For the first time in more than a generation, inflation, and the increase in cost of living has been the main focus for the Government in the lead-in to a Budget. The Minister for Finance stated that Budget 2023 is a “Cost of Living Budget”, focused on helping individuals, families, and businesses to deal with rising prices.
The significant expected budget surplus for the current year has given the Minister for Finance some leeway in easing the burden on taxpayers and welfare recipients, with a wide range of tax reductions, welfare increases, and energy cost supports announced.
A summary of the main tax features in this afternoon’s budget are as follows:
- Once-Off Cost of living supports to include €600 in electricity credit – payable in 3 equal instalments of €200 each for all households.
- Temporary Business Energy Support Scheme (TBESS) to support significant increase in energy costs – applicable to fully tax compliant businesses with Case I trading income subject to monthly cap of €10,000, where qualifying conditions are met.
- The Finance Bill will introduce changes to the payment provisions for the R&D tax credit, to align with new international definitions of refundable tax credits.
- Knowledge Development Box extended for another 4 years. KDB will have an effective rate of 10%.
Value Added Tax and Excise
- Reduced 9% VAT rate retained for the hospitality sector to the remain until 28 February 2023.
- The current excise reduction of 21 cent per litre in respect of petrol, 16 cent per litre in respect of diesel and 5.4 cent per litre in respect of Marked Gas Oil (MGO) extended to 28 February 2023.
- Temporary extension of 9% VAT rate for gas and electricity until 28 February 2023.
- Application of a 0% VAT rate on newspapers and news periodicals, including digital additions from 1 January 2023.
- Application of a 0% VAT rate to be applied to a small number of period products (currently at 9%) from 1 January 2023.
- Application of a 0% VAT rate to be applied to all non-oral hormone replacement therapy from 1 January 2023.
- Application of a 0% VAT rate to be applied all non-oral nicotine replacement therapy from 1 January 2023.
- Flat rate scheme for farmers will be decreased from 5.5% to 5.0% from 1 January 2023.
- Special Exemption Order Licence fee will be reduced from €110 to €55.
- Small cider and perry producers can avail of 50% excise relief subject to production levels.
- Qualifying production threshold for microbreweries is being increased.
- Extension of the Bank Levy until 31 December 2023.
- Income Tax Standard Rate Band increased to €40,000 for a single person with a corresponding increase for other taxpayers.
- €75 increase in personal tax credit, employee tax credit and earned income credit.
- USC second rate band (2%) increased from €21,295 to €22,920.
- Reduced rate of USC for medical card holders is being extended for a further year.
- Home Carer Credit increased by €100.
- Third Income Tax band not introduced, but to be considered.
- Small benefit exemption increased to €1,000 per annum and can now be in the form of 2 vouchers per annum.
- Key Employee Engagement Programme (KEEP) extended to 31 December 2025, facilitating the buy-back of KEEP shares by the issuing company and increasing the company limit to €6 million.
- Special Assignee Relief Programme (SARP) extended to 31 December 2025 and minimum income limit for new entrants increased to €100,000.
- Foreign Earnings Deduction extended to 31 December 2025.
- €500 tax credit for private tenants who are not in receipt of other State housing supports. The credit will be claimable in 2023 and in subsequent years. It can also be claimed for 2022 (in early 2023).
- Allowable pre-letting expenses for landlords doubled to €10,000 and vacancy period halved from 12 to 6 months.
- Vacant Homes Tax will apply to property occupied for less than 30 days per annum and will be 3 times the LPT liability for the property.
- Help to Buy scheme to be kept under review and will continue to the end of 2024 at current rates.
- Residential Zoned Land Tax maps to be published on 1 November by Local Authorities. Following publication, the zoning status of their land can be amended as part of a variation process. The Finance Bill will include several amendments to streamline the operation of the tax.
- The Residential Development Stamp Duty Refund Scheme for land used for residential development is extended to the end of 2025.
- Defective Concrete Products Levy will be applied from the 3rd of April 2023 at a rate of 10 per cent.
- Living City Initiative extended to 31 December 2027.
- Young Trained Farmer Stamp Duty relief extended to 31 December 2025.
- Young Trained Farmer and Registered Farm Partnerships Stock Relief extended to 31 December 2024.
- Accelerated capital allowances for the construction of slurry storage facilities so that 50% of expenditure is claimed over two years.
- Farm Restructuring (Capital Gains Tax) Relief and Farm Consolidation (Stamp Duty) Relief extended to 31 December 2025.
- 50c additional duty on a pack of 20 cigarettes from midnight tonight.
- Carbon Tax increase will mean that there will be an increase of just over two cent VAT inclusive per litre of petrol and diesel. But the NORA levy which is collected at a rate of 2 cent per litre (VAT exclusive) will be reduced to zero to offset the carbon tax increase which means that the price at the pump will not increase.
- Weekly social welfare rates will be increased by €12 for working age recipients.
- Qualifying Social Protection recipients will receive a once-off double week (including pensioners, carers and those on disability payments and jobseekers) in October 2022, with Christmas Bonus also payable in early December.
- Funding will be provided to provide access to IVF treatments.
- Free School Book Scheme for primary school pupils from Autumn 2023.
- €200 lump sum living alone allowance to be paid in November 2022 to persons over 66 years of age, living alone and in receipt of a social welfare payment.
- €400 lump sum fuel allowance to be paid by Christmas 2022.
- Qualifying Child benefit recipients will receive a double payment in November.
- Those who qualify for Disability Allowance will receive a once of lump sum payment of €500.
- Students – once off reduction in the Student Contribution of €1,000 for eligible students in the 2022-2023 education year.
- SUSI maintenance grant recipients will receive a once-off double monthly payment.
- Post graduate tuition contribution grant will increase by €1,000.
- Extension to the 20% public transport fare reduction and the Youth Travel Card discount if 50% on all operators’ services to end 2023.
- No changes to Capital Taxes.
The link to the relevant Department of Finance papers is included here
Please contact a member of the Keogh Ryan Tierney Tax Team if you have any queries.
The Keogh Ryan Tierney Tax Team – 27 September 2022
This does not constitute advice. Advice should be taken from a professional advisor before any actions are taken.