Finance Act 2010

PART 1 Cost Benefit Analysis of Tax Expenditures

1. Cost benefit analysis of tax expenditures.

1.— The Minister shall within three months from the passing of this Act prepare and lay before Dáil Éireann a report on a cost-benefit analysis of tax expenditures provided for by this Act, setting out the costs of tax foregone, and the benefits in terms of job creation or otherwise.

PART 2 Income Levy, Income Tax, Corporation Tax and Capital Gains Tax

Chapter 1 Interpretation

2. Interpretation (Part 2).

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

Chapter 2 Income Levy

3. Income levy.

3.— (1) The Principal Act is amended in Part 18A—

(a) in section 531B by substituting the following for paragraph (a) of the Table to subsection (1):

“(a) The income described in this paragraph, to be known as ‘relevant emoluments’, is emoluments to which Chapter 4 of Part 42 applies or is applied—

(i) other than social welfare payments and similar type payments,

(ii) other than excluded emoluments,

(iii) disregarding expenses, in respect of which an employee may be entitled to relief from income tax, which fall within Regulation 10(3) of the PAYE Regulations,

(iv) having regard to any relief under section 201(5)(a) and paragraphs 6 and 8 of Schedule 3, and

(v) excluding emoluments of an individual who is resident in a territory with which arrangements have been made under subsection (1)(a)(i) or (1B)(a)(ii) of section 826 in relation to affording relief from double taxation, where those emoluments are the subject of a notification issued under section 984(1).”,

(b) in section 531B in paragraph (b) of the Table to subsection (1) by inserting the following after subparagraph (iv):

“(iva) having regard to any reduction arising by virtue of section 825A, and”,

(c) in section 531B in paragraph (b) of the Table to subsection (1) by inserting the following after subparagraph (iva) (inserted by paragraph (b)):

“(ivb) having regard to any allowances due under section 659 arising from the obligations under Council Directive 91/676/EEC of 12 December 1991 [^1] concerning the protection of waters against pollution caused by nitrates from agricultural sources.”,

and

(d) in section 531B in paragraph (b) of the Table to subsection (1) by deleting subparagraphs (v), (vi) and (vii).

(2) The Principal Act is amended in paragraph 1(1) of Part 1 of Schedule 24 by substituting the following for the definition of “ the Irish taxes ”—

“ ‘ the Irish taxes ’ means income tax, income levy and corporation tax;”.

(3) This section applies—

(a) as respects paragraphs (a), (b) and (d) of subsection (1) and subsection (2), for the year of assessment 2009 and subsequent years, and

(b) as respects paragraph (c) of subsection (1), for the year of assessment 2010 and subsequent years.

Chapter 3 Income Tax

4. Amendment of section 122 (preferential loan arrangements) of Principal Act.

4.— As respects the year of assessment 2010 and subsequent years of assessment, section 122 of the Principal Act is amended in subsection (1)(a)—

(a) by inserting the following after the definition of “preferential rate”:

“ ‘qualifying loan’ has the meaning assigned to it by section 244(1)(a);”,

and

(b) by substituting for paragraph (i) of the definition of “the specified rate” the following:

“(i) in a case where the preferential loan is a qualifying loan, the rate of 5 per cent per annum or such other rate (if any) prescribed by the Minister for Finance by regulations,”.

5. Cesser of certain reliefs.

5.— The Principal Act is amended—

(a) in section 236 by inserting the following after subsection (6):

“(7) This section ceases to have effect for the year of assessment 2010 and subsequent years of assessment.”,

and

(b) in section 470A by inserting the following after subsection (12):

“(13) This section ceases to have effect for the year of assessment 2010 and subsequent years of assessment.”.

6. Amendment of section 469 (relief for health expenses) of Principal Act.

6.— (1) Section 469 of the Principal Act is amended—

(a) in subsection (1) by substituting the following for the definition of “ health care ”:

“ ‘health care’ means prevention, diagnosis, alleviation or treatment of an ailment, injury, infirmity, defect or disability, and includes care received by a woman in respect of a pregnancy, but does not include—

(a) routine ophthalmic treatment,

(b) routine dental treatment, or

(c) cosmetic surgery or similar procedures, unless the surgery or procedure is necessary to ameliorate a physical deformity arising from, or directly related to, a congenital abnormality, a personal injury or a disfiguring disease;”,

(b) in subsection (1) in the definition of “ health expenses ” by substituting the following for paragraph (c):

“(c) maintenance or treatment necessarily incurred in connection with the services or procedures referred to in paragraph (a) or (b),”,

(c) in subsection (1) by deleting the definition of “ hospital ”,

(d) in subsection (1) in paragraph (a) of the definition of “practitioner” by substituting “section 43 of the Medical Practitioners Act 2007” for “section 26 of the Medical Practitioners Act, 1978”,

(e) by substituting the following for subsection (2)—

“(2) (a) Subject to this section, where an individual for a year of assessment proves that in the year of assessment he or she defrayed health expenses incurred for the provision of health care, the income tax to be charged on the individual, other than in accordance with section 16(2), for that year of assessment shall be reduced by the lesser of—

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

(ii) the amount which reduces that income tax to nil,

but, where an individual proves that he or she defrayed health expenses incurred for the provision of health care in the nature of maintenance or treatment in a nursing home, other than a nursing home which does not provide access to 24 hour nursing care on-site, the individual shall be entitled for the purpose of ascertaining the amount of the income on which he or she is to be charged to income tax, to have a deduction made from his or her total income of the amount proved to have been so defrayed.

