29 TCA 1997 (capital gains) and section 71 TCA 1997 (income) provide for the remittance basis of assessment which generally applies to individuals not Irish domiciled. The Bill amends both sections to provide that, in the case where gains/income had been subject to the remittance basis and the individual transfers the gains/income to a spouse/civil partner outside the State, the remittance basis will continue to apply. Therefore the gains/income will be subject to Irish tax when remitted.

Capital Gains Tax

The Bill makes a technical amendment to section 599 TCA 1997 to ensure that CGT retirement relief will be available for disposals of qualifying assets of €3 million or less by individuals aged 66 or over. This measure was required following the changes by Finance Act 2012 which restricted retirement relief at €3 million on the value of disposals by individuals aged 66 or over where the disposal is made on or after 1 January 2014. Section 599 is also amended so that the €3 million limit is an aggregate lifetime limit for all disposals.

Revenue Online Services (ROS)

The Bill inserts a new provision into section 960E TCA 1997 which puts on a legislative basis the issue of demand notices by electronic means. Demand notices issued by the Collector General via ROS will now be enforceable in the same way as demand notices issued in paper form.

Amendments are also introduced to extend the meaning of a return required under section 884 TCA 1997 so that in the case of a non-resident company operating in Ireland through a branch or agency, Revenue may require the submission of accounts as part of the return which relates to the branch or agency.

Direct Tax Assessing Rules

Concerns have been raised by the TALC subgroup which includes Chartered Accountants Ireland, on the changes introduced in Finance Act 2012 to the direct tax assessing rules. As a result, Finance Bill 2013 makes a number of technical amendments to Part 41A TCA 1997 and updates references, terms and time limits in other sections of the TCA 1997. Chartered Accountants Ireland will continue to engage with Revenue on the new rules, which came into effect from the 2013 year of assessment, and the next meeting of this subgroup is scheduled for end-March.

General Anti-Avoidance

Finance Act 2008 introduced a provision into section 811A TCA 1997 which lowered the “burden of proof” in cases appealed under section 811(7) where Revenue had not received a “valid” Protective Notification on time. Section 811A (1C) is repealed by Finance Bill 2013 so that the same “burden of proof” will apply regardless of whether a Protective Notification is made.

Research and Development Credit

In addition to the increase to the volume based expenditure threshold from €100,000 to €200,000, the Finance Bill also relaxes one of the conditions to section 472D TCA 1997 to allow a company allocate the R&D credit to a key employee. The amendment results in the threshold of time spent working on R&D by a key employee reduce from 75% to 50%.

Intangible Asset Regime

A tax deduction for capital expenditure incurred on the acquisition of certain intangible assets such as copyrights and trademarks is allowed for under section 291A TCA 1997. If such assets are disposed of or cease to be used for the trade within a certain holding period, then a claw-back of capital allowances claimed is triggered. The Finance Bill reduces the holding period for such assets from ten years to five years.

Resting in Contract

The Finance Bill enacts anti-avoidance legislation to counter a number of schemes where stamp duty is avoided through the absence of a stampable instrument in respect of the transfer of an interest land. The new measures do not apply where a binding written contract is in place before 13 February 2013.

The new measures mean that a charge to stamp duty will arise in respect of a contract or agreement for the sale of an estate or interest in land in the State where 25% of the purchase price is paid to the seller and stamp duty has not been paid in full within 30 days. Stamp duty is also triggered in the case of licensing agreement where 25% or more of the market value of the land is paid to the landowner. An agreement for a lease for more than 35 years will also be liable to stamp duty where 25% of the consideration has been paid.

Section 82 Finance (No. 2) Act 2008 proposed legislation to close the perceived stamp duty loopholes associated with resting in contract, licensing and long lease arrangements. However, the relevant Ministerial Order to activate this legislation never issued.

Young Trained Farmers

Relief from stamp duty on transfers of agricultural land as provided for under section 81AA SDCA 1999 (including farm houses and buildings) to young trained farmers is extended until 31 December 2015.

Receivers and Liquidators

The VAT treatment of receivers and liquidators is addressed in Finance Bill to amend Sections 28, 65 and 76 of VATCA 2010. The amendments clarify that a receiver, liquidator or other person exercising a power, who, in the course of carrying on or winding up a business, supplies taxable services (e.g. operates a hotel or makes a taxable letting), is liable for the VAT on those services/rents. Although the accountable person is deemed to have made the supplies, the receiver/liquidator is required to register, make the return and remit any tax due (a) in relation to those supplies and (b) in relation any adjustment of deductibility under the capital goods scheme. The receiver or liquidator or any other person exercising a power is now accountable under the capital goods scheme for obligations of the defaulter under that scheme for the duration of the receivership.

E-Invoicing Provisions

New rules for electronic invoicing came into force on 1 January 2013 which provided for a system of electronic invoicing. Finance Bill 2013 provides that regulations can be made by Revenue outlining the business controls that may be applied by businesses that issue or receive electronic invoices.

Readers will be kept updated on the progress of the Bill as it moves through the Dáil.