Déjà vu – didn’t I pay this property tax already?

A property tax based on floor area and location could be easily introduced according to a study by Economic and Social Research Institute (ESRI) published this month. The options for a property tax include an annual levy, similar to the €200 levy on rental property introduced in 2009, and an annual payment based on floor area and location.


The Commission on Taxation (COT) put forward a similar property tax system in its 2009 report, which recommends a tax based on the gross value of property. Should the COT proposal be implemented, a couple living in a property with a value of €300,000 would face an additional tax bill of between €938 and €1,125. At property values above €400,000 the annual tax cost would range from €1,313 and €1,575. The liability for couples living in property valued at €600,000 and above would range from €1,688 to over €3,750. Under these proposals individuals living in certain large detached homes would be required to have an independent valuation taken out for the purpose of settling the annual tax bill.


The proposals contain no mechanism for taking into account the level of mortgage debt outstanding and cases where mortgage repayments are in arrears. Furthermore, the annual property tax would apply to vacant residential housing units and certain commercial property including bed and breakfast and guesthouse accommodation. They even went as far as to say that person living “in an affluent area should pay more tax than one who lives in a similar sized house in a less affluent area”.


On average, the Government collected €1.09bn in stamp duty each year from 2005 and 2007. A significant portion of this tax take came from young families who traded up at the height of the boom. To impose a further property tax on hese families, many of whom are still paying off this stamp duty liability out of reduced incomes, amounts to double taxation.


The COT proposal recommends a transitional exemption for couples that have paid stamp duty since 2002. However, the short-term deferral of tax is insignificant when compared to the level of stamp duty already suffered by many young families.


The COT and ESRI proposals are not workable and will disadvantage many families with reducing incomes and significant mortgage debt.  the Government should focus on a wealth tax which would be calculated by reference to an individual’s net assets after mortgages and other outstanding debts are taken into account.

Risk of entitlement to State Contributory Pension for SMEs

There are two types of pension that can be claimed by a spouse; the State Contributory Pension (SCP) and a State Non-Contributor Pension (SNCP).  The contributor pension is based on the number and type of PRSI contributions made by an individual.  It is a full pension and entitles the holder to significant benefits including a fuel allowance and discounts on phone and electricity.

Husbands and wifes working for (and not with) their self-employed spouse need to carefully consider whether they are in fact due to make PRSI contributions and also whether they will be granted a full SCP in future.  It may surprise you to know that no PRSI is actually payable in respect of salary payments made by a self-employed person to his or her spouse (note this does not apply to non-spouses).  It should also be noted that this obscure issue only arises for spouses working for a self-employed husband or wife.  It does not apply where the husband or wife trades through a partnership or through a company.  Also, the exemption does not apply where a husband or wife works in partnership with his or her spouse. 

In the very short term, self-employed individuals may wish to consider whether they have overpaid PRSI in the current year.  As any overpayment can be reclaimed before the year-end this could be a valuable source of cash for struggling businesses.

Whilst this may benefit some self-employed individuals in the short-term, the longer term implications are horrendous for retirees and their families.  It is very likely that the Government will continue to take PRSI contributions and later refuse provide a SCP to the salaried spouse.  The experience of women farmers in recent years is an example of the hardship that individuals may have to endure.  An article in the Irish Examiner earlier this year highlights this issue  http://www.irishexaminer.com/ireland/kfkfgbmhmhid/rss2/

Interesting and very disconcerting, wouldn't you agree?

Revenue announce new VAT and PAYE Filing options for SMEs

SMEs you may qualify to reduce the frequency of PAYE and VAT filings with Revenue.  Reductions in the frequency of PAYE/PRSI and VAT tax returns and payments for smaller businesses will be extended to certain businesses from 1 January 2011. Similar arrangements in respect of RCT will also become available from that date.

The new pay & filing arrangements are based on the level of annual payment.  They are:

• Annual VAT payments < €3,000 - pay and file on a 6 monthly basis;
• Annual VAT payments between €3,000 and €14,400 - pay and file on a 4 monthly basis;
• Annual PAYE/PRSI payments < €28,801 - pay and file on a 3 monthly basis; and
• Annual RCT payments < €28,801 - pay and file on a 3 monthly basis.

What are the benefits to businesses?

The benefits for qualifying businesses are (a) improved cashflow by only having to make payments at the end of each 3, 4 or 6 monthly period as appropriate, and (b) reduced costs of administration through less frequent filing of tax returns.

How will these changes be implemented?

Revenue is now in the course of writing to each eligible business advising them of the reduced frequency of tax returns and tax payments that will apply to them with effect from 1 January 2011.