Budget 2020 – Summary and Highlights

9 October 2019

Pascal Donohoe delivered his budget yesterday, 8 October 2019. Developed in the shadow of Brexit, he presented, this Budget as one with two strands:

  • the extra steps we need to face up to of the very real risk of a No Deal Brexit;
  • improving our public services and help our most vulnerable citizens.

COMMITMENTS

Total voted expenditure for 2020 will be €70bn.

Brexit

The Minister announced a package of over €1.2bn to respond to Brexit and in particular the risk of a No Deal Brexit.

Approximately €200m is to be allocated across a number of Departments and Agencies to increase the level of staffing, upgrade infrastructure at ports and airports and invest in information technology and facilities management – to deal with whatever form Brexit takes.

Further funds will be borrowed if we need it to protect the economy in the event of a No Deal Brexit.

€650m will be made available of which:

  • €110m will be made available for enterprises for targeted new interventions to support viable firms with a particular focus on sectors most exposed, including food, manufacturing and internationally traded services. Support will be by way of grants, loans and equity investment.
  • €110m will be provided through the Department of Agriculture, Food and the Marine to support beef farmers (€85m), fisheries (€14m), other livestock farmers and mushrooms sector (€6m) and the food and drinks processing industry (€5m).
  • €40m will be made available to the tourism sector with a focus on the regions likely to suffer most from a No Deal Brexit.
  • €390m to be deployed as determined closer to the time.

In addition, €365m will also be provided for extra Social Protection expenditure on the Live Register and related schemes with a further €45m being made available to assist people to transition to new employment opportunities.

Rainy Day Fund

The Minister established a “Rainy Day Fund” under the previous Budget. The Fund will still be capitalised with €1.5bn from the Ireland Strategic Investment Fund but given that a No Deal Brexit is more likely, the Minister announces that the proposed transfer of €500m from the Exchequer will not be made this year.

Supporting Business

  • Nearly €1bn to be allocated to the Department of Business, Enterprise and Innovation in 2020.
  • Up to €600m to be available in supports for enterprises.
  • An extra €10m to be made available to the Disruptive Technologies Innovation Fund, allowing for a total of €30m to be made available for co-funded projects involving enterprise and research partners in 2020.

Housing and Homelessness

The Minister announced an allocation of €2.5bn to the Housing Programme in 2020 which will fund:

  • A further €20m for homeless services (bringing the allocation to €166m for 2020)
  • Capital funding of €1.1bn to support delivery of over 11,000 new social homes in 2020 and 12,000 in 2021
  • €80m for the Housing Assistance Payment Scheme
  • €130m to be made available in Urban Regeneration and Development funding
  • €2m to be made available to the Residential Tenancies Board to support their increased powers to investigate and sanction non-compliance with Rent Pressure Zones
  • Extension of the Help to Buy Scheme for 2 years to the end of 2021 and of the Living City Initiative

Health

Current expenditure in Health is set to increase by 6.3 per cent to €17.4bn in 2020. This will fund:

  • An additional €25m allocated to the National Treatment Purchase Fund to reduce waiting lists.
  • Prescription charges for all persons to be reduced by 50 cent and the monthly threshold for the Drug Payment Scheme is being reduced by €10 per month.
  • Medical card income thresholds for people over 70 by €50 for a single person or €150 for a couple per week.
  • Free GP care to be expanded to cover children under 8 and free dental care for children under 6.
  • 1 million additional home care hours to be provided in 2020.
  • A ring-fenced Sláintecare Integration Fund of €20m and €12m Care Redesign Fund, and investment in enhancing community healthcare services with the recruitment of up to 1,000 therapists, nurses and other healthcare professionals.

Social Welfare

The Minister announced various increases, including:

  • the payment of a 100 per cent Christmas bonus to all social welfare recipients in 2019;
  • an increase in 2020 of €5 in the Living Alone Allowance, €15 for the One Parent Family Payment and Jobseeker Transition income disregards and €10 for the Working Family Payment income threshold for families with up to three children
  • Increases in the Qualified Child Payment by a further €3 for over 12s and €2 for under 12s.

To address the burden of carbon tax falling unequally:

  • An increase in the fuel allowance by €2 per week and I will match this with increases to programmes that help address the causes of fuel poverty.
  • €13m for the Warmer Homes scheme to provide free energy efficiency upgrades to households deemed to be in or at risk of energy poverty.

