FDC: Spot those savings that might have been missed in the budget

BY SIOBHAN HEALY

THE Finance Bill 2021 is currently before the Dáil and is expected to be enacted later this month.

The income tax changes (increased standard rate bands and tax credits), first announced on budget day, with the aim of easing the burden of increasing costs of living for taxpayers have already been well publicised.    

There are a number of further welcome measures which may not have been as well documented.

One such measure is the extension for another year of the help to buy (htb) scheme. The HTB scheme provides income tax relief to help first-time buyers in obtaining the required deposit to purchase or build their first home.

A temporary enhanced HTB relief was previously introduced earlier this year to increase the HTB relief to the lesser of (i) €30,000 (up from €20,000) or (ii) 10 per cent (up from 5 per cent) of the purchase price of the new home or of the completion value of the property in the case of self builds or (iii) the amount of income tax and Dirt paid over the four years prior to making the application.

The enhanced HTB relief, which was originally extended to 2021, was set to expire on December 31st 2021.

This amendment provides for a further extension of the enhanced HTB relief by 12 months to next December 31st.

A full review of the scheme is to be carried out in order to assess its overall effectiveness.

A second provision with the potential to benefit many is the introduction of income tax relief for remote working, in the form of a tax deduction, allowing employees who work from his or her residential premises claim 30% of the cost of electricity, heating and broadband, apportioned on the basis of the number of days worked from his or her residential premises during the year.

On the other side, one change (initially brought in as part of the Finance Bill and dealt with in a previous article by a colleague of mine) has since been abandoned.

The Minister for Finance has decided to remove the planned change to the calculation of the gift element of interest free loans for gift tax purposes. Up to now, the value of the gift has been calculated using the best interest rate available for a comparable amount held on deposit.

This rate, in the recent past has been so low as to yield a nominal amount (if any) for a deemed gift to one who has the benefit of an interest free loan.  It had been proposed to change the calculation of the gift so that it was measured by reference to the best price obtainable of borrowing an equivalent sum in the open market.

However, it has since been removed in light of the need for further consideration.

Consequently, the gift element of an interest free loan is unlikely to give rise to any gift tax implications for the borrower.

This development has been welcomed in light of the likely implementation challenges of the proposal.

We await the Finance Act later this month for the final detail of the above and all other measures.

•Siobhan Healy is a tax consultant with FDC.