TAXATION ADVISORY

INVESTING IN TAX DESIGNATED PROPERTY

Property based tax incentives focus on three areas:

Urban & Rural Rene wal
Tourism
Health Care Sector

With the exception of most of the Health Care Sector incentives, the period in which qualifying construction has to be completed expires on 31st July 2010 and in many cases subject to the project having been commenced prior to specified dates. Schemes with termination dates include Park & Ride facilities, 1999 Urban Renewal Scheme, 2000 Town Renewal Scheme, Multi Storey Car Parks and Living Over Shop Scheme.

In addition, the allowances are now subject to a tapering relief of 75% of expenditure incurred in 2008 and 50% for expenditure incurred for the period 1st January 2010 to 31st July 2010. These dates relate to the date on which the work was carried out and finalized by the builder

Investors clearly need to ensure that the scheme they are investing in has met these conditions and also to have crystal clear clarification and appropriate documentary evidence as to the particular tax incentive i.e. is the expenditure restricted to allowance against other rental income or may be set against all income, including your farming profits, subject to a ceiling of €31,750 per annum. The mechanics of the rules, regulations and conditions attaching to property reliefs are now complex and investors must ensure that the scheme they are investing in meets all conditions. From 7th April 2009 the tax deductions for interest on monies borrowed for purchase, improvement or repair of rented residential premises is restricted to 75% of the amount which would otherwise have been deductible. A brief summary of the reliefs are as follows:

Residential - Investor	Tax Relief off-settable against other rental income for expenditure on construction, conversion or refurbishment.
Residential - Owner Occupier	Construction: 5% p.a. off-settable against total income for 10 years. Refurbishment: 10% deduction against total income for 10 years
Non-Residential - Investor	(a) free depreciation - 50% (b) 4% annual allowance for 12.5 years
Non-Residential - Owner Occupied	(c) free depreciation - 50% (d) 4% annual allowance for 12.5 years
Many of the allowances are now subject to 75% of the above reliefs where building works carried out in 2007 and 50% when carried out up to 31st July 2008.

Renting Farmland

The above reliefs are allowable against rental income arising from renting of farmland.

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PERSONAL TAX CREDITS AND RELIEFS- TAX DEDUCTIBLE AT 20% RATE

Single Person Married Couple Single Person with dependent children	2010 €1830 €3660 €3660
Widowed Person Without dependent children Widowed person (in year of bereavement)	€2430 €3660
One Parent Family Widowed person (except in year of bereavement) Other person (Deserted, Separated or Unmarried)	€1830 €1830
Widowed Parent First Year After Bereavement Second Year After Bereavement Third Year After Bereavement Fourth Year After Bereavement Fifth Year After Bereavement	€4000 €3500 €3000 €2500 €2000
Home Carer's Credit - Max.	€900
Employee Tax Credit	€1830
Age Credit Single/Widowed Married	€325 €650
Incapacitated Child Credit	€3660
Dependent Relative Credit	€80
(Income Limit) (2009)	(€13,837)
Blind Credit Single Person Both spouses blind	€1830 €3630

The personal tax credit and relief system replaced the old tax free allowance based system and equalises the value of tax allowances to all taxpayers. Accordingly, every €1,000 of a personal tax allowance is now equivalent to a tax credit of €200 (i.e. €1,000 at 20%) for each taxpayer irrespective of whether they are taxable at 20% or 41%. The current level of basic tax credit for a single person is €1,830 allowing them to earn €9,150 tax free (€18,300 for a married couple). For a farmer with off-farm PAYE income in excess of €9,150 an additional employee tax credit of €1,830 (single) €3,660 (married) may be claimed enabling tax free earnings of €18,300 for a single person (€36,600 for a married couple).

Set out below are the tax credits available in 2010 which will yield a 20% tax saving.

Health/Medical Expenses

Un-reimbursed health/medical/dental expenses incurred by the taxpayer in respect of themselves, their spouse and their dependents (including dependent relatives) may be claimed at the standard rate against taxable income. Nursing Home expenses until 31st December 2009 could be claimed at the 41% rate. For the tax year 2007 onwards there is no longer a requirement that persons are related to each other in order to claim relief for medical expenses. Tax relief is not available for any expenditure that has been or will be re-imbursed by VHI, BUPA, VIVAS Health, HSE, or where a compensation payment is made or will be made.

Health Expenses

Health expenses include the following: Services of a practitioner, drugs and medicines, hearing aids, physiotherapy or similar treatment, wheelchair/wheelchair lift, orthopedic bed/chair, home nursing/ special nursing, kidney patient's expenses including a mileage allowance where the patient attends hospital for dialysis (For home dialysis patients tax relief is allowed for electricity, laundry, telephone and travel to and from the hospital) maternity care, child oncology patients, educational psychological assessments and speech and language therapy for children, Invetro fertilization, glucometer machine for a diabetic, gluten free food for coeliacs, nursing care and certain payments to nursing home for dependent relatives.

Dental Expenses

Dental treatment which is not considered "normal" qualifies and in this context includes: crowns, veneers, tip replacing, gold posts, gold inlays, endodontics, root canal treatment, periodontal treatment orthodontic treatment and the surgical extraction of impacted wisdom teeth. In order to claim un-reimbursed dental expenditure it is necessary for the dentist to supply a signed MED2 form which indicates that the treatment is tax deductible. Routine dental treatment is excluded from tax relief and this includes the extraction, scaling and filling of teeth, bridge work and the provision and repairing of artificial teeth and dentures. Routine Ophthalmic treatment is also excluded and this includes sight testing and advice as to the use of spectacles or contact lenses and the provision and repair of spectacles or contact lenses.

