Finance Bill 2009, which implements the Supplementary Budget announcements together with further measures not announced in the Budget, was published on 7 May 2009.

The following is a summary of the measures which were not announced in the Budget.

Income Levy

The taxable element of redundancy payments paid between 1 January and 30 April 2009 will be charged on the basis of the income levy rate in force in the first four months of the year.

Mid-Shannon Tourism Infrastructure Scheme

The scheme was introduced with effect from 1 June 2008 following State Aid approval from the European Commission. The relevant legislation provided for a 31 May 2009 deadline for submission of projects for certification by the Mid Shannon Tourism Infrastructure Scheme Board. It is proposed that the 31 May 2009 deadline for submission of applications for certification to the Board be extended by one year to 31 May 2010. The qualifying period for incurring expenditure is also extended to 31 May 2013.

Participation Exemption

This amendment will provide that the “participation exemption”, i.e. exemption from capital gains tax for Irish resident companies disposing of shares in other companies, cannot be availed of where the shares derive their value from exploration or exploration rights.

Interest on certain overdue tax

The statutory rate of interest applied by Revenue to delayed payments of taxation and underpayments by taxpayers engaged in business activities will be reduced by some 20% to 0.0219% and 0.0274% giving respective annualised equivalents of 8% and 10% approx. These new rates are to take effect from 1st July 2009.

Changes to measures announced in the Budget include:

VAT

The proposed introduction of a VAT Margin Scheme for second-hand cars is not included in the Finance Bill.

According to the Minister, “the Society of the Irish Motor Industry (SIMI) expressed appreciation at the efforts made by the Government to try to assist the industry, they considered, in view especially of the difficult financing situation facing the industry, that on balance it would not be in its overall best interest for the Margin Scheme to be introduced at this time.”

The following deal with specific measures where changes to the Budget announcements were made in the Finance Bill:

I. Income Levy

The Finance Bill amended the application of the composite rates of Income Levies on taxable redundancy payments made in the period 1 January 2009 to 30 April 2009.

This means that taxable redundancy payments made before 30 April 2009 can still avail of the income levy rates in force up to 30 April 2009 as follows:

• 1% on the first €100,100
• 2% on the next €150,020
• 3% on the remainder

This measure goes some way towards alleviating the fundamental uncertainties at the heart of the retrospective taxation measures introduced by the Supplementary Budget. However, there are still a lot of issues to be clarified by Revenue such as if the PAYE taxpayer will have to make payments or indeed can claim a refund at the year end if income levies based on the composite rates differ from income levy operated under the payroll rates. The Finance Bill gives Revenue powers to make regulations necessary to administer the Income Levy so the waiting game continues on how the biggest change to the Irish tax system in ten years will eventually operate.

II. Mortgage Interest Relief

The Revenue have the power now to request a lender to provide relevant information for the purposes of assessing the 280,000 cases requiring review on foot of the new Budget measures which move to abolish mortgage interest relief on home loans exceeding 7 years.

III. Reduced Rates of Interest on Underpaid Tax

The statutory rates of interest applied by Revenue to delayed payments of taxation and underpayments by taxpayers are amended by Finance Bill 2009.

The current daily rate applicable on late tax payments of income tax, corporation tax, capital gains tax, gift tax and inheritance tax is reduced from 0.0273% to 0.0219% and for fiduciary taxes such as PAYE the rate reduces from 0.0322% to 0.274% with effect from 1 July 2009.

IV. Intangibles

The Finance Bill provides for a new scheme of tax relief for capital expenditure incurred by companies on the provision of intangible assets for the purpose of a trade. This new relief will consolidate existing reliefs for certain intangibles (such as patent rights and know-how), together with providing relief for other intangibles (such as trade marks and copyright).

In summary, the scheme provides for capital allowances against taxable income on capital expenditure incurred by companies on the provision of intangible assets for the purposes of a trade. The new scheme applies to expenditure incurred by a company after 7 May 2009.

The scheme applies to intangible assets which are recognised as such under generally accepted accounting practice and which are included in the specified categories listed in the new section, including patents, trade marks, copyright, know-how, goodwill.

Allowances provided under the scheme will reflect the standard accounting treatment of intangible assets. However, companies can opt instead for a fixed write-down period of 15 years at a rate of 7% per annum and 2% in the final year.

Activities which consist of the managing, developing or exploiting of a specified intangible asset and carried on by a company as part of a trade are to be treated as a separate trade and income from such activity is to be assessed separately.

There will be no claw-back of allowances where an intangible asset is disposed of more than 15 years after the beginning of the accounting period in which the asset was first provided, provided that the disposal does not result in a connected company claiming allowances in respect of capital expenditure on the asset.

There are specific provisions for group companies.

The following is the interaction of the new relief with existing reliefs:

Computer Software

The allowances currently available for capital expenditure on the provision of computer software are being retained. The new scheme does not apply to computer software.

Patent Rights and Know-How

As patent rights and know-how are being included in the new scheme, the existing reliefs for capital expenditure on patent rights and know-how are being discontinued for companies, but with provision for companies to opt for these reliefs for a further 2 year period.

Interaction with Stamp Duty

The definition of ‘'intellectual property’’ in section 101 of the Stamp Duties Consolidation Act 1999 is being changed to broadly align the definition of ‘'intellectual property’’ in the Stamp Duty code with a similar definition in the new relief above. The change applies to instruments executed after 7 May 2009.