(b) For the purposes of this section any contribution made by an individual in defraying expenses incurred in respect of nursing home fees where such an individual is entitled to or has received State support (within the meaning of section 3(1) of the Nursing Homes Support Scheme Act 2009) shall be treated as health expenses qualifying for relief under this section.

(c) Financial support (within the meaning of the Nursing Homes Support Scheme Act 2009) shall not be treated as health expenses for the purposes of this section.”,

and

(f) by inserting the following after subsection (7)—

“(8) (a) Where the Minister for Finance determines that expenses, or a class of expenses, representing the cost of anything referred to in paragraphs (a) to (i) in the definition of ‘health expenses’ in subsection (1) has been or may be incurred in the provision of health care which in the opinion of the Minister for Finance is inappropriate having regard to public policy, then the Minister may by order prescribe those expenses, or class of expenses, as not being eligible for relief under this section.

(b) The Minister for Finance shall not make an order under paragraph (a) unless he or she has consulted with the Minister for Health and Children and such appropriately qualified persons, bodies or institutions (if any), which in the opinion of the Minister for Finance or the Minister for Health and Children should be consulted.

(c) Every order made by the Minister for Finance under paragraph (a) shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the order is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the order is laid before it, the order shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.”.

(2) This section shall have effect for the year of assessment 2010 and subsequent years.

7. Amendment of section 244 (relief for interest paid on certain home loans) of Principal Act.

7.— As respects the year of assessment 2010 and subsequent years of assessment, section 244 of the Principal Act is amended—

(a) in subsection (1)(a) by inserting “taken out on or after 1 January 2004 and on or before 31 December 2011” after “qualifying loan” in the definition of “relievable interest”,

(b) by substituting the following for paragraph (b) of subsection (1A):

“(b) Notwithstanding paragraph (a), this section shall continue to apply—

(i) for the year of assessment 2010 and subsequent years of assessment up to and including the year of assessment 2017 in respect of qualifying interest paid in respect of a qualifying loan taken out on or after 1 January 2004 and on or before 31 December 2011, and

(ii) for the year of assessment 2012 and subsequent years of assessment up to and including the year of assessment 2017 in respect of qualifying interest paid in respect of a qualifying loan taken out on or after 1 January 2012 and on or before 31 December 2012.”,

and

(c) by substituting the following for subsection (2)(a):

“(2) (a) In this subsection ‘appropriate percentage’, in relation to a year of assessment, means—

(i) as respects qualifying interest to which subsection (1A)(b)(i) applies—

(I) where relievable interest is determined by reference to paragraph (i) or (ii) of the definition of ‘relievable interest ’, 15 per cent for that year, and

(II) where relievable interest is determined by reference to paragraph (iii) or (iv) of the definition of ‘relievable interest ’:

(A) 25 per cent for the first and second years of assessment for which there is an entitlement to relief under this section,

(B) 22.5 per cent for the third, fourth and fifth years of assessment for which there is an entitlement to relief under this section, and

(C) a percentage equal to the standard rate of tax for the sixth and seventh years of assessment for which there is an entitlement to relief under this section,

and

(ii) as respects qualifying interest to which subsection (1A)(b)(ii) applies—

(I) where relievable interest is determined by reference to paragraph (i) or (ii) of the definition of ‘relievable interest’, 10 per cent for that year, and

(II) where relievable interest is determined by reference to the first 6 years of assessment or, where the period of entitlement to relief under this section is shorter, such shorter period, 15 per cent for that year.”.

8. Amendment of section 997A (credit in respect of tax deducted from emoluments of certain directors) of Principal Act.

8.— As respects the year of assessment 2010 and subsequent years of assessment, section 997A of the Principal Act is amended by inserting the following subsection after subsection (5)—

“(6) Where, in accordance with subsection (5), the tax to be treated as having been deducted from the emoluments paid to each person to whom this section applies exceeds the actual amount of tax deducted from the emoluments of each person, then the amount of credit to be given for tax deducted from those emoluments shall not exceed the actual amount of tax so deducted.”.

9. Amendment of section 71 (foreign securities and possessions) of Principal Act.

9.— As respects the year of assessment 2010 and subsequent years of assessment, section 71 of the Principal Act is amended—

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

“(2) Subsection (1) shall not apply to any person who satisfies the Revenue Commissioners that he or she is not domiciled in the State.”,

(b) in subsection (3), by substituting “In the case mentioned in subsection (2)” for “In the cases mentioned in subsection (2)”, and

(c) in subsection (5), by substituting “as to domicile” for “as to domicile or ordinary residence”.

