ITI Annual Conference Main Tax Points

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 7^th December 2011 and 31^st 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.

Jeremy Mitchell

Director

ITC Consulting

ITI Annual Conference. Fund your Bucket List with an ITC Pension

ITC were proud to sponsor the Irish Taxation Institute Annual Conference last weekend in Galway where over 370 delegates attended. Bucket List's were a hot topic throughout the Conference as we invited delegates to share their's with us in the hope of winning a New iPad. 


An ITC Pension can ensure that you make the most out of your retirement. Our bucket will be seen at many more events in the coming months so be sure to have your list at the ready. A sample of some of the  entries we received:

"To dance the Argentine Tango with Antonio Bandero"

"To become the No. 1 Formula One Driver"

"To star in a musical on the West End"

"To visit the 7 Ancient Wonders of the World"

The seminar topics ranged from a general update on the 2012 Finance Act to more specific topics such as Capital Taxes, Business Taxes and Property Taxes.

One of the more interesting topics for the delegates from ITC was the Pensions seminar. Most of the key take home points have been the subject of ITC Blogs over the last number of months, and the top five to consider are:

1. Fund to SFT as soon as possible

Individuals whose pension fund is currently less than €2.3m should consider funding their pension to €2.3m (taking account of a buffer for future investment returns within the fund up to retirement) in light of announcements to decrease tax relief on pension contributions and other potential changes that may be introduced in the future. 

2. Consider de-risking pension if close to SFT

For individuals that are close to the SFT, consideration should be given to reducing investment risk (employing a de-risked pension investment strategy – e.g. cash/bonds), with increasing urgency depending on how close one is to the SFT.

3. Critical that pension funds are monitored re SFT ceiling

Advisors should consider putting a tracking system in place to determine when an individual’s pension fund may be coming close to the SFT so that alternatives can be considered in advance.

4. Maximising lump sum at retirement remains attractive – 13% effective tax up to €575K. Tax credit up to the amount of tax paid on the lump sum is available against tax payable on any chargeable excess over SFT. 

5. Employer Pension Contributions – Incorporation of business can increase the level of pension contributions allowed and can involve family members in the business.

We will provide worked examples of these main points in the next few blog posts.