The Finance Bill 2022
The Finance Bill 2022 was published yesterday. It will now progress through the Oireachtas and will be subject to potential amendments throughout this process. It is anticipated that it will become law in late December 2022.
The Finance Bill gives effect to many of the Budget announcements, including:
- Standard rate band increase.
- Increase in tax credits.
- USC changes.
- Help to Buy scheme.
- “Small benefits” exemption for employees.
- Rent tax credit, including for student accommodation.
- 9% VAT rate on electricity and gas until 28 February 2023.
- Residential zoned land tax.
- Pre-letting expenses for vacant properties.
- Defective concrete products levy (with amendments).
We have commented further below in greater detail on the following additional provisions:
- Temporary Business Energy Support Scheme (TBESS).
- New reporting requirement for employers on tax-free payments made to employees.
- Vacant homes tax.
- Non-Irish resident landlords.
There are certain provisions in the Finance Bill which are not included in this PSC summary. Included in this circular are the provisions which we feel are more relevant to you and your business. If you need any further information, please let us know. A link to the Department of Finance explanatory memorandum is here
- Temporary Business Energy Support Scheme (TBESS)
The TBESS has been introduced to assist businesses over the coming months. Eligible businesses will be able to reclaim 40% of the year-on-year increase in their energy bills up to certain caps.
The scheme operates by reference to bills for the metered supply of electricity and natural gas through electricity accounts or gas connections which are identified by their own Meter Point Reference Number (MPRN) or Gas Point Reference Number (GPRN).
The scheme covers electricity and natural gas bills issued for the period from 1 September 2022 to 31 December 2022. The minister has the ability to extend the scheme up to 30 April 2023.
The scheme will be administered by the Revenue Commissioners.
Who can Qualify?
To qualify for the TBESS, a person (including an individual, partnership or company) must meet all of the following conditions:
- The person must carry on a trade or profession (Case I or Case II) (i.e., the person must be an ‘eligible business’). Revenue approved charities who carry on a trade and Revenue approved sporting bodies who carry on a trade may also qualify.
- The business must be able to demonstrate that the average unit price for electricity or natural gas on the relevant bill has increased by 50% or more as compared to the average unit price in the reference period. The reference period is generally 12 months prior to the month to which the relevant bill relates. If the business was not issued with an electricity or gas bill in the reference period (for example, if the business did not exist or did not hold an electricity account in the reference period), a deemed monthly reference unit price is to be used. The deemed monthly reference unit price rates will be made available by the Sustainable Energy Authority of Ireland and will be published in Revenue
- For each monthly claim period the business must:
- Be tax compliant;
- Be eligible to obtain a tax clearance certificate from the Revenue Commissioners;
- Have carried on a trade or profession and intend to continue to do so following the end of the claim period;
- Have registered for the TBESS through the Revenue Online System (ROS); and
- In respect of any claim for a TBESS payment, the business must make the claim though ROS and make a declaration that the business satisfies the conditions outlined
The Relief
A qualifying business is entitled to make a claim for payment of 40% of the increased cost in the energy or natural gas bill, whichever is applicable. The maximum monthly payment is capped at €10,000.
Where a qualifying business has more than one electricity or gas connection at different business locations (which may not be adjacent to each other), it may be eligible for an increased cap of €10,000 per electricity account, which is available as regards both electricity and natural gas costs, up to a maximum amount of €30,000 per claim period.
The aggregate amount of TBESS payments that may be claimed in respect of the four-month period from 1 September 2022 to 31 December 2022, when taken together with any other amount claimed in respect of aid granted under the Temporary Crises Framework, must not exceed €500,000.
This €500,000 limit applies for a ‘single undertaking’ which requires consideration of certain related entities, such as subsidiaries. This €500,000 limit is reduced to €62,000 for persons carrying on a farming trade and to €75,000 where the person is engaged in the production, processing and marketing of fishery and aquaculture products.
How to Claim
The claim must be made through ROS, no later than four months from the last day of the month to which the claim relates.
Other Considerations
There are measures to ensure that deductions for energy costs are limited to the true cost of the energy bills, net of the TBESS payment (i.e. the receipt of the payment is effectively taxable).
If a claim for a TBESS payment is made and it transpires that the claim was not permitted or the amount claimed exceeds the amount the person was entitled to claim, the business is required to repay the amount to Revenue, together with interest. Undue delays in repayments of invalid claims by businesses attract further monetary sanction.
Details of a claimant business, including name, address and total amount of TBESS payments claimed will be published on Revenue’s website. The TBESS is subject to a commencement order by the minister.