Education

The Minister allocated €11bn to Education in 2020. This will fund, additional posts including special needs assistants and an increase in the standard and enhanced capitation rates and funding for schoolbooks in primary schools, as well as funding to higher education.

The final increase of 0.1% in the National Training Fund levy in 2020 will be used to fund reskilling and lifelong learning with a focus on responding to the sectoral and regional impact of Brexit.

Justice and Policing

The Minister announced increases in funding to recruit 700 further Gardai, new capital investment (including in a new Forensic Science Laboratory).

TAXATION CHANGES

Stamp Duty

  • The rate of stamp duty applicable to non-residential property has been increased by 1½ per cent from last night, with transitional arrangements to apply to transfers signed before 8 October and completed before 31 December 2019.
  • Stamp duty at the rate of 1 per cent will be applicable where a company sale is achieved through cancellation of shares under a scheme of arrangement under Part 9 of the Companies Act 2014.

Dividend withholding Tax

Dividend Withholding Tax will increase from 20% to 25% from 1 January 2020. Overpayments will be refundable in the usual way and this does not alter the underlying liability to tax of Irish residents. Secondly, the Minister announced a plan to introduce a modified Dividend Withholding tax regime from 1 January 2021, which would enable Revenue to apply a personalised rate of DWT to each individual taxpayer based on the rate of tax that they pay on their PAYE income.

Climate Change Taxes

The Minister noted that “While Brexit represents our most immediate economic risk, climate change is without doubt the defining challenge of our generation”

  • Carbon Tax: The price of carbon is to increase from €20 today to €80 per tonne in 2030, with a €6 increase from midnight tonight on auto fuels and from May 2020 on other fuels, after the winter heating season. This measure will raise €90m in 2020 all of which will be ring-fenced to fund new climate action measures, including a package targeted at the Midlands to create sustainable employment and support peatland rehabilitation.
  • The 1 per cent diesel surcharge introduced last year is to be replaced with a nitrogen oxide (NOx) emissions-based charge. This will apply to all passenger cars registering for the first time in the State from 1 January 2020.
  • The Minister has promised to introduce further measures in the Finance Bill to support a transition to a low carbon economy.

Measures to support Enterprises/SMEs/Agri-Sector  

  • Improvements to the Key Employee Engagement Programme (KEEP) – amendments to the Scheme will allow group structures to qualify, allow for part- time/flexible working and to allow existing shares to qualify for KEEP
  • Employment and Investment (EEI) – the scheme is to be enhanced by allowing full income tax relief (40%) in the year in which investment is made, and an increase in the annual investment limit to €250,000 and to €500,000 for 10-year investment periods.
  • Special Assignee Relief Programme (SARP) and Foreign Earnings Deduction (FED) are to be extended until 31 December 2022
  • R&D Tax Credit – to be enhanced to 30% for micro and small companies and a new provision to allow such companies conduction pre-trading R&D to claim an offset against VAT and payroll tax liabilities. The limit on outsourcing to third level institutes to be increased to 15%
  • Betting Tax – a relief is to be introduced up to a limit of €50,000 for single undertakings to support the difficulties experience by small independent bookmakers.

Anti-Avoidance Measures

  • Irish Real Estate Funds (IREFs) and Section 110 Companies – will be subject to a number of anti-avoidance measures, some of which were brought in immediately and some to be introduced in the Finance Act.
  • A number of amendments are being made to the Real Estate Investment Trust (REIT) framework to ensure that the appropriate level of tax is collected from the regime, particularly in the area of capital gains. The distribution of proceeds from the disposal of a rental property will be subject to dividend withholding tax upon distribution. An existing provision whereby a deemed disposal and re-basing of property values occurs should a company cease to be a REIT is being limited to apply only where the REIT has been in operation for a minimum of 15 years.

Capital Acquisitions Tax

The lifetime Group A tax-free threshold which applies to transfers between parents and their children will further increase from €320,000 to €335,000.

Income Tax and USC

Other measures include an increase in the home carer credit of €100, bringing it to €1600 per annum and an increase in the self-employed earned income credit of €150, bringing it to €1500

Customs & Excise

And finally, the old reliable: excise duty has again been increased on tobacco products again this year with an additional duty of 50 cent per pack of 20 cigarettes.

For further information on this topic please contact: Nicola McGrath, Corporate Partner or another member of the Corporate team at Eugene F Collins.

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