Finance Act 2005

PART 1 Income Tax, Corporation Tax and Capital Gains Tax

Chapter 1 Interpretation

1 Interpretation (Part 1).

1.—In this Part “Principal Act” means the Taxes Consolidation Act 1997.

Chapter 2 Income Tax

2 Amendment of section 15 (rate of charge) of Principal Act.

2.—As respects the year of assessment 2005 and subsequent years of assessment, section 15 of the Principal Act is amended—

(a) by substituting “€20,400” for “€19,000” (inserted by the Finance Act 2002) in subsection (3), and

(b) by substituting the following Table for the Table (as so inserted) to that section:

“TABLE

PART 1

	Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first €29,400	20 per cent	the standard rate
The remainder	42 per cent	the higher rate
---	---	---	---
	Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first €33,400	20 per cent	the standard rate
The remainder	42 per cent	the higher rate

PART 3

	Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first €38,400	20 per cent	the standard rate
The remainder	42 per cent	he higher rate

”.

3 Personal tax credits.

3.—(1) Where an individual is entitled under a provision of the Principal Act mentioned in column (1) of the Table to this subsection to have the income tax to be charged on the individual, other than in accordance with the provisions of section 16(2) of the Principal Act, reduced for the year of assessment 2005 or any subsequent year of assessment and the amount of the reduction would, but for this section, be an amount which is the lesser of—

(a) the amount specified in column (2) of that Table, and

(b) the amount which reduces that liability to nil,

the amount of the reduction in accordance with paragraph (a) shall be the amount of the tax credit specified in column (3) of the Table.

TABLE

Statutory Provision	Existing tax credit (full year)	Tax credit for the year 2005 and subsequent years
(1)	(2)	(3)
Section 461
(basic personal tax credit)
(married person)	€3,040	€3,160
(widowed person bereaved in year of assessment)	€3,040	€3,160
(single person)	€1,520	€1,580
Section 461A
(additional tax credit for certain widowed persons)	€300	€400
Section 462
(one-parent family tax credit)	€1,520	€1,580
Section 463
(widowed parent tax credit)
(1st year)	€2,600	€2,800
(2nd year)	€2,100	€2,300
(3rd year)	€1,600	€1,800
(4th year)	€1,100	€1,300
(5th year)	€600	€800
Section 465
(incapacitated child tax credit)	€500	€1,000
Section 468
(blind person's tax credit)
(blind person)	€800	€1,000
(both spouses blind)	€1,600	€2,000
Section 472
(employee tax credit)	€1,040	€1,270

(2) Section 3 (as amended by the Finance Act 2004) of the Finance Act 2002 shall have effect subject to the provisions of this section.

(3) Schedule (1) shall apply for the purposes of supplementing subsection (1).

4 Age exemption.

4.—As respects the year of assessment 2005 and subsequent years of assessment, section 188 of the Principal Act is amended, in subsection (2), by substituting “€33,000” for “€31,000” (inserted by the Finance Act 2004) and “€16,500” for “€15,500” (as so inserted).

5 Amendment of section 126 (tax treatment of certain benefits payable under Social Welfare Acts) of Principal Act.

5.—Section 126 of the Principal Act is amended by substituting the following for paragraph (b) (inserted by the Finance Act 2003) of subsection (8):

“(b) Notwithstanding subsection (3) and the Finance Act 1992 (Commencement of Section 15) (Unemployment Benefit and Pay-Related Benefit) Order 1994 (S.I. No. 19 of 1994), subsection (3)(b) shall not apply in relation to unemployment benefit paid or payable, in the period commencing on 6 April 1997 and ending on 31 December 2006, to a person employed in short-time employment.”.

6 Amendment of section 473 (allowance for rent paid by certain tenants) of Principal Act.

6.—Section 473 of the Principal Act is amended as respects the year of assessment 2005 and subsequent years of assessment, by the substitution in subsection (1) of the following definition for the definition of “specified limit” (inserted by the Finance Act 2001):

“ ‘specified limit’, in relation to an individual for a year of assessment, means—

(a) in the case of—

(i) a married person assessed to tax in accordance with section 1017, or

(ii) a widowed person,

€3,000; but, if at any time during the year of assessment the individual was of the age of 55 years or over, ‘specified limit’ means €6,000, and

(b) in any other case, €1,500; but, if at any time during the year of assessment the individual was of the age of 55 years or over, ‘specified limit’ means €3,000;”.

7 Amendment of section 116 (interpretation (Chapter 3)) of Principal Act.

7.—Section 116 of the Principal Act is amended by inserting the following after the definition of “employment” in subsection (1):

“ ‘premises’ includes lands;”.