10. Amendment of section 825B (repayment of tax where earnings not remitted) of Principal Act.

10.— As respects the year of assessment 2010 and subsequent years of assessment, section 825B of the Principal Act is amended—

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

“(1A) As regards individuals who are not domiciled in the State and who, on or after 1 January 2010—

(a) become resident in the State for tax purposes for the first time, and

(b) exercise the duties of their employment in the State for the first time,

then, this section shall apply as if in subsection (1)—

(i) the words ‘which is not a party to the EEA agreement, but’ were deleted from the definition of ‘associated company’;

(ii) the words ‘that is not a party to the EEA Agreement but’ were deleted from the definition of ‘relevant employee’; and

(iii) the words ‘that is not a party to the EEA Agreement but’ were deleted from the definition of ‘relevant employer’.”,

(b) in subsection (2)—

(i) in paragraph (c) by substituting “one year” for “3 years”, and

(ii) by inserting “and not repaid” after “tax deducted”,

(c) in subsection (5) by inserting “, computed by reference to paragraphs (i) and (ii) of subsection (2),” after “shall be liable to income tax on those emoluments”, and

(d) in subsection (6) by substituting “one year” for “3 year”.

11. Amendment of section 825A (reduction in income tax for certain income earned outside the State) of Principal Act.

11.— Section 825A of the Principal Act is amended by substituting the following for subsection (7):

“(7) For the purposes of this section—

(a) as respects the year of assessment 2009 and previous years of assessment, an individual shall be deemed to be present in the State for a day if the individual is present in the State at the end of the day, and

(b) as respects the year of assessment 2010 and subsequent years of assessment, an individual shall be deemed to be present in the State for a day if the individual is present in the State at any time during that day.”.

12. Amendment of section 477 (relief for service charges) of Principal Act.

12.— Section 477 of the Principal Act is amended by inserting the following after subsection (7):

“(8) This section ceases to have effect as respects service charges paid in the financial year 2011 for that financial year and subsequent financial years for those financial years.”.

13. Amendment of section 216A (rent-a-room relief) of Principal Act.

13.— Section 216A of the Principal Act is amended by inserting the following after subsection (3A):

“(3B) (a) Subsection (2) shall not apply for a year of assessment to relevant sums arising to—

(i) an individual, or

(ii) a person connected with the individual,

where the individual is an office holder, or employee, of—

(I) the person making the payment, or

(II) a person connected with the person making the payment.

(b) This subsection shall apply irrespective of whether the relevant sums are paid directly or indirectly by the person referred to in clauses (I) and (II) of paragraph (a) to the individual or to a person connected with the individual.”.

14. Amendment of section 667B (new arrangements for qualifying farmers) of Principal Act.

14.— The Table to section 667B of the Principal Act is amended in paragraph (3) by inserting the following after subparagraph (a):

“(aa) Bachelor of Agricultural Science — Agri-Environmental Science awarded by University College Dublin;”.

15. Amendment of section 384 (relief under Case V for losses) of Principal Act.

15.— Section 384 of the Principal Act is amended—

(a) in subsection (3) by substituting “Subject to subsection (4), any” for “Any”, and

(b) by inserting the following after subsection (3):

“(4) Any allowance to be made in charging income under Case V of Schedule D in accordance with section 305(1)(a) shall be made in priority to any relief to be given under this section.”.

16. Retirement benefits.

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

(a) in section 784A(1BA) by deleting paragraph (a) and substituting the following for paragraph (c):

“(c) The specified amount for a year of assessment shall be an amount equivalent to the amount determined by the formula—

(A 3) — B

100

where the amount so determined is greater than zero and where—

A is the value of the assets in an approved retirement fund on 31 December in the year of assessment or, where there is more than one approved retirement fund the assets of which are owned by the same individual and managed by the same qualifying fund manager, the aggregate of the value of the assets in each approved retirement fund on that date (in this subsection referred to as the ‘relevant value’ whether there is one or more than one such approved retirement fund), and

B is the amount or value of the distribution or the aggregate of the amounts or values of the distribution or distributions (in this subsection referred to as the ‘relevant distribution’), if any, made during the year of assessment by the qualifying fund manager in respect of assets held in—

(i) the approved retirement fund or, as the case may be, approved retirement funds referred to in the meaning of ‘A’, and

(ii) an approved minimum retirement fund, if any, the assets of which are beneficially owned by the individual and managed by that qualifying fund manager,

(in this paragraph referred to as the ‘funds’) being funds the assets in which were first accepted into the funds by the qualifying fund manager on or after 6 April 2000.”,

(b) in section 787O(1) by inserting the following after paragraph (b) of the definition of “date of the current event”:

“(ba) the annuity would otherwise become payable under a PRSA of a kind referred to in paragraph (c) of the definition of ‘relevant pension arrangement’ where an individual does not elect to exercise an option in accordance with section 787H(1) and instead retains the assets available in the PRSA at that date, in that PRSA or any other PRSA,”,