Tax Update – Recent Amendments

As readers will be aware, tax legislation is continuously being amended. This article summarises some amendments to tax reliefs and other measures introduced by Finance Act (No. 2) 2023.

Mortgage Interest Relief

A one-year mortgage interest tax relief has been introduced for homeowners who have an outstanding mortgage balance of between €80,000 and €500,000 on their private residence. The relief will be available at the standard rate of tax on the amount by which interest paid in 2023 exceeds interest paid in 2022. The maximum tax relief available is €1,250 per property.

Rental Income Relief

A new personal tax credit for landlords of residential property will be available for the years 2024 to 2027 to offset against income tax on rental profits. Clawback provisions will apply where the property is removed from the rental market during the four-year period.

Retirement Relief

Retirement relief provides a relief from capital gains tax (CGT) to individuals over the age of 55, in respect of disposals of business assets or of shares in a family trading company, where qualifying conditions are satisfied. Relief is currently available on disposals to children without limit for individuals between 55 and 66 years of age. The age limit for qualifying for the maximum amount of relief is increased to 69 years and a maximum limit of €10m is being introduced for disposals to a child, for individuals up to age 70 years.

The age limit for the upper threshold of €750,000 to apply on disposals of qualifying business assets to third party purchasers has also been increased from 65 to 69 years. The amendments are due to take effect from 1 January 2025.

Angel Investor Relief

A new CGT relief has been introduced for ‘Angel Investors’ which will result in an effective reduced rate of CGT of 16% (or 18% if investment is made through a Partnership), where specific criteria are met. The relief will have a lifetime limit of €3m and will apply on chargeable gains of up to twice the value of the initial investment.

Interest free Loans

In the August 2023 edition of this magazine, I provided a broad overview of the capital acquisitions tax (CAT) implications of receiving gifts. The provision of an interest free loan for less than full consideration to a person is a tax benefit on which a tax liability may arise.

A mandatory filing requirement has been introduced in relation to interest-free loans obtained from “close relatives” (e.g. parents, grandparents, lineal ancestors, siblings) or from a company owned by a close relative, where the balance outstanding on the loan, when aggregated with all interest-free loans, exceeds €335,000.

CAT Agricultural Relief/Business Relief

Business relief provides valuable relief from CAT in respect of the gift or inheritance of an interest in a business or shares in a company which qualify for the relief. Agricultural relief may apply to the gift or inheritance of farming assets, provided qualifying conditions are satisfied. Both reliefs can potentially reduce the taxable value of a gift or inheritance by 90%.

Clawback provisions apply where the assets cease to be “qualifying assets” within a six-year period. Finance Act (No. 2) 2023 amended the commencement of the clawback period for the two reliefs to the valuation date as opposed to the date of the gift or inheritance. This means that in the case of an inheritance of business/agricultural assets, the six-year clawback period begins on the date that the beneficiary becomes entitled to the property (usually the date grant of probate issues) as opposed to the date of death of the disponer.

Disposals of certain land or buildings

Section 604A TCA 1997 provides for CGT relief on the disposal of land or buildings acquired between 7 December 2011 and 31 December 2014. The land or building must have been held for at least 4 years prior to sale and, if owned for longer than 7 years, the relief is proportionate to effectively exempt 7 years of the gain from CGT.

The amendment to the legislation provides that relief is only available on property that was ‘purchased’ for full market value or ‘purchased’ from a relative for at least 75% of market value. This sets out to avoid situations where properties may have been transferred and a deemed market value was imposed rather than consideration transferring. The amendment will be applied retrospectively to disposals made on or after 1 January 2018.

As this article is intended as a general guide to the subject matter, it should not be used as a basis for decisions. Specific tax advice should be obtained in relation to all transactions where tax consequences arise and when reliefs are being claimed.