Finance Act 2006

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 2006 and subsequent years of assessment, section 15 of the Principal Act is amended—

(a) by substituting “€23,000” for “€20,400” (inserted by the Finance Act 2005) 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 €32,000	20 per cent	the standard rate
The remainder	42 per cent	the higher rate

PART 2

Part of taxable income	Rate of tax	Description of rate
(1)	(2)	(3)
The first €36,000	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 €41,000	20 per cent	the standard rate
The remainder	42 per cent	the 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 2006 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 2006 and subsequent years
(1)	(2)	(3)
Section 461
(basic personal tax credit)
(married person)	€3,160	€3,260
(widowed person bereaved in year of assessment)	€3,160	€3,260
(single person)	€1,580	€1,630
Section 461A
(additional tax credit for certain widowed persons)	€400	€500
Section 462
(one-parent family tax credit)	€1,580	€1,630
Section 463
(widowed parent tax credit)
(1st year)	€2,800	€3,100
(2nd year)	€2,300	€2,600
(3rd year)	€1,800	€2,100
(4th year)	€1,300	€1,600
(5th year)	€800	€1,100
Section 464
(age tax credit)
(married person)	€410	€500
(single person)	€205	€250
Section 465
(incapacitated child tax credit)	€1,000	€1,500
Section 466
(dependent relative tax credit)	€60	€80
Section 468
(blind person’s tax credit)
(blind person)	€1,000	€1,500
(both spouses blind)	€2,000	€3,000
Section 472
(employee tax credit)	€1,270	€1,490

(2) Section 3 (as amended by the Finance Act 2005) 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 2006 and subsequent years of assessment, section 188 of the Principal Act is amended, in subsection (2), by substituting “€34,000” for “€33,000” (inserted by the Finance Act 2005) and “€17,000” for “€16,500” (as so inserted).

5 Amendment of section 467 (employed person taking care of incapacitated individual) of Principal Act.

5.— As respects the year of assessment 2006 and subsequent years of assessment, section 467 of the Principal Act is amended by substituting “€50,000” for “€30,000” (inserted by the Finance Act 2002) in both places where it occurs.

6 Amendment of section 472C (relief for trade union subscriptions) of Principal Act.

6.— As respects the year of assessment 2006 and subsequent years of assessment, section 472C of the Principal Act is amended, in subsection (1), by substituting “€300” for “€200” (inserted by the Finance Act 2004) in the definition of “specified amount”.

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

7.— Section 473 of the Principal Act is amended, as respects the year of assessment 2006 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 2005):

“ ‘ 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,

€3,300 but, if at any time during the year of assessment the individual was of the age of 55 years or over, ‘specified limit’ means €6,600, and

(b) in any other case, €1,650; but, if at any time during the year of assessment the individual was of the age of 55 years or over, ‘specified limit’ means €3,300;”.

8 Relief for service charges.

8.— The Principal Act is amended by substituting, as respects the year of assessment 2006 and subsequent years of assessment, the following for section 477:

“477.— (1) In this section—

‘ appropriate percentage ’, in relation to a year of assessment, means a percentage equal to the standard rate of tax for that year;

‘ claimant ’ has the meaning assigned to it by subsection (2);

‘ financial year ’, in relation to any year, means the period of 12 months ending on 31 December in that year;

‘ group water supply scheme ’ means a scheme referred to in the Housing (Improvement Grants) Regulations 1983 (S.I. No. 330 of 1983);

‘ service ’ means the provision by or on behalf of a local authority of—

(a) a supply of water for domestic purposes,

(b) domestic refuse collection or disposal, or

(c) domestic sewage disposal facilities;

‘ service charge ’ means a charge imposed under—

(a) the Local Government (Financial Provisions) (No. 2) Act 1983, or

(b) section 65A (inserted by the Local Government (Sanitary Services) Act 1962, and amended by the Local Government (Financial Provisions) (No. 2) Act 1983) of the Public Health (Ireland) Act 1878,

in respect of the provision by a local authority of any service or services;

‘specified amount’ , in relation to a claimant, means the lesser of—

(a) the amount proved to have been paid in the financial year immediately before the year of assessment in respect of service charges, or

(b) €400,

but if, in respect of the financial year ended on 31 December 2005 a claimant proves that he or she paid an amount greater than €400 by way of a fixed annual charge, then, in relation to that claimant, the specified amount for the year of assessment 2006 shall mean the amount proved to have been so paid.

