Changes to interest rates
Well, clearly, we are now out of the deep dark forest and speeding down the road to recovery if one were to view the signals presented by the recently announced interest rate changes in that regard.
Effective from May 10th, the paying rate for UOMI will increase from the present 7% to 7.28%. However, while the Government is prepared to TAKE more from your pockets, they are certainly not being as generous in return, with their pay-out rate remaining at 0%.
Equally the prescribed rate of interest for FBT low interest loans is on the increase, moving from its present 4.5% to 4.78%, for the quarter beginning 1st July 2022.
If you have any questions or would like a second opinion on any national or international tax issues, please email me directly.
Further Covid variations released
Now just to confuse you post the signals reflected in the first article, heading in the opposite direction and a stark reminder that times are in fact vary gloomy for a number of people, we’ve seen two further Covid-19 variations issued.
The first is determination COV 22/15, ‘Variation in relation to s RP 17B(4) of the ITA07.’ This variation is to extend the time for tax pooling transfers to clarify that the last date upon which a taxpayer can make a transfer request is 30 September 2022.
In order to use funds in a tax pooling account to satisfy a tax obligation for the 2021 income year, present legislation requires a transfer request to be made on or before either 75 or 76 days after the terminal tax date.
COV 22/15 will vary s.RP 17B(4)(a) and (b), to allow a taxpayer to ask a tax pooling intermediary to arrange the transfer of an amount to satisfy an obligation for provisional tax (other than under the AIM method), terminal tax or use of money interest on the provisional tax or terminal tax for the 2021 income year falling due on 17 January 2022 or later, on or before the earlier of:
- The date that is 183 days after a person’s terminal tax date for the 2021 income year, or
- 30th September 2022.
The second variation is determination COV 22/16, ‘Variation in relