Budget - 2016West Wicklow Business Network – Wednesday

21 October 2015

MARTIN CRAUL & CO/ACAS CONSULTANCYASSURED EXPERTISE LOCALLY

Incorporated Public Accountants and Registered Auditors2 Millbank, Blessington, County Wicklow. W91 W965

Telephone 045 891505 Fax 045 891507 E-mail mcraul@indigo.ieMartin Craul AITI AIPA FAIA, dip. rural dev (UCD), dip. corporate law & governance (Law

Society)

Budget 2016 News• Earned Income Tax Credit• Home Carer Tax Credit• Universal Social Charge Rate

Changes• Home Renovation Incentive

Extension• Employment & Investment (EII)

Changes• Succession Farm Partnerships• Agri-Tax Extensions• LPT Valuation Delays• Knowledge Development Box

• CT Start Up Extension• Film Relief• CGT Business Sale Relief• CAT Category A change• Relief for Micobreweries• Cigarette Tax• ATM Charge Changes• Young Trained Farmer

Extension• Commercial Motor Tax• PRSI Tapered credit

Social Justice Ireland

• 375k people in constant poverty

• 2015 – 1,400,000 experiencing deprivation

• 2008 – 614,000 experiencing deprivation

• One in six children/ one in ten aged over 65 at risk

• Budget 2016 widens rich-gap by €506 per year

• Minimum Wage 25% below living wage €11.50

• While OAP increased by €5 per week no Social Protection increases for those below poverty line of €204.25 (Brian Harvey)

Income Tax Credits 2016

Credit Type• Single Person Credit • Married/Civil Partnership• Employee Tax Credit• Widowed Person/Civil P’ner• Earned Income Tax Credit

• Earned Income Credit 2017?• Earned Income Credit 2018?

Amount of Credit• €1,650• €3,300• €1,650• €2,190• €550• €1,100• €1,650

Other Personal Tax Credits

Credit Type• Incapacitated Child Credit• Blind Person Individual• Home Carer Credit 2015• Home Carer Credit 2016• H/C Income Threshold 2015• H/C Income Threshold 2016• Age Tax Credit • Health Expenses

Amount of Credit• €3,300• €1,650• €810• €1,000• €5,080• €7,200• €245/€490• 20% Rate Allowed

EARNED INCOME T/C 2016

• COMPUTED AT 20% OF EARNED INCOME• MAXIMUM TAX CREDIT €550• INDIVIDUAL – PART TIME FIREMAN €7,000• SELF EMPLOYED MECHANIC €25,000• TAX CREDIT OF €1,400 ON THE JOB• TAX CREDIT OF €250 FROM SELF EMPLOYED• EITC + EMPLOYEE CREDIT NO MORE €1,650

UNIVERSAL SOCIAL CHARGE

2015• Income to €12,012 – 1.50%• Next €5,564 – 3.50%• Next €52,468 – 7.00%• Above €70,044 – 8.00%• Non-Paye Earner – 3% extra

over €100,000 income

2016• Income to €12,012 – 1.00%• Next €6,656 – 3.00%• Next €51,376 – 5.50%• Above €70,044 – 8.00%• Non-Paye Earner – 3% extra

over €100,000 income

Exempt/Reduced USC

2016Individual not earning more

than €13,000All Department of Social

Protection PaymentsIncome Already Subject to

Deposit Retention Tax

2015Individual not earning more

than €12,012Ditto

Ditto

THE TAX BANDSSingle/Widowed/Civil Partner Surviving (No Child)

€33,800 @ lower 20% Rate

Remainder @ 40%

Single/Widowed/Civil Partner Surviving (Qualifying Child)

€33,800 @ lower 20% Rate

Remainder @ 40%

THE TAX BANDS

Married/Civil P’ship One Income

€42,800 @ lower 20% Rate

Remainder @ 40%

Both with Incomes

€42,800 @ lower 20% Rate

€24,800 (max) @ 20%/Remainder 40%

Say main earner had €100k and smaller earner had €15k, €42,800 @ 20% + €15,000 @20%, remainer €42,200 @ 40%