(2) Where in relation to income tax for a year of assessment an individual (in this section referred to as a ‘claimant’) proves that in the financial year immediately before the year of assessment he or she has paid service charges for that financial year, the income tax to be charged on the claimant for that year of assessment, other than in accordance with section 16(2), shall, subject to subsection (3), be reduced by an amount which is the lesser of—

(a) the amount equal to the appropriate percentage of the specified amount, and

(b) the amount which reduces that income tax to nil.

(3) (a) In the case of a claimant assessed to tax for the year of assessment in accordance with section 1017, any payments made by the spouse of the claimant, in respect of which that spouse would have been entitled to relief under this section if the spouse were assessed to tax for the year of assessment in accordance with section 1016 (apart from subsection (2) of that section), shall be deemed to have been made by the claimant.

(b) In the case of an individual who resides on a full-time basis in the premises to which the service charges relate and pays such service charges on behalf of the claimant, that claimant may disclaim the relief provided by this section in favour of the individual, and such disclaimer shall be in such form as the Revenue Commissioners may require.

(4) Where the service consists of the provision of domestic refuse collection or disposal, is provided and charged for by a person or body of persons other than a local authority, and where such person or body of persons has—

(a) notified its provision to the local authority in whose functional area such service is provided, and

(b) furnished to that local authority such information as the local authority may from time to time request concerning that person or body of persons or the service provided by that person or body of persons,

the service provided shall be deemed for the purposes of this section as having been provided on behalf of the local authority and a payment in respect of such service shall be deemed a payment in respect of service charges.

(5) The provision of a supply of water for domestic purposes effected by a group water supply scheme shall be treated for the purposes of this section as if it were provided on behalf of a local authority, and a payment by an individual member of such a scheme in respect of such provision shall be deemed to be a payment in respect of service charges.

(6) Where a person makes a claim for relief under this section they shall, when requested by the Revenue Commissioners, indicate the name of the local authority, or person referred to in subsection (4) who provides the service on behalf of a local authority, and whether the charge consists of either or both of—

(a) a charge which is a fixed annual charge, or

(b) a charge determined by other means.

(7) Any deduction made under this section shall be in substitution for and not in addition to any deduction to which the individual might be entitled in respect of the same payment under any other provision of the Income Tax Acts.”.

9 Amendment of section 248 (relief to individuals on loans applied in acquiring interest in companies) of Principal Act.

9.— Section 248 of the Principal Act is amended—

(a) in subsection (1)(a), by substituting, as respects a loan which is made after 7 December 2005, the following for subparagraph (i):

“(i) a company which exists wholly or mainly for the purpose of carrying on a trade or trades, or”,

and

(b) by inserting the following after subsection (1):

“(1A) Subsection (1)(c) shall not apply to a loan made after 7 December 2005 which is applied in paying off another loan applied in acquiring ordinary share capital in, or making a loan to, a company whose income consists wholly or mainly of profits or gains chargeable under Case V of Schedule D unless—

(a) the loan does not exceed the balance outstanding on, and

(b) the term of the loan does not exceed the balance of the term of,

the loan being paid off.”.

10 Amendment of Schedule 13 (accountable persons for purposes of Chapter 1 of Part 18) to Principal Act.

10.— (1) Schedule 13 to the Principal Act is amended by inserting the following after paragraph 153 (inserted by the Finance Act 2005)—

“154. National Council for Special Education.

(2) Subsection (1) comes into operation on 1 May 2006.

