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Outline of some of the main changes introduced in Budget 2012

The majority of measures announced in Budget 2012 by the Minister for Finance, Michael Noonan, TD, had been signalled well in advance and as a result there were very few surprises in the Minister’s budget speech. That being said a number of key points were confirmed.

The first of these being the confirmation that, the standard rate of VAT will increase from 21% to 23%. This increase will come into effect from the 1st January 2012 and is expected to yield earnings for the exchequer of €560 million in 2012. The rates of Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) have also been increased from 25% to 30% with effect from 7th December 2011.  While, Deposit Interest Retention Tax (DIRT), has been increased to 30% with effect from 1st January 2011. A property charge of €100 per household will also be effective from 1st January 2012.

Unfortunately, in these challenging times, the Redundancy and Insolvency scheme is also being amended to reduce the employer rebate on statutory redundancy payments from 60% to 15%. While, Employer PRSI relief, on pension contributions have also been removed. These changes will have a significant impact on many small businesses who are currently struggling to survive. The Minister also made a number of changes in the pensions area, the most notable of these being an increase to 6% in the annual imputed distribution from ARFs, where the fund in question has a value of greater than €2m.

It wasn’t all negative however and there was confirmation that there will be no increase in Income tax rates, bands or credits in 2012. Employee PRSI and Universal Social Charge (USC) rates will also remain unchanged. This is of course welcomed news, as is the increase in the exemption level for the USC from €4,004 to €10,036. The budget also outlined positive changes to mortgage interest relief with the relief being increased to 30% for first time buyers who took out their first mortgage between 2004 and 2008.

The Minister also again pledged the Governments commitment to our much publicised Corporation Tax rate of 12.5%, while the SME sector in particular will welcome the enhancement of the Research & Development tax credit regime.

Certain changes in the budget are also aimed at stimulating the commercial property market inIreland. These changes would include the reduction in the stamp duty rate on commercial property from a current top rate 6% to a flat rate of 2%. A CGT incentive in relation to certain properties purchased between now and the end of 2013 has also been introduced. If the property is bought during this period and held for 7 years, no CGT is applicable.