Finance Bill 2024

Following the recent Budget, the Finance Bill was published on 10 October 2024. The Finance Bill sets out the legislative changes required to implement the Budget Day announcements of 1 October 2024. Please see our Budget newsletter which outlines the majority of changes.

Some other measures have also been included in the Finance Bill which were not announced on Budget Day. Some of the headline changes include the below.

1. Employer Contributions to PRSAs and PEPPS

Prior to the Bill, employer PRSA contributions were not subject to a BIK charge and there was no limit in respect of the amount of employer PRSA contributions.

From 1 January 2025, the Bill now provides for employer contributions to PRSAs and PEPPs to be considered to be a BIK if they exceed an ‘employer limit’ which is defined as 100% of an employee’s salary in the year of assessment.

Furthermore, the employer can only take a deduction for employer contributions for income tax or corporation tax purposes within the 'employer limit’.

For example, where an employee earns €50,000 in a year of assessment and their employer makes a contribution of €125,000 to the employee’s PRSA, €50,000 will be allowable with the balance of €75,000 subject to BIK in the hands of the employee. The employer will also only be entitled to a tax deduction for the €50,000 and not the total €125,000;

2. Split Year Residence

Split Year Residence limits the Irish tax one employment income from the point of arrival and up to the date of departure, subject to certain conditions. Revenue have been strictly applying the condition whereby the relief must be claimed in the year of arrival or departure. In practice, the relief was generally being claimed in the year following arrival or departure, at the stage an income tax return was being filed.

The Bill inserts new legislation which will apply to individuals arriving in, or departing from, Ireland on or after 1 January 2025, and removes the requirement for the taxpayer to make a submission to Revenue in the year of arrival or departure to claim the relief.

3. Small Benefit Exemption

As announced on Budget Day, the Bill provides for an increase in the combined annual limit provided for in the exemption from €1,000 to €1,500 and an increase in the number of non-cash benefits permitted under the exemption from two to five. The change applies from 1 January 2025.

A change which was not mentioned on 1 October is the inclusion of an expiry date in relation to the exemption for the first time. The Bill provides that the exemption will expire on 31 December 2029.

4. Reporting Interest Free Loans

The Bill has increased the scope of loans that are required to be reported by beneficiaries for CAT purposes. Prior to the Bill, there was a filing obligation in relation to loans made to close relatives which exceed €335,000 where no interest, or interest below market rates, has been paid on the loan or where no interest is paid within a six month timeframe.

Under the updated provision applicable from 1 January 2025, the reporting requirement will apply with respect to all low-interest loans (even if interest is paid).

5. Interest Limitation Rules

The Bill includes technical amendments to certain aspects of the Interest Limitation legislation regarding the finance cost element of leases to include changes to the definition of leases. The Bill also provides clarification on the treatment of amounts carried forward in a foreign currency.

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