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Budget 2013 – Impact on Employers/Employees

Here is a quick overview of some of the changes that take affect from the budget news on 5th December 2012.

REDUNDANCY REBATE:

The Employer rebate on statutory redundancy payments, which was reduced from 60% to 15% in last year’s Budget, will be abolished from 1st January 2013.In order for Employers to avail of the rebate prior to it being discontinued, the date of redundancy will have to take effect prior to the 1st January 2013.

For further information, or to discuss any aspect of Employment Law please contact any of the Solicitors in our Employment Law Department.

INCOME TAX

Maternity Benefit is to be taxable for all claimants with effect from 1 July 2013.

Top Slicing Relief will no longer be available from 1 January 2013 on ex-gratia lump sums in respect of termination and severance payments where the non-statutory payment is €200,000 or over

PRSI

Removal of weekly PRSI allowance from full rate and modified rate PRSI contributors. Increase in the minimum annual PRSI contribution for self-employed earners from €253 to €500.

Abolition of PRSI block exemption on income from a trade or profession with effect from 1 January 2013 for modified rate contributors. Removal of remaining block exemption from 1 January 2014

EMPLOYMENT AND INVESTMENT INCENTIVE (EII)

Extend the EII from 2014 to 2020 subject to State Aid clearance.

 CORPORATION TAX

3 Year Relief for Start-up Companies

This scheme provides relief from corporation tax on trading income (and certain capital gains) for new start-up companies in the first 3 years of trading. This relief is being extended to allow any unused relief arising in the first 3 years of trading due to insufficiency of profits to be carried forward for use in subsequent years. This is subject to the maximum amount of relief in any one year not exceeding the eligible amount of Employers’ PRSI in that year.

R&D TAX CREDIT

The R&D Tax Credit regime provides for a 25% tax credit for incremental expenditure on certain research and development (R&D) activities over such expenditure in a base year (2003).

Finance Act 2012 provided that the first €100,000 of qualifying R&D expenditure would benefit from the tax credit without reference to the 2003 threshold. The amount of expenditure so allowed on a volume basis is being increased to €200,000.

The R&D Tax Credit regime will be reviewed in 2013.

SUPPLEMENTARY PENSIONS

PRE-RETIREMENT ACCESS TO FUNDED ADDITIONAL VOLUNTARY CONTRIBUTIONS

Individuals will be allowed a once-off option to withdraw up to 30% of the value of funded Additional Voluntary Contributions made to supplement retirement benefits.

Withdrawals will be liable to tax at an individual’s marginal rate. The option to withdraw will be available for 3 years from the passing of Finance Bill 2013.

* Assume €200m in total over 3 years.

CHANGES TO THE MAXIMUM ALLOWABLE PENSION FUND

Changes will be put in place in 2014 to the maximum allowable pension fund at retirement for tax purposes (the Standard Fund Threshold). Other possible changes will also be made to give effect to the commitment in the Programme for Government to cap taxpayers’ subsidies for pension schemes which deliver pension income of more than €60,000.

 The estimated full year savings are provisional at this time as further detailed analysis of the necessary changes and their impact will be required.

IF YOU HAVE ANY SPECIFIC QUESTIONS ON HOW THESE CHANGES WILL IMPACT YOUR OR YOUR STAFF, JUST GET IN TOUCH ON 01 5252914 OR contact@voltedge.ie.