Reading the small print: What we missed in Budget 2022
When bidding for farm land, you’re not just competing against other farmers; you’re competing against investors too, even for smaller land parcels.
The Finance Bill 2022, being the document to legalise the changes announced in the Budget has been published and made its initial way through Dáil Éireann.
The Bill outlines additional details beyond that revealed on budget day. The Bill includes some interesting tax breaks and extensions to tax reliefs for 2022. Of note, employees who work from home will from 2023 be entitled to claim up to 30% of relevant expenses of heating, electricity and internet costs as a deduction against their taxable income, apportioned as to the number of days that the employee works from home and after deduction of any disbursements from their employers.
The new legislation requires that the employee must furnish statements of their expenses to Revenue. The Help-to-Buy scheme which also applies incidentally to qualifying applicants who build their own home is extended to 31 December, 2022. Where employers provide employees and directors with approved Covid-19 PCR or Antigen tests necessary for the performance of the duties of the office or employment of the director or employees are not to be regarded as a Benefit in Kind for such employees.
In relation to electric vehicles provided by an employer to an employee, current rules dictate that an employee is exempted from paying tax on the free use of an electric vehicle where the car has an original value of less than €50,000. This favourable tax regime was introduced to encourage the uptake of electric vehicles.
These rules are set to be changed with the relief being tapered down over the next few years.
From 2023 onwards, employees will be taxed on the benefit of an electric car provided by their employers albeit a disregard of €35,000 from the original price will be applied for that year, a reduced disregard of €20,000 applying for 2024, and a further disregard of just €10,000 will apply for 2025.
This means the electric cars will, over time, come much of the way into line with how traditional petrol and diesel cars are taxed.
On pensions, a significant change is afoot for 2022.
Under current rules, an individual with a private pension who is not in receipt of the full State Pension either because of insufficiency of PRSI contributions or because the individual wishes to access their fund prior to reaching State Pension age may be required to park part of their pension fund (up to €63,500) into an Approved Minimum Retirement Fund which denied the individual access to that part of their fund until they reach 75 years of age.
The original ethos underlying the AMRF principle was to ensure that individuals had sufficient income into their later years. From 2022 onwards individuals will no longer be subject to such rules and individuals with part of their funds tied up in an AMRF fund will have the capacity to draw down income from such funds.
On gift tax, where an individual is in receipt of a loan from another person, they will from the date of the passing of the finance act be regarded as being in receipt of a benefit equal to the amount of interest which would otherwise be chargeable were they to borrow an equivalent amount of money in the open market.
This makes a change from the status quo where the individual was regarded as having received a benefit equal to the amount of interest the lender could have earned. From a practical tax-planning perspective parents lending money to their children to help them get started may under the new rules impact significantly more heavily on that child’s lifetime tax-free threshold.
On the new zoned land tax, the Finance Bill contains the new rules. The legislation applies an annual tax, calculated at 3% of the market value of the land which is zoned as being suitable for residential development, that is serviced and that is not affected in physical condition by considerations which may impact the ability to provide housing on the land.
Serviced in this context is further defined as including sites where it is reasonable to consider the site may have access, or be connected, to public infrastructure and facilities, including roads and footpaths, public lighting, foul sewer drainage, surface water drainage and water supply, necessary for dwellings to be developed and with sufficient service capacity available for such development.
Certain exclusions apply but generally, it would seem that agricultural land connected to such services or having access to such services in a zoned area would be primed for the annual tax. Further details pertaining to that new land tax is detailed in the Finance Bill.
Undoubtedly there will be much discussion on the new tax as the Finance Bill is discussed in the Dáil and Seanad which may give yet more clarity for landowners who may be affected by the charge.
The tax changes outlined above are subject to the final enactment of the Finance Bill and may be augmented or withdrawn in due course before finally coming into law.