Earning €200,000/USC

Hospital Consultant at SVUH Earning Salary

USC 1.00% Rate €120.12USC 3% Rate €199.68USC 5.50%

€2,825.68USC 8% €10,396.48USC 3% S/C N/A Effective USC 6.77%

Hospital Consultant at SVUH Self Employed

USC 1.00% Rate €120.12USC 3% Rate €199.68USC 5.50% €2,825.68USC 8% €10,396.48USC 3% S/C €3,000.00Effective USC 8.27%

MARGINAL RELIEF CLAIMS

• SELF EMPLOYED INCOME €125,000• Married, spouse works at home• Engages carer for mother-in-law, cost €55,000• Will be relieved at higher rate 40%• Worth €22,000 off tax

LOW INCOME EXEMPTION

Applies to Income Tax Only Related to Age, being 65 or over – Tax

Exemption @ 65/Bus Pass @ 66Single Person – Exempt on €18,000 of incomeMarried/Civil Partners – Exempt on €36,000Child 1 - €575 extra/Child 2 - €575 extraChild 3 - €380 extra/Child 4 - €380 and so on….No Change in Budget 2016

MARRIED INCOME €50,000Income, Tax, USC, PRSI

Case I €50,000Basic Tax @20% €8,560.00Marginal @ 40% €2,880.00USC 1.5% Rate €180.18USC 3.5% Rate €194.74USC 7% Rate €2,269.68USC 5.50% USC 8% USC 3% S/C PRSI 4% €2,000.00

Summary - 2015

Case I €50,000Tax, USC, PRSI

€16,084.60Married T/C

€3,300.00Earned Income T/C Home Carer €810.00Take Home

€38,025.40Effective Deduction 23.95%

MARRIED INCOME €50,000Income, Tax, USC, PRSI

Case I €50,000Basic Tax @20% €8,560.00Marginal @ 40% €2,880.00USC 1% Rate €120.12USC 3% Rate €199.68USC 5.50% €1,723.26USC 8% €USC 3% S/C €PRSI 4% €2,000.00

Summary - 2016

Case I €50,000Tax, USC, PRSI

€15,483.06Married T/C

€3,300.00Earned Income T/C €550.00Home Carer €1,000.00Take Home

€39,366.94Effective Deduction 21.27%

MARRIED INCOME €125,000

Income, Tax, USC, PRSI

Case I €125,000Basic Tax @20% €8,560.00Marginal @ 40% €32,880.00USC 1.50% Rate €180.18USC 3% Rate €194.74USC 7% €3,672.76USC 8% €4,396.48USC 3% S/C €750.00PRSI 4% €5,000.00

Summary - 2015

Case I €125,000Tax, USC, PRSI €55.634.16Married T/C €3,300.00Earned Income T/C Home Carer €810.00Take Home €73,475.84Effective Deduction 41.22%

Married income of €125,000 Income, Tax, USC, PRSI

Case I €125,000Basic Tax @20% €8,560.00Marginal @ 40% €32,880.00USC 1% Rate €120.12USC 3% Rate €199.68USC 5.50% €2,825.68USC 8% €4,396.48USC 3% S/C €750.00PRSI 4% €5,000.00

Summary - 2016

Case I €125,000

Tax, USC, PRSI €54,731.96

Married T/C €3,300.00

Earned Income T/C €550.00Home Carer €1,000.00Take Home

€75,118.04Effective Deduction 39.91%

Supporting Entrepreneurs

• CGT Relief• CT –Three Year Start-Up• R & D Tax Credit• Micro Brewery Excise• Frg Earnings Deduction• EII (BES)• SURE (Seed Capital)• Home Renovations HRI• Restricted Shares

• Share Based Pay PRSI• Low Rate ER PRSI IRL• Listed Shares transfer• Vat cash receipts• 9% Vat tourist related

Knowledge Development Box

A company which has engaged in Research and Development in Ireland and which earns profits from patents or copyrighted software resulting from that R & D can avail of tax relief under the K.D.B to be taxed effectively at 6.25%.

