The Minister for Finance published the Finance Bill on 19 October 2017. Here are the key highlights affecting businesses.
Stamp duty on non-residential property
The Finance Bill legislates for an increase in the stamp duty rate on transfers of non-residential property from 2% to 6%. The increase applies in respect of transfer deeds executed on or after 11 October 2017, but there are transitional measures in respect of contracts entered into before 11 October, provided the transfer deed is executed before 1 January 2018. However, these transitional provisions will not come into effect until the Bill has been passed by the Oireachtas. In the meantime, transfer deeds giving effect to contracts entered into before 11 October must contain a statement that the deed is executed solely in pursuance of a binding contract entered into prior to 11 October 2017. Stamp duty should then be paid at 6% and a refund can be sought once the Finance Bill has become law.
As one of the measures intended to address the shortage of houses in the rental sector, the Bill introduces a new deduction against rental income for expenses incurred on a vacant residential premises prior to it being let after a period of non-occupancy of at least 12 months. The new provision applies to a premises let between the date of the passing of the Finance Act 2017 and 31 December 2021. The expenditure must have been incurred in the 12 months before it is let as a residential premises and the expenditure must be such as would be allowed against rental. The deduction allowed is capped at €5,000 per vacant premises and the deduction will be clawed-back if the property ceases to be let as a residential premises within four years of the first letting.
Irish SMEs (ie companies that employ fewer than 250 people and have an annual turnover not exceeding €50 million, and / or an annual balance sheet total not exceeding €43 million) will be able to avail of this new relief aimed at assisting such companies to recruit or retain key employees. The company must carry on a trading activity, but certain trading activities are specifically excluded eg dealing in or developing of land, professional services companies. Under the scheme, during the period 1 January 2018 to 31 December 2023, companies who qualify may grant share options to full time employees and directors (working a minimum of 30 hours per week). Gains realised on the exercise of an option will be exempt from income tax. Capital Gains Tax will apply to any gain arising on the subsequent disposal of the shares, with the base cost being the amount paid for the shares on exercise of the option.
There are certain limits to the programme. Companies may grant options only up to a total market value of €3 million. The value of the share options granted to any one person may not exceed €100,000 in any one tax year, €250,000 over three consecutive years or 50% of annual emoluments. The share options must be held for at least 12 months before being exercised and must be exercised within ten years of the date of grant. The options must be in respect of ordinary shares without any preferential rights to dividends, redemption or assets on winding up. The KEEP programme will not apply to persons who own or control (either alone or with connected persons) directly or indirectly more than 15% of the ordinary share capital of the company.
The KEEP programme is subject to EU state aid approval, and will be commenced by ministerial order.
The stamp duty increase from 2% to 6% will also apply to premiums paid on leases of non-residential property executed on or after 11 October 2017, but again subject to the transitional provisions outlined above. The Bill raises the exemption threshold for leases of residential property (exceeding 35 years or for an indefinite term) coming within the charge to stamp duty from €30,000 to €40,000. This change will come in from the date of the passing of the Finance Act.
No BIK for e-cars
The Bill introduces an exemption from the general benefit-in-kind (BIK) charge in respect of any expense incurred by an employer in the provision of e-charging points on their premises for use by employees or directors. The Bill also provides for a BIK exemption for the provision of electric cars or vans to employees or directors – this will be available only from 1 January 2018 to 31 December 2018.