Are changes on the horizon? 
With a potential election nearing there has been a flurry of recommendations made to the Minister of Finance. One such group is the Tax Strategy Group (TSG) which is chaired by the Department of Finance and comprises senior officials and political advisers from a number of civil service departments and offices. They published some working papers last month, which outlines a list of options and issues for the minister to consider.  

I have summarised the most impactful suggestions, ranging from inheritance tax, changes to the upper limit to pensions; and the taxation of personal investments.

The full reports can be found here gov - Budget 2025 Tax Strategy Group papers (www.gov.ie)

The TSG group also produced a short, but interesting presentation on the Irish economy, which can be found here https://rb.gy/n9psi8

Inheritance (CAT) Tax Simplication 
You currently need to file a capital acquisitions tax (CAT) return only when eighty per cent of the relevant lifetime tax threshold (currently €335,000 in respect of gifts and inheritances from parents) is passed. So, once you have received €268,000 (80% of €335,000) you are obliged to file a CAT return. In their report the TSG advised that this placed “a significant burden on taxpayers to retain detailed records over a long period of time”. 

What the TSG are suggesting is that a CAT return would need to be filed for any gift or inheritance amounts above the annual gift exemption amount of €3,000. So, if you received a gift for a house deposit, of, say, €25,000 you would need to declare this and file a return. The real reason for suggesting this change is presumably to catch undeclared gifts that are eluding the tax system.

Standard Fund Threshold (SFT)
There is a scene in the 1980s comedy, ‘Yes, Minister’ where Humphrey, the cerebral civil servant, describes a decision the new minister Jim Hacker has taken as ‘very brave’. This is Humphrey’s way of suggesting that the decision might be ill-considered. One decision that will never be ill-considered by senior civil servants is one that impacts their own pensions. So, it comes as no surprise that they are suggesting increasing maximum pension threshold, which is also known as the standard fund threshold (SFT). This is very good news for business owners too, particularly those who are close to or have pensions above the current threshold of €2m. The TSG said that , ‘The current SFT regime is affecting the retention and recruitment of individuals in senior positions'. The SFT is cited as a cause of some less optimal investment decisions within a pension (such as moving investments into cash) to avoid penal tax. A common view that the SFT should be index-linked, either to the Consumer Price Index or to wages/earnings’ and there is grounds for optimism that this will change in the next budget. 

Exit Tax 
Exit tax (ET) is currently payable on the gain for personal investments under the “gross roll up” regime which allows for the life assurance investments to roll over for eight years before it becomes taxable. ET also applies to exchange traded funds (ETFs) or investment funds that are regulated in Europe (UCITS). 

Prior to 2014, the tax rate was both DIRT (tax on deposits) and ET moved in tandem, although the rates were not harmonised with ET being generally three percentage points higher than DIRT. The disparity between the two rates is now 8%, with the DIRT rate now 33% and ET remaining at 41%. This disparity is currently being reviewed by the Department of Finance as it acts as a disincentive for people to invest and instead encourages people to retain their savings in deposit accounts. It is also being reviewed under an investment fund review entitled, ‘Funds Sector 2030: A Framework for Open, Resilient and Developing Markets’. The taxation will be reviewed and possibly changed; however, the removal eight-year rule would be welcomed as it impacts the compounding of monies, particularly those looking to save for education or who are investing for the long-term.