Finance (No. 2) Act 2023, implementing the measures announced in Budget 2024, was signed into law on 18 December 2023. It introduces a number of significant amendments to previous practice.
Share options
There is a major change to how tax is collected on gains arising on the exercise, assignment or release of a right to acquire shares or other assets (section 128 of the Taxes Consolidation Act 1997). Gains realised from 1 January 2024 will no longer be subject to self-assessment but taxed under the PAYE system, and employers will be responsible for accounting for the income tax, USC and employee PRSI as part of the payroll process.
GPs
A significant amendment has been made to the tax treatment of income of general practitioners arising from General Medical Service (GMS) contracts entered into with the Health Service Executive by introducing a new s1008A into part 43 of the TCA 1997. Revenue’s guidance confirms that the GP who holds the GMS contract is a chargeable person for income arising under the contract and should report that income under the self-assessment system. The contract-holder GP is also the specified person for the purposes of professional services withholding tax (PSWT) and may, where the relevant criteria are met, claim a credit for PSWT deducted on a GMS payment by the HSE.
The new s1008A TCA 1997 provides that where individual GPs enter into contracts with the HSE to provide certain medical services in a partnership with other individual GPs, the income from those services can be treated for income tax purposes as that of the partnership, and any PSWT credit may be claimed by the partnership. The partner who has the contract with the HSE, and not the precedent partner of the medical partnership, will provide the tax number of the medical partnership concerned to the HSE for PSWT purposes.
Angel investor relief is a new targeted CGT relief for investment in innovative start-ups
R&D credit
The rate of the R&D tax credit has been raised from 25% to 30% of qualifying expenditure for accounting periods starting on or after 1 January 2024, and the amount of the first-year payment has gone up from €25,000 to €50,000. Other changes include the introduction of a pre-notification requirement for companies that either intend to claim the R&D tax credit for the first time or have not claimed the credit in the previous three years. New transfer of trade provisions have also been introduced for both R&D expenditure and capital expenditure on R&D buildings.
CGT
A new targeted CGT relief for investment in innovative start-ups has been introduced, known as angel investor relief. It aims to encourage investors to acquire significant minority shareholdings in early-stage innovative companies that are less than five years old by reducing the rate of CGT on a sale to a third party. The investment made must be for a minimum amount of €20,000, or €10,000 where a shareholding of at least 5% is acquired, and the shares must be held for a minimum of three years.
The reduced CGT rate of 16% is available on a gain in value equivalent to twice the value of the investor’s initial investment. An effective reduced rate of 18% applies to individuals who make the investment via a qualifying partnership. There is a lifetime limit of €3m on gains at the reduced rate of CGT. The relief is subject to a certification process.
The upper age limit for CGT retirement relief has gone up from 65 years to 70
The upper age limit for CGT retirement relief has gone up from 65 years to 70 years for disposals made on or after 1 January 2025. In addition, there will be a new lifetime limit of €10m on the relief available for disposals to a child made by an individual under the age of 70. The relief must be claimed in a tax return filed by the individual for the relevant year of assessment as a chargeable person.
A retrospective amendment has been made to the CGT relief in s604A TCA 1997 for disposals taking place on or after 1 January 2018. The relief applies to the disposal of land or buildings acquired between 7 December 2011 and 31 December 2014 and which was held between four and seven years from the date of acquisition (with reduced relief available if held for more than seven years). The amendment provides that relief is only available on property that was purchased for full market value or from a relative for at least 75% of market value.
Specified loans
A new mandatory reporting requirement has been introduced for interest-free ‘specified loans’. These are loans made to a person by a close relative (or by a company with a close relative as beneficial owner), or loans made by a close relative (or by a company with a close relative as beneficial owner) to a company with the person as beneficial owner.
A beneficiary will be required to file a capital acquisitions tax return for the use or enjoyment of the specified loan, where no interest has been paid on the loan within six months of the relevant period in which the gift is deemed to have been taken, and where the balance outstanding on the specified loan (aggregated with any other specified loan in the relevant period) exceeds €335,000 on at least one day in the relevant period.
While every effort has been made to ensure the accuracy of this information, no responsibility for loss or distress occasioned to any person acting or refraining from acting as a result of the material contained in this email can be accepted by the Irish Tax Institute, the designer, authors, contributors or publishers. Professional advice should always be sought for your particular circumstances before acting on any tax issue.
