As mentioned in our previous post, ITC recently sponsored the Irish Tax Institute
Annual Conference. The Conference provides an opportunity to discuss
issues that other advisors come across with their
clients.
One topic of
conversation was the change in language in the latest update of the EU/IMF
Programme of Financial Support for Ireland published in February. Previous versions have proposed the reduction
of private pension tax reliefs as one of its revenue-raising measures, but the February
update omits any reference to such a reduction. This coincides with previous comments, so it seems that marginal rate
tax relief on pension contributions is safe, for now at least. That is very good news for those making
personal pension contributions.
A couple of other themes
that came up time and again with advisors, whether speaking from the podium or in
private, were:
1.
Inheritance
Tax
Clients
are realising that inheritance tax is now for everyone. Well, “for everyone” was the phrase used by
one practitioner and it is somewhat exaggerated, but inheritance tax affects far more people
than it did four years ago.
You
can see the massive differences for someone with an estate of €3 million with
three children. The respective tax bills
are:
2008
tax bill: €287,000
2012
tax bill: €675,000
Additional
tax: €388,000
That’s
a hike in the tax take of over 130%!
It’s certainly enough to get people considering estate planning when a
few years ago they would not have considered it was for them.
2. Capital Gains Tax
One
of the more interesting aspects of the Budget last December, which has since
been enshrined in the Finance Act, was the CGT exemption for property. It seems that people are just not familiar
with it as it was not highly publicised, but it provides excellent
opportunities, including in the family context.
What
the exemption means is that, for a
property acquired between 7th December 2011 and 31st
December 2013 and held for more than 7 years, on the sale of that property no CGT will be payable on the gain attributable to that 7 year period.
A
couple of interesting points:
- The exemption applies to any property within the EEA, i.e. the EU, Norway, Iceland and Liechtenstein. A particular popular destination for property purchasers at the moment is Germany – the exemption would work there.
- The exemption also applies where there is a gift element in relation to children. If consideration is paid of 75% or more of the value of a property by a child to a parent, the gain over the 7 year period will be CGT free to the child. Of course, stamp duty has to be factored in, but it is now at much more favourable rates.
Despite the recurring uncertainties in
which we live these days, the certainty of tax does at least throw up some
opportunities for advisors.
Director
