The following are the principal items of note relevant to the property industry and agriculture contained in Budget 2012:

1.Reliefs

Mortgage Interest Relief

• First time buyers in 2012 will get mortgage interest relief at a rate of 25 per cent rather than the 15 per cent proposed by the previous Government
• Non-first time buyers in 2012 will benefit from relief at 15 per cent instead of the reduced rate of 10 per cent proposed by the last Government.
• Mortgage interest relief will no longer be available to house purchasers who purchase after the end of 2012 and will be fully abolished from 2018.

2.Measures relating to property-based ‘legacy’reliefs

These measures will apply to the various property-based tax relief schemes in the following manner:

Section 23-type Reliefs and Accelerated Capital Allowances

A surcharge will be introduced effective from 1 January 2012 on individuals with gross incomes over €100,000. The surcharge will apply at a rate of 5% on the amount of income sheltered by property reliefs in a given year.

This surcharge (essentially a higher rate of USC) will apply to all investors regardless of whether they invested in Section 23 or accelerated capital allowance schemes with this level of gross income.
Residential owner-occupier relief is unaffected by these changes.

Accelerated Capital Allowances

Investors in accelerated capital allowance schemes will no longer be able to use any capital allowances beyond the tax life of the particular scheme where that tax life ends after 1 January 2015.  Where the tax life of a scheme has ended before 1 January 2015 no carry forward of allowances into 2015 will be allowed.

3.Stamp Duty

Transfers of non-residential property

Abolition of multiple Stamp Duty rates for non-residential properties, replaced with a single rate of 2% in respect of instruments executed after 6 December 2011. Consanguinity relief on transfers of non-residential properties to be retained for intra-family transfers to end-2014. Abolished after 1 January 2015.

4.Household Charge

A household charge of €100, to fund vital local services, in line with the requirement in the EU/IMF Programme of Financial Support for Ireland, is being introduced in 2012. The charge which will raise some €160m per annum is an interim measure pending design and implementation of a full property tax, which will apply in 2014.

5.Capital Acquisitions Tax

The current rate of 25% is being increased to 30%. This increase applies in respect of gifts or inheritances taken after 6 December 2011.

The current Group A tax-free threshold is being reduced from €332,084 to €250,000 (from ten times to 7.5 times the Group B threshold). This reduction applies in respect of gifts or inheritances taken after 6 December 2011.

6.Capital Gains Tax

The current rate of 25% is being increased to 30%. This increase applies in respect of disposals made after 6 December 2011.

A new incentive relief from CGT is being introduced for the first seven years of ownership for properties bought between Budget night and the end of 2013, where the property is held for more than seven years. Where such property is held for more than seven years the gains accrued in that period will not attract CGT. This measure comes into effect after 6 December 2011.

7. Upward only rent reviews
It has not proved possible to develop a targeted scheme to tackle this issue that would not be vulnerable to legal challenge or require compensation to be paid to landlords.

This is a matter of particular interest to NAMA who have to deal with the problems caused by upward only rent reviews which apply to NAMA properties. NAMA has a policy guidance for dealing with tenants’ difficulties arising from upward only rent reviews which they have published. The NAMA policy guidance provides an opportunity for NAMA to approve rent reductions where it can be shown that rents are in excess of the current market levels and viability is threatened. The policy also provides for the appointment of an independent valuation of market rent where necessary. Where a tenant is not getting satisfaction in negotiations with his NAMA landlord, he can contact NAMA directly and any queries will be dealt with speedily by them.

8.Capital allowances and Tax Incentive Schemes

Renewable energy generation

The qualifying period for the scheme of tax relief for corporate investment in certain renewable energy projects is being extended from 31 December 2011 to 31 December 2014.

The purpose of the scheme is to encourage investment in renewable energy projects and to facilitate the growth of electricity generation capacity using these sources.
To qualify for the relief the energy project must be approved by the Minister for Communications, Energy and Natural Resources and be in one of the following categories of technology:

1. Solar
2. Wind
3. Hydro (including ocean, wave or tidal energy)
4. Biomass

9.VAT

Increase in standard VAT rate from 21 per cent to 23 per cent

The standard rate of VAT will be increased by 2 percentage points from 21 to 23 per cent with effect from 1 January 2012. This increase will apply to all goods and services which are currently subject to VAT at 21 per cent.

VAT rate on district heating reduced from 21% to 13.5%

The VAT rate applicable to district heating will be reduced from 21% to 13.5% in the Finance Bill, following consultation with the EU Commission. This will bring district heating in line with the majority of energy supplies that are subject to 13.5%. This measure also promotes energy efficiency and provides cost reduction solutions for business.

Admissions to open farms to apply at the 9% reduced rate

Following changes at EU level, admissions to open farms will become liable to VAT from 1 January 2012. Consistent with the recent VAT reduction in respect of the tourist industry, the rate of VAT on admissions to open farms will apply at the reduced rate of 9%.

10.Farmer Taxation

Stock Relief for Registered Farm Partnerships

An enhanced 50% stock relief (100% for certain young trained farmers) for registered farm partnerships is being introduced and will run until 31 December 2015 subject to clearance with the European Commission under State Aid rules.

Measures to incentivise timely farm transfers

Full retirement relief from CGT for intra-family transfers will be maintained for individuals aged 55 to 66. An upper limit of €3m on retirement relief for business and farming assets disposed of within the family is introduced where the individual transferring the assets is aged over 66 years. This will incentivise earlier transfer of farms. (The current unlimited amount applies for a transitional period of two years for individuals currently aged 66 or who reach that age before 31 December 2013.)

The current upper limit of €750,000 for assets transferred outside the family for individuals aged between 55 and 66 years will be maintained. The upper limit for retirement relief for business and farming assets transferred outside the family is reduced from €750,000 to €500,000 for individuals aged over 66 years.

(The current upper limit of €750,000 applies for a transitional period of two years for individuals currently aged 66 or who reach that age before 31 December 2013.) Full details of these measures will be set out in the Finance Bill.

Extension of the existing VAT Refund Order for flat-rate farmers to include a refund on the purchase of wind turbines.

The existing VAT refund order, which provides for the refund of VAT paid by un-registered farmers on the construction of farm buildings, fencing, drainage and reclamation of farm land, will be amended to provide that such farmers may claim a refund on wind turbines purchased from 1 January 2012. This change is part of a series of measures aimed at assisting and promoting the farming community.
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