The Government has confirmed that redundancy payments made in the first four months of the year will not be subject to higher income levies introduced in the Budget last month.
The issue was dealt with today in the Finance Bill which gives affect to the measures announced in the Budget on April 7th.
The income levy rates doubled to 2 per cent, 4 per cent and 6 per cent with the rate thresholds falling to €74,036 and €174,980. The exemption threshold for these levies has been reduced to €15,028. However, there was concern following the Budget that the new rates would be retrospectively applied to redundancy payments and bonuses.
The Government is also to close a loophole that could allow Irish companies disposing of shares in other companies avail of a “participation exemption”.
Minister for Finance Brian Lenihan made the comments in a statement accompanying the publication of Bill. He also said borrowing target of 10.75 per cent of GDP would achieve the difficult balance between providing a “credible way forward” and protecting the economy.
No measures has been included to change the method used by car dealers to account for VAT on second-hand cars. Mr Lenihan said the Society of Irish Motor Industry (SIMI) had indicated such a scheme would not assist the sector at the moment.
“Consequently, the proposed introduction of a VAT margin scheme is not being included in the Finance Bill”, Mr Lenihan said. He added talks would continue with the industry on other measures that could be brought in to support it, particularly with regard to the large stock of second-hand cars.
With regard to the capital gains tax on share sales Mr Lenihan said an “anti-avoidance amendment” will mean Irish companies disposing of shares in other companies can no longer avail of a “participation exemption” where the shares derive their value from exploration or exploitation rights.
He said this measure closed off a loophole and brought the State into line with regards the “treatment of shares deriving their value from land and minerals in the State”.
The Finance Bill gives effect to an announcement in the April Budget to limit interest relief to the first seven years of a mortgage.
It confirms that that approximately 230,000 mortgage-holders face temporarily higher mortgage bills as their mortgage interest relief is suspended pending an examination by the Revenue Commissioners as to whether they are entitled to it.
Up until then mortgage interest relief was applied for the duration of the mortgage on a primary residence.
First-time buyers who bought their home within the last seven years are not affected by the move.
Those who maybe include people who have moved house at least once, switched mortgage provider or remortgaged.
Mortgage-holders who show the Revenue Commissioners their mortgage was used solely for the purchase of their primary residence will have their relief reinstated and backdated.
The Finance Bill also includes a number of new measures. Among these is a reduction in interest rates imposed by the Revenue Commissioners on firms for late or underpayment of taxes.
These rates will fall from approximately 20 per cent to less than 10 per cent by July 1st. Mr Lenihan said the measure was designed to assist businesses in the current difficult environment.
The Bill also provides for an extension for applications under the Mid-Shannon Corridor Tourism Infrastructure Investment Scheme until May 31st 2010.