- Employer PAYE Reporting for Certain Benefits
The bill provides for a proposed new employer reporting requirement aimed at recording certain tax-free benefits and expenses payments made to employees. Specifically, items covered by the small benefits exemption, remote daily working allowance of up to €3.20 per day and travel and subsistence payments are all included in the reporting requirement.
The proposed legislation confirms that Revenue will provide the prescribed format and manner in which these benefits and expenses will be reported. This will place an increased compliance burden particularly on large employers with significant workforces. However, Revenue may be willing to seek stakeholder engagement on the measure prior to implementation of the provision which is subject to ministerial commencement order.
- Vacant Homes Tax
The minister on Budget Day announced his intention to introduce a new Vacant Homes Tax (‘VHT’) from 2023 with the stated aim of maximising the use of existing housing stock to increase the supply of homes available for rent or purchase to meet demand. The new tax is not expected or intended to be a significant revenue raising measure, with projected yield of €3m for a full year.
The bill sets out the details of the new tax which will apply to properties which are residential properties for the purposes of Local Property Tax (LPT) and which are in use as a dwelling for less than 30 days in a 12-month period.
Each chargeable period has a duration of 12 months and commences on 1 November each year. In the bill, the first chargeable period commences on 1 November 2022, and so the first
chargeable period will end in November 2023.
The VHT will be charged at a rate equal to three times the base amount of LPT payable in respect of the residential property (i.e. before any application of the ‘local adjustment factor’) for the year in which the chargeable period ends.
The person chargeable to VHT in respect of a chargeable period is the person who owns the residential property on the first day following the end of that chargeable period. Similar to LPT, there are provisions to deal with scenarios where there are multiple owners, including outlining who should be responsible for filing the required return.
Properties which are subject to a bona fide tenancy which is registered with the Residential Tenancies Board and which lasts at least 30 days during the chargeable period are exempt from VHT for that chargeable period.
In addition, there are a number of other exemptions which will apply to ensure that owners are not unfairly taxed where the property may be vacant for a genuine reason. These exemptions include properties:
- Where no LPT was payable in respect of the year in which the chargeable period ends,
- Which are sold during the chargeable period,
- Where the property is actively marketed for sale or rent in certain circumstances,
- Which are vacant due to the chargeable person’s illness or long-term care, where prior to this the chargeable person occupied the property as their sole or main residence,
- Which are vacant during the chargeable period as a result of significant refurbishment work carried out over a period of not less than 6 months in the chargeable period, and various other conditions are satisfied,
- Where the sale or occupation of the property is prohibited by a court order,
- Where the chargeable person in respect of the property dies in the chargeable period or in 12 months prior to the commencement of the chargeable period, and the property was the sole or main residence of that person immediately prior to their death,
- Where a grant to administer the estate of a deceased chargeable person issues in the chargeable period and for any chargeable period following such a grant, where the administration of the estate has not yet completed (provided the property was the sole or main residence of that chargeable person), and
- Which are owned by a North-South implementation body within the meaning of the British-Irish Agreement Act 1999.
The tax will operate on a self-assessment basis and will be administered by Revenue. The filing date for VHT returns will be 7 November after the end of the chargeable period and the
payment date will be the following 1 January. Penalties, interest and a late filing surcharge shall apply in the case of non-compliance.
The legislation provides that Revenue shall establish a register of vacant homes which includes details of the associated chargeable persons and allows for an exchange of information between Revenue and certain other bodies to maintain this register and administer the tax.
The legislation also sets out an indicative list of items that could be used to prove to Revenue that the property has been in use for more than 30 days in any given chargeable period, including utility records, records of waste collected or evidence of short-term letting.
The bill also denies a deduction for VHT for the purposes of income tax, corporate tax and capital gains tax and provides details of mechanisms for appeals against assessments which are consistent with those provided for elsewhere in the legislation.
The provisions will become effective from the date of the passing of the bill.
- Non-Resident Landlords
Under existing legislation certain procedures apply to rental income paid to a non-Irish resident person.
Generally, the person making the rental payment to the non-resident landlord (e.g., the tenant) is required to deduct tax at source from the payment. The bill proposes that the person making the payment will also be required to provide certain information to Revenue concerning the non-resident landlord, the property (including Eircode and the Local Property Tax reference number), the gross payment and tax withheld.
In certain cases, resident persons acting on behalf of the non-resident landlord (i.e. ‘collection agents’) are assessable to Irish tax on the income of the non- resident landlord. The bill proposes that the ‘collection agents’ will not be chargeable to tax on the income of the non-resident landlord if they:
- deduct withholding tax from payments made by the agent to the landlord and pay the tax to Revenue; and
- provide certain information to Revenue relating to the non-resident landlord, the property (including Eircode and the Local Property Tax reference number), the gross payment and tax withheld.
The proposed amendments are subject to a commencement order.