As you know, Budget
2013 took place on December 6th 2012. In light of the upcoming Finance Act we continue our coverage on the
main changes that took place.
In line with previous Budgets, there were further
changes in relation to capital taxes, which will have a significant impact on
estate and succession planning. The headline
changes were:
- Increase in the Capital Acquisitions Tax (CAT) and Capital Gains Tax (CGT) rates to 33% from 30%. These changes were effective from 6th December 2012.
- A reduction in the CAT tax free thresholds by 10%. This change was also effective from 6th December 2012. The Group A threshold is now €225,000, the Group B threshold is €30,150 and the Group C threshold is €15,075.
- An
increase in the rate of DIRT and exit tax from life assurance and investment
fund products to 33% and 36%. This
applied from 1st January 2013.
It is worth
remembering that around four years ago the Group A threshold was around €520,000 and
the CAT rate was 20%. To illustrate the
changes, using a simple example, if a child inherited an asset worth €600,000
in 2008, there would have been a CAT liability of around €16,000. Under the new regime with the same facts, the
CAT liability would be around €123,000.
There does not
appear to be a change to the tax rate applicable on the transfer from an ARF to
a child over 21. The 2012 Budget changed
the applicable rate to match the CAT rate. That may change in the Finance Act later this
year.
Another change
which may be of interest is contained in the summary of Budget measures which
provides for a roll-over relief for agricultural property on disposal of
farmland where the proceeds are re-invested in farmland to enable farm
restructuring. This measure is subject
to EU approval.
It was
noticeable that there were no announcements restricting capital tax reliefs. It is to be hoped that the lack of mention
means they will be left as is. However,
it is possible that restrictions will be introduced in the Finance Act early
this year. So, if there is any chance of you or a client undertaking the sale
or transfer of a business or business asset in the near future, you should take
advice to see if any potential changes in the upcoming Finance Act might affect
your ability to rely on these valuable tax reliefs.
