Budget 2014 was unveiled by the Government on the 15th of October 2013. While there were large trenches of austerity built into the budget, from a property investors point of view the outcome has been surprisingly satisfactory.
Clarke Jeffers & Co. Solicitors have specialised in the acquisition and disposal and investment in property for the last 80 plus years. We have always remained to the forefront of legal firms not only in terms of investment, acquisition and disposal but in terms of commercial planning and applicability tax rates to enhance our clients possibility for success. This article concentrates only on the property taxes and reliefs defined in the 2014 budget.
Stamp Duty as a tax affects the vast majority of all property transactions within the jurisdiction. While there are exemptions and exceptions the general rates applicable have remained the same.
Stamp Duty / Commercial & Other Property*(including farmland)
2% on commercial / non-residential properties
*Commercial & other property is defined as property other than residential.
Stamp Duty / Residential Property (unchanged)
1% on properties valued up to 1 million
2% on the balance of consideration in excess of 1 million
Consanguinity Relief (this is where the applicable rate of stamp duty can be halved if the transfer of non- residential property is conducted between blood relatives) remains in situ and available as a relief. This is a very important relief in the transfer of farms and in particularly in situations where the transferee is not a Young Trained Farmer within the meaning of the Tax provisions. It is also very important for site transfers between blood relatives (eg parent to child) as it allows for the rate of duty to be decreased from 2% down to 1%.
Capital Acquisitions Tax (Gift Tax)
Capital Acquisition Tax Rate has remained unchanged:
The Tax Fee Thresholds have also remained unchanged
Group A: €225,000
Group B: €30,150
Group C: €15,075
The thresholds represents the maximum tax free gift that can be made to any individual without incurring tax. In order to ascertain the relevant and applicable threshold you must establish the relationship of the parties (for example, a gift from a parent to a child is treated as a class A threshold) Over and above the relevant threshold the prevailing rate of 33% will apply. It is also important that you take into account previous gifts which may have been given as these are required to be aggregated. This is obviously a very important aspect in the calculation of your tax and one which should not be overlooked.
If you have any questions on CAT or the applicable threshold for any gift then please do not hesitate to contact our office.
Capital Gains Tax
Capital Gains Tax rate has also remained unchanged as follows:
Annual Exemption: €1,270
The Property investors Capital Gains Tax Relief has also been extended for another year and will now continue to be applicable for all investors up until the 31st of December 2014. This relief operates If a qualifying property is purchased on or before the 31stof December 2014 and held by the investor for a minimum period of 7 years then the sale will be free of gains tax. If one considers the element of 7 years appreciation coupled with 7 seven inflation and the fact that a 33% (the current rate) tax free benefit can be taken upon sale then this is an extremely attractive relief. There are strict rules to the operation of the relief and if you are interested then you should check that the target property qualify’ s. there are also rules as regards the timing of the sale and the relief lessens after the 7 year period expires.
Clarke Jeffers have conducted a number of talks in relation to this relief and would be happy to speak to any client interested in availing of same.
The relief is also of huge attraction to deposit holders given the increase in dirt tax to 41 % .
Capital Gains Tax Relief for Farmers.
This relief is to be extended. The relief allows the transfer of land from older farmers to younger farmers (typically parents to children). The scheme is to be extended to include certain disposals of farm land which have been leased for 5 years or more. One caveat which has been included is that in order to qualify the leased farmlands must be disposed of to a person other than a child. This relief is designed to encourage older farmers with no children to lease out the farm to younger farmers rather than them farming it themselves. This relief should not be seen as a way of forcing farmers to retire early but moreover a good option for farmers who wish to retire but do not have children and therefore cannot plan succession in a normal way. Again this is a welcome relief for farmers but is not an absolute exemption. Specific advice should be taken in all cases prior to relying on this relief.
Farmer Taxation (Young Trained Farmer)
The eligibility for Young Trained Farmers Relief is being extended. Currently this relief can be availed of by individuals of 35 years of age or less who have an accredited qualification and undertake to conduct farming as their principle activity. The extension will now be put in place by adding 3 more qualifying courses to the list of relevant qualifications. This is a crucial relief for the farming industry and Clarke Jeffers has been advising farmers on eligibility since its very inception. Should you have any queries at all relating to your eligibility for Young Trained Farmer relief or whether the qualifications you may hold allow you qualify for the relief then please do not hesitate to contact us.
The farmers flat rate Vat of 4.8% will increase to 5% from the 1st of January 2014. The flat rate addition is paid to farmers who are unregistered as a form of compensation for Vat incurred on costs which they are prevented from reclaiming as a Vat input.
Tourism and Hospitality Sectors
The 9% Vat rate for the hotel food and leisure industry has been retained This will be a very welcome announcement for the Tourism and Hospitality Sectors given that the tax rate was due to revert to 13.5% on the 1st of January 2014. Further the Minister has announced that the rate will remain in place for the foreseeable future which is indeed good news to a sector which seems to be having a mini revival.
The standard rate remains at 23%.
The lower rate remains at 13.5%.
Home Retention Initiative.
A new relief will be put in place for qualifying expenditure on home renovation and improvement works. The tax relief of 13.5% will be available and granted by way of tax credit split over 2 years following the year in which the works are carried out. There are minimum and maximum expenditure (a minimum expenditure is €5,000 and maximum expenditure is €30,000). The relief relates only to the principle private residence the relevant contractors carrying out the works on the property must be fully taxed compliant.
From a property acquisition / disposal / investment point of view the budget has been relatively kind. In particularly the extension of the Capital Gains Tax Relief for investment for a further year is most welcome. This relief came in ‘under the radar’ as it were and did not attract a huge amount of publicity. In essence it is one of the best investment opportunities from a tax perspective available at present. Clarke Jeffers & Co. are happy to advise on the relevant qualifying criteria if requested.
From a farming point of view the Capital Acquisition Tax rates not changing (i.e. not going up) and the relevant tax thresholds remaining in place (i.e. not going down) are again welcomed. Again there are strict qualifying criteria to obtain exemptions from CAT and Clarke Jeffers & Co. are vastly experienced in advising clients as to the suitability of these reliefs and ones qualification for same.
Should you have any queries at all in relation to Budget 2014 (whether it is applicable to investment / acquisitions / disposal or any other aspect of the budget) then please do not hesitate to contact our office and we would be most happy to clarify any matter for you).
The above commentary merely acts as a general overview of part of the 2014 Budget and Independent professional advice should always be sought in advance of reliance of the forgoing as individual circumstances and qualifying criteria may vary. Clarke Jeffers & Co take no responsibility for any liability or any loss occasioned to any person acting or refraining from acting as a result of the above information.