Home Carer's Credit

The Home Carer's Credit may be claimed by a married couple, who are jointly assessed, where one spouse works at home to care for children or an aged or incapacitated person. Where the Home Carer has income exceeding €5,080 (2010) for the tax year the credit is reduced by 60 cent for every extra €1 of income and any Home Carer's allowance from the Department of Social Community and Family Affairs is disregarded in calculating the Home Carer's income.

PAYE / Employee Tax Credit

To claim this credit an individual must be in receipt of PAYE income and in the case of married couples where each spouse is in employment the credit is available to each spouse. The credit may be claimed in respect of farmers children working on the farm provided they are full-time employees and
(a) PAYE must be operated in respect of the employment, and
(b) The son/daughter's income from employment on the farm must be at least €4,572.

Age Credit

If the taxpayer or his spouse is over, or will reach, the age of 65 during the tax year, the following credits apply:
Single or Widowed - €325
Married Couple - €650

Incapacitated Child Credit

Available if an incapacitated child is living at any time during the tax year with the taxpayer.

Dependent Relative Credit

This credit is granted for each dependent relative of a taxpayer, or spouse, who is incapacitated, and, even if not incapacitated, the widowed mother or mother-in-law of the taxpayer. Also available in respect of a son/daughter maintained by the taxpayer and on whose services he/his wife depend because of old age or illness. The credit is reduced euro for euro where the dependent's income exceeds the maximum contributory old age pension rate for someone aged 80 or over and living alone.

Blind Person's Credit

Claimable by a person where he or his spouse is blind during the tax year. Where both husband and wife are blind the credit is doubled. An additional allowance of €825 at the marginal rate is available for a guide dog.

Dental Insurance

Relief is available for premiums paid on Dental Insurance Policies for non-routine dental treatment.

Long Term Care Policies

Tax allowance for premia is available on qualifying insurance policies designed to cover, in whole or in part, future care needs of individuals who are unable to perform at least two activities of daily living or are suffering from severe cognitive impairment.

Rent Paid for Private Accommodation

A tax credit of 20% may be claimed by tenants for rent paid for rented residential accommodation which is their sole or main residence subject to certain rent limits as follows:

	Over 55 years	Rent Limit	Others	Rent Limit
Single Person	€800	€4,000	€400	€2,000
Married and Widowed Persons	€1,600	€8,000	€800	€4,000

Credit for payment of Service Charges

A 20% tax credit is available for service charges paid in the previous tax year, subject to a maximum tax credit of €80 (€400 x 20%). Service charges include those charges imposed by Local Authorities for the provision of a domestic water supply, domestic refuse collection, or domestic sewage disposal and includes payments made to a Group Water Scheme for domestic water supplies.

Third-Level Tuition Fees

Subject to a maximum limit on qualifying fees of €5,000 p.a., tax relief at the 20% rate is available for certain third-level tuition fees paid to approved colleges in Ireland and the EU. Course registration fees are not allowed.

Fees paid for Training Courses

Tax Relief at the 20% rate may be claimed for tuition fees ranging from €315 to €1,270 for approved training courses of at least two years duration in the areas of information technology and foreign languages.

The course must be approved by FAS as to quality and standards and the course must result in the awarding of a certificate of competence.

Mortgage Interest Relief

Relief is available, at the 20% rate, for interest on money borrowed for the purchase, erection or improvement of a principle private residence, or the residence of a former or separated spouse, or the residence of a dependent relative who is living in the house rent free. Where the Lending Institution is aware that the mortgage is for the purchase, erection or improvement of a principal private residence the tax credit will already have been netted off the interest payable to the Lending Institution.

The maximum allowable amounts for mortgage interest paid are:

	Yearly Maximum Allowable
	First Time Buyers *	Other **
Single Person	€10,000	€1,000
Married/Widowed	€20,00	€2,000

Rate of Tax Relief - % of Interest claimable (subject to ceiling)

	First Time Buyers *	Other **
Year of Mortgage	Before 1/7/2011	Before 1/7/2011
Years 1 + 2	25%	15%
Years 3,4 + 5	22.5%	15%
Years 6 + 7	20%	15%

* First-time buyers who claimed mortgage interest relief for the first time in the tax year 2003 or later.
The increased limit applies for a period of seven years beginning with the tax year in which mortgage interest was claimed for the first time.

** With effect from 1 May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for both first time and non-first time buyers.

If the money was borrowed for business or farm purposes it should be charged against profits in the profit & loss account thereby having no restriction on the amount of interest claimable against profits. Where the mortgage/part thereof was taken out for purposes other than the purchase, erection or improvement of a principal private residence, the tax credit applied by the Lending Institution should be restricted proportionately.

Payment of Wages to a Spouse

The 20% rate band for a married couple where only one of the spouses has an income is €45,400 (2010). However, where both spouses have income the rate band is increased to €72,800, which is an additional €27,400 or the amount of the spouse's second income, if less. A farmer with sufficient income taxable at 41%, by paying a wage to his spouse of up to €27,400 could effect a tax saving of up to €5,754 (€27,400 x 21%).

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In reading this taxation section interpret the word "he" as meaning he or she and the law stated as at 1st November 2008 incorporating the 2009 budget proposals.

Disclaimer: The taxation content prepared by IFAC Accountants in this publication is intended as an aid to farmers and has been written in general terms and is intended as a guide only and is not intended to be a comprehensive statement of relevant law or regulation with its application to specific situations depending on the particular circumstances involved.

It should not be used as a basis of any conclusion drawn or argument made and the original legislation should be consulted at all times. Accordingly, the reader should seek proper professional advice if acting on any of the issues outlined in this publication and this publication should not be relied upon as a substitute for such advice. While every effort has been made to ensure accuracy, the author or publisher will not accept any liability for loss, distress or damage resulting from any errors or omissions.