Retirement Benefits: Death-in-Service Provision
At present the trustees of an active occupational pension scheme can only pay a spouse four times salary as a death in service benefit from the company funded element of the pension (this includes separate death in service or executive term assurance plans, which in a lot of cases are four times salary), Any amount remaining in the pension after the four times salary had to be used to purchase an annuity.
Finance Bill 2021 now provides for an ARF option also which is welcome and provides alternatives for drawdown that may better suit individual’s requirements.
Retirement Benefits: Removal of 15 Year Rule
The Bill removes the current prohibition on transfers from an occupational pension scheme to a PRSA where an individual has more than 15 years' service. Another welcome measure in providing more transfer options than at present where such individuals would otherwise be required to transfer it to a new occupational scheme if available or to a “buy out bond”. This change will be effective from 1 January 2022.
Retirement Benefits: Removal of Approved Minimum Retirement Fund (‘AMRF’)
The Bill removes the AMRF requirement for individuals availing of the ARF option on retirement.
This change will be effective from the passing of the Act.
From 1 January 2022, any existing AMRFs will become ARFs, and they will become subject to the ARF regime. In reality, since the increase in the state old age pension, there has been no need for an AMRF except in limited circumstances.
The Finance Bill expands the debt warehousing scheme to allow self-assessed income taxpayers who have a material (>15%) interest in their employer company to warehouse tax liabilities relating to their Schedule E income from that employer company only.
This will be available to such individuals where the employer company is warehousing its PAYE (Employer) liabilities, even where the individual themselves do not meet the relevant reduction in turnover criteria for income tax warehousing.
In such cases, the debt warehousing facility will not be apply to other sources of income outside of this Schedule E income and a declaration that debt warehousing is being availed of must be made when filing the individual’s income tax return on ROS.
The Bill also removes any interest charge on an individual who has a material interest in their employer company, where both the individual and their employer company are availing of debt warehousing. This new section provides in these circumstances interest on tax due on emoluments will be collected form the employer only, unless the employer fails to pay the liabilities and associated interest. In that case, the employee will be liable for the interest unpaid.
In calculating the CAT on interest free loans, the deemed gift/inheritance was calculated by reference to the highest rate of return which the individual providing the loan could have obtained on deposit. In recent times, given negative interest rates, any gift element would have been minimal.
The Bill provides that from 1 January 2022 the value of the gift/inheritance attributable to the free use of money is to be determined by reference to the best price obtainable for borrowing the equivalent amount on the open market.
Where a disponer makes a gift and the beneficiary claims either Agricultural Relief or Business Property Relief, they will be obliged to submit a CAT return to Revenue if requested, regardless of whether they have exceeded 80% of the relevant group threshold.
There were limited changes in the Finance Bill 2021 in respect of VAT.
Of those changes, perhaps the most significant is the amendment to reflect recent European case law rendering cancellation fees VATable on the basis the payment received is for a service or the right to access a service.
This Finance Bill also provides for the exemption and zero-rating of specific goods and services utilised in the response to the Covid-19 pandemic. This includes application of the zero rate of VAT to the supply of Covid-19 vaccines and in-vitro diagnostic medical devices and services closely linked to them for the period from 12 December 2020 to 31 December 2022. This is a welcome extension given the on-going Covid-19 landscape.
There will be a reduction of the flat-rate addition rate for farmers from 5.6% to 5.5% (due to take effect from 1 January 2022), and some technical and notification requirement amendments with respect to VAT group criteria. Penalties are to be introduced where there is a failure to fulfil those requirements.
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