8 Amendment of section 118 (benefits in kind: general charging provision) of Principal Act.

8.—Section 118 of the Principal Act is amended by substituting the following for subsection (5A):

“(5A) (a) Subsection (1) shall not apply to expense incurred by the body corporate in or in connection with the provision for a director or employee of a monthly or annual bus, railway or ferry travel pass issued by or on behalf of one or more approved transport providers.

(b) In this subsection—

‘approved transport provider’ means—

(a) Córas Iompair Éireann or any of its subsidiaries,

(b) a holder of a passenger licence granted under section 7 of the Road Transport Act 1932,

(c) a person who provides a passenger transport service under an arrangement entered into with Córas Iompair Éireann in accordance with section 13(1) of the Transport Act 1950,

(d) the Railway Procurement Agency or any of its subsidiaries,

(e) a person who has entered into an arrangement with the Railway Procurement Agency, in accordance with section 43(6) of the Transport (Railway Infrastructure) Act 2001 to operate a railway, or

(f) a person who provides a ferry service within the State, operating a vessel which holds a current valid—

(i) passenger ship safety certificate,

(ii) passenger boat licence, or

(iii) high-speed craft safety certificate,

issued by the Minister for Communications, Marine and Natural Resources;

‘railway pass’ includes a pass issued by a railway designated as a light railway or as a metro in a railway order made under section 43 of the Transport (Railway Infrastructure) Act 2001.”.

9 Preferential loans.

9.—Section 122 of the Principal Act is amended—

(a) in subsection (1)—

(i) by substituting the following for the definition of “employee”:

“ ‘employee’, in relation to an employer, means an individual employed by the employer in an employment—

(a) to which Chapter 3 of this Part applies, or

(b) the profits or gains of which are chargeable to tax under Case III of Schedule D,

including, in a case where the employer is a body corporate, a director (within the meaning of that Chapter) of the body corporate;”,

and

(ii) in the definition of “preferential loan” by substituting “means, in relation to an individual, a loan, in respect of which no interest is payable or interest is payable at a preferential rate, made directly or indirectly to the individual” for “means a loan, in respect of which no interest is payable or interest is payable at a preferential rate, made directly or indirectly to an individual”,

and

(b) by substituting the following for subsection (2):

“(2) Where, for the whole or part of a year of assessment, there is outstanding, in relation to an individual, a preferential loan, the individual shall, subject to subsection (4), be treated for the purposes of section 112 or a charge to tax under Case III of Schedule D, as having received in that year of assessment, as a perquisite of the office or employment with the employer who made the loan, a sum equal to—

(a) if no interest is payable on the preferential loan or loans, the amount of interest which would have been payable in that year, if interest had been payable on the loan or loans at the specified rate, or

(b) if interest is paid or payable at a preferential rate or rates, the difference between the aggregate amount of interest paid or payable in that year and the amount of interest which would have been payable in that year, if interest had been payable on the loan or loans at the specified rate,

and the individual or, in the case of an individual who is a wife whose husband is chargeable to tax for the year of assessment in accordance with the provisions of section 1017, the spouse of the individual, shall be charged to tax accordingly.”.

10 Costs and expenses in respect of personal security assets and services.

10.—The Principal Act is amended by inserting the following after section 118:

“118A.—(1) In this section—

‘asset’ includes equipment or a structure, but not any mode of transport or a dwelling or grounds appurtenant to a dwelling;

‘service’ does not include a dwelling or grounds appurtenant to a dwelling.

(2) This section applies where there is a credible and serious threat to a director's or an employee's personal physical security, which arises wholly or mainly because of the director's or employee's office or employment.

(3) This section applies to expense incurred by the body corporate, or incurred by a director or employee and reimbursed to the director or employee by the body corporate—

(a) in—

(i) the provision or use of, or

(ii) expenses connected with,

an asset or service for the improvement of personal security which is provided for or used by the director or employee to meet the threat to his or her personal physical security, and

(b) with the sole object of meeting that threat.

(4) Subject to subsections (6) and (7), where this section applies, section 118(1) shall not apply to an expense to which this section applies.

(5) Where the body corporate intends the asset to be used solely to improve personal physical security, any use of the asset incidental to that purpose shall be ignored.

(6) Where the body corporate intends the asset to be used only partly to improve personal physical security, subsection (4) shall apply only to that part of the expense incurred in relation to the asset which is attributable to the intended use for that purpose.

(7) Subsection (4) shall only apply to an expense incurred in relation to a service referred to in subsection (3) where the benefit resulting to the director or employee consists wholly or mainly of an improvement of his or her personal physical security.

