The Finance Bill, which was published on 23 October, includes many measures not previously announced in Budget 2015. Anti-avoidance features prominently with a rewrite of Section 811 and the Mandatory Disclosure Regime. Anti-evasion also features, particularly in relation to VAT. There is little or nothing to relieve the tax compliance burden on business; in fact the contrary is the case.

A whistlestop tour of new measures includes:

Anti Avoidance

Section 10 – restriction on losses on part-time trades. Generally the taxpayer will have to spend 10 hours a week working in a loss-making trade to have the losses available for offset. Otherwise the loss offset is restricted to the lower of the loss actually incurred, and €31,750. Farming, market gardening and Lloyd’s underwriting are specifically excluded from the restriction. “Tax planned” losses are also excluded.

Section 40 – CGT anti-avoidance. Ensures that an asset uplift during a period of temporary non residence gets caught for CGT charging purposes.

Section 41 – in future, works of art cannot be regarded as items of plant (and therefore cannot be regarded as wasting assets).

Section 72 – a main purpose test has been introduced into the charitable discretionary trust tax regime.

Section 73 – exemption from CAT payments already exists for the support and maintenance or education of children, including the children of the civil partner, or to a person to whom the donor stands in loco parentis. An amendment confines the exemption to payments made to minor children and to children under the age of 25 in full-time education. It will also ensure that the children of living parents and orphaned children are treated the same way for CAT purposes.

Section 79 replaces TCA 97 sections 811 and 811A. The new section 811C effectively redefines a tax avoidance transaction, and removes the necessity for an Inspector of Taxes to form an opinion that a transaction is a tax avoidance transaction. Revenue may at any time withdraw or deny tax advantage by making or amending an assessment on the taxpayer by reference to the return in which the benefit of the tax avoidance transaction is claimed. A new section 811D puts a 30% surcharge on the tax recovered from a tax avoidance transaction where 811C has been applied, unless a protective notification has been made.

Section 80 addresses Mandatory Disclosure. It rewrites the Mandatory Disclosure legislation, inserting into the Taxes Consolidation Act the details of the Mandatory Disclosure regime which had hitherto been dealt with by Revenue Regulation. In addition, notified schemes are in the future to be given a reference number, which will be used on returns. A similar approach is already taken in other jurisdictions.

Compliance and Anti Evasion

Section 15 – tightens up RCT legislation with additional penalties on principal contractors.

Section 59 – VAT record retention. Accountable persons must retain all records and linking documents on VAT matters in dispute until the dispute is resolved.

Section 61 is VAT anti-evasion. The accountable person must issue a document which contains all of the particulars required on a VAT invoice to the customer, even if the customer is not VAT registered.

Section 62 is more VAT anti-evasion. The accountable person can become jointly and severally liable for VAT liabilities if involved in a series of transactions designed to evade VAT.

Section 77 allows Revenue to demand a return in connection with the domicile levy.

Section 83 extends the retention period for records in cases which are under appeal or legal process until such time as the proceedings have closed. It also provides for the retention of records by personal representative of a deceased person.

Regime Changes and Relieving Measures

Section 17 – makes significant changes to the pensions tax regime. It attempts to nail down any planning round ARFs and AMRFs. More positive changes include the allowing of a drawdown of 4% per annum from AMRFs. The annual rate of imputed distribution from ARFs is being reduced from 5% to 4% where the value is less than €2 million and the owner isn’t 70 years of age or older. The 6% rate continues in all cases where the value is greater than €2 million.

Section 29 – a new regime of allowances for aircraft hangars will take flight subject to commencement order.

Section 63 – exempts green fees, fostering services, and the management of certain defined contribution pension schemes from VAT. In future, the same rate of VAT will apply to herbal tea as to black tea.

Section 38 – removes the “trading” over-ride from the definition of corporate residence in Section 23A TCA 97. Section 882 is also amended, which concerns the notification of incorporation requirements to Revenue. The effect of any relevant Double Taxation Agreement appears unchanged.

Finance Bill 2014, including the Explanatory Memorandum, is available on the Oireachtas website.

According to Oireachtas officials, Committee Stage is scheduled for 18th, 19th, 20th of November and followed by Report Stage later in the month. The Bill is expected to be signed into law in December.