11 Computational rules and allowable deductions.

11.— (1) The Principal Act is amended—

(a) in section 97 by inserting the following after subsection (2H) (inserted by Finance Act 2003):

“(2I) (a) Notwithstanding subsection (2), a deduction shall not be authorised by paragraph (e) of that subsection by reference to interest payable for a chargeable period (within the meaning of section 321) on borrowed money employed in the purchase, improvement or repair of a rented residential premises unless the person chargeable can show that the registration requirements of Part 7 of the Residential Tenancies Act 2004 have been complied with in respect of all tenancies which existed in relation to that premises in that chargeable period.

(b) For the purposes of paragraph (a), a written communication from the Private Residential Tenancies Board to the chargeable person confirming the registration of a tenancy, relating to a rented residential premises to which paragraph (a) applies, shall be accepted as evidence that the registration requirement in respect of that tenancy (and that tenancy only) has been complied with.”,

and

(b) in section 372AM(10), as respects claims for a deduction under section 372AP for a chargeable period in relation to a special qualifying premises—

(i) in paragraph (a) by substituting the following for subparagraph (iii):

“(iii) Part 7 of the Residential Tenancies Act 2004 in respect of all tenancies relating to that premises.”,

and

(ii) by inserting the following after paragraph(a)—

“(aa) For the purposes of paragraph (a)(iii) a written communication from the Private Residential Tenancies Board to the chargeable person confirming the registration of a tenancy relating to a special qualifying premises shall be accepted as evidence that the registration requirement in respect of that tenancy (and that tenancy only) has been complied with.”.

(2) Subsection (1) applies as respects chargeable periods, being—

(a) where the chargeable period is a year of assessment, the year of assessment 2006 and subsequent years, and

(b) where the chargeable period is an accounting period of a company, for accounting periods beginning on or after 1 January 2006.

12 Amendment of section 664 (relief for certain income from leasing of farm land) of Principal Act.

12.— (1) Section 664 of the Principal Act is amended—

(a) in subsection (1)(a) in the definition of “the specified amount”—

(i) in subparagraph (ii)(V)(B) by deleting “or” where it last occurs, and

(ii) by substituting the following for subparagraph (ii)(VI):

“(VI) in the period beginning on 1 January 2004 and ending on 31 December 2005—

(A) €10,000, in a case where the qualifying lease or qualifying leases is or are for a definite term of 7 years or more, and

(B) €7,500, in any other case,

or

(VII) on or after 1 January 2006—

(A) €15,000, in a case where the qualifying lease or qualifying leases is or are for a definite term of 7 years or more, and

(B) €12,000, in any other case,”,

(b) in subsection (1)(b) by substituting the following for subparagraph (iv):

“(iv) from a qualifying lease or qualifying leases made in the period beginning on 1 January 2004, and ending on 31 December 2005, and from a qualifying lease made before 1 January 2004, the specified amount shall not exceed—

(I) €10,000, in a case where the qualifying lease or qualifying leases is or are for a definite term of 7 years or more, and

(II) €7,500, in any other case;

(v) from a qualifying lease or qualifying leases made on or after 1 January 2006, and from a qualifying lease made at any other time, the specified amount shall not exceed—

(I) €15,000, in a case where the qualifying lease or qualifying leases is or are for a definite term of 7 years or more, and

(II) €12,000, in any other case.”,

and

(c) by inserting the following after subsection (6):

“(7) Notwithstanding any other provisions of the Tax Acts, for the purposes of determining the amount of any relief to be granted under this section, any payment received by the lessor, relating to the leasing of farm land under a qualifying lease, which is in consequence of the receipt or the expected receipt by the lessee of a payment relating to that farm land under the EU Single Payment Scheme operated by the Department of Agriculture and Food under Council Regulation (EC) No. 1782/2003 of 29 September 2003 [^1], will be treated as rent from farm land.”.

(2) Subsection (1)(c) applies and has effect as on and from 1 January 2005.

13 Childcare services relief.

13.— Chapter 1 of Part 7 of the Principal Act is amended by inserting the following after section 216B:

“216C.— (1) In this section—

‘ childcare services ’ means any form of childminding services or supervised activities to care for minors, whether or not provided on a regular basis;