(8) In determining whether or not this section applies in relation to an asset or service, the fact that—

(a) the asset becomes fixed to land (whether the land constitutes a dwelling or otherwise), or

(b) the director or employee is, or becomes, entitled—

(i) to the property in the asset, or

(ii) if the asset is a fixture, to any estate or interest in the land concerned,

or

(c) the asset or the service improves the personal physical security of a member of the director's or employee's family or household, as well as that of the director or employee,

does not exclude the expense incurred by the body corporate from coming within subsection (4).”.

11 Foster care payments etc.

11.—The Principal Act is amended in Chapter 1 of Part 7 by inserting the following after section 192A (inserted by the Finance Act 2004):

“192B.—(1) In this section—

‘carer’ means an individual who is or was a foster parent or relative or who takes care of an individual on behalf of the Health Service Executive;

‘foster parent’ has the meaning assigned to it in the Child Care (Placement of Children in Foster Care) Regulations 1995 (S.I. No. 260 of 1995);

‘relative’ has the meaning assigned to it in the Child Care (Placement of Children with Relatives) Regulations 1995 (S.I. No. 261 of 1995).

(2) This section applies to payments made—

(a) to a carer by the Health Service Executive in accordance with—

(i) article 14 of the Child Care (Placement of Children in Foster Care) Regulations 1995, or

(ii) article 14 of the Child Care (Placement of Children with Relatives) Regulations 1995,

(b) at the discretion of the Health Service Executive to a carer in respect of an individual—

(i) who had been in the care of a carer until attaining the age of 18 years,

(ii) in respect of whom a payment referred to in paragraph (a) had been paid until the individual attained the age of 18 years,

(iii) who since attaining the age of 18 years continues to reside with a carer, and

(iv) who has not attained the age of 21 years or where the person has attained such age, suffers from a disability or is in receipt of full-time instruction at any university, college, school or other educational establishment and such disability or instruction commenced before the person attained the age of 21 years,

or

(c) in accordance with the law of any other Member State of the European Communities which corresponds to the payments referred to in paragraph (a) or (b).

(3) Payments to which this section applies are exempt from income tax and shall not be taken into account in computing total income for the purposes of the Income Tax Acts.”.

12 State employees: foreign service allowances.

12.—The Principal Act is amended in Chapter 1 of Part 7 by inserting the following section after section 196:

“196A.—(1) Where any allowance to, or emoluments of, an officer of the State are certified by the Minister for Finance, having consulted with the Minister for Foreign Affairs, or with such Minister of the Government as the Minister for Finance considers appropriate in the circumstances, to represent compensation for the extra cost of having to live outside the State in order to perform his or her duties, that allowance, or those emoluments, shall be disregarded as income for the purposes of the Income Tax Acts.

(2) In this section—

‘emoluments’ means emoluments to which section 985A applies;

‘officer of the State’ means—

(a) a civil servant within the meaning of section 1(1) of the Civil Service Regulation Act 1956,

(b) a member of the Garda Síochána, or

(c) a member of the Permanent Defence Force.

(3) This section is deemed to have applied as on and from 1 January 2005.”.

13 Credit in respect of tax deducted from emoluments of certain directors.

13.—Chapter 4 of Part 42 of the Principal Act is, as respects the year of assessment 2005 and subsequent years of assessment, amended by inserting the following after section 997:

“997A.—(1) (a) In this section—

‘control’ has the same meaning as in section 432;

‘ordinary share capital’, in relation to a company, means all the issued share capital (by whatever name called) of the company.

(b) For the purposes of this section—

(i) a person shall have a material interest in a company if the person, either on the person's own or with any one or more connected persons, or if any person connected with the person with or without any such other connected persons, is the beneficial owner of, or is able, directly or through the medium of other companies or by any other indirect means, to control, more than 15 per cent of the ordinary share capital of the company, and

(ii) the question of whether a person is connected with another person shall be determined in accordance with section 10.

(2) This section applies to a person to who, in relation to a company (hereafter in this section referred to as ‘the company’), has a material interest in the company.

(3) Notwithstanding any other provision of the Income Tax Acts or the regulations made under this Chapter, no credit for tax deducted from the emoluments paid by the company to a person to whom this section applies shall be given in any assessment raised on the person or in any statement of liability sent to the person under Regulation 37 of the Income Tax (Employments) (Consolidated) Regulations 2001 (S.I. No. 559 of 2001) unless there is documentary evidence to show that the tax deducted has been remitted by the company to the Collector-General in accordance with the provisions of those regulations.

(4) Where the company remits tax to the Collector-General which has been deducted from emoluments paid by the company, the tax remitted shall be treated as having been deducted from emoluments paid to persons other than persons to whom this section applies in priority to tax deducted from persons to whom this section applies.