Company therefore may have 12.50% and 6.25%

Research and Development

Likely to Qualify • Natural Sciences

• Engineering & Technology

• Medical

• Agricultural Sciences

• Maths, computer sciences, software; physical/chemical sciences; earth sciences; biological

• Civil Engineering; Electrical; systems analysis

• Basic Medicine; Clinical Medicine; Health Sciences

• Agri, Fishery, Forestry, Horticulture; Vet Medicine

Non Qualifying R & D

Exclusions• Social Science Research• Routine Testing Analysis• Cosmetic Alterations Existing• Corrective Breakdown Remedy• Legal and Administrative• Other activities• Market Research• Prospecting• Commercial and Financial • Admin and General Support

Specifically• Economic , Business Mng, Arts• Analysis Quality/Quantity Co• Even where some improvement• During Commercial Production• Application; Records; Litigation• Not Wholly & Exclusively• Markets tests; Surveys• Looking for Minerals or Gas• Marketing Commercial • Transportation, Storage, Cleaning

Research and Development

The Entity• Must be a company• Within charge to CT• Qualifying R & D activities• Deduction only in Ireland

Qualifying Activities• Be systematic, investigative or

experimental• In a field of science or

technology• Involve either basic research;

applied research; or experimental development

• Seek achieve scientific or tech advancement

• Resolution of scientific or tech uncertainty

CT START UP RELIEF

The Relief• Companies Incorporated

ager 14 October 2008• Applies to CT and CGT in

first three years trading• Exempting Tax Payable up to

€40,000 per year• Linked to Employment

Creation• Applies to New Trades Only

Applies to most activities but:• Professional Services

Companies• Land Dealing• Petroleum, coal or minerals• Acqaculture or agriculture• Road Freight or Export

Activities

TAX RELIEF START UP COMPANIES

Section 486C TCA 1997 Rules• Company Incorporated on or

after 14 October 2008• Set-up and commence a

qualifying trade between 1 September 2009 and (now) 31 December 2016, and

• Have Corporation Tax Liabilities which do not exceed the specified levels

• Since FA 2013 no longer on “use it or lose it” basis

The Details• Not an succession to trade

already set up• Activities not previously

carried on• Not available

dealing/developing/oils• Professional Service

Companies not eligible• Watch associated operations

Minimum Relief Start Up

Profits 31/12/16 €160,000• Employee 1 €18,605/ER

PRSI €2,000• Employee 2 €18,605/ER

PRSI €2,000• Employee 3 €102,500/ER

PRSI €6,000

PRSI Restriction and Caps• Normal CT Bill €20,000• Employer PRSI, €2,000 +

€2,000 + €6,000 = €11,000• Qualifying PRSI paid in the

accounting period €2,000 + €2,000 + €5,000 (capped) = €9,000

• Relief Available €9,000• CT Payable €11,000

CT START UP – PRSI AHEAD OF CT

The Payroll Analysis• Worker 1 €37,209/PRSI €4,000• Worker 2 €37,209/PRSI €4,000• Worker 3 €46,500/PRSI €5,000• Worker 4 €37,209/PRSI €4,000• Worker 5 €37,209/PRSI €4,000• Worker 6 – On Jobs Incentive• Worker 7 €18,605/PRSI €2,000• Worker 8 €18,605/PRSI €2,000• Qualifying PRSI €25,000

Profits 31/12/16 €160,000• Normal CT Bill €20,000• Qualifying PRSI (ER) €25,000• Relief S486C €20,000• CT Payable €Nil• Maximum Relief Granted

Statement from Brendan Howlin T.D.From now on children will be eligible for free childcare from three years of age up until they are five and a half, or until they start primary school. According to James Reilly, Minister for Children “from now on” means 1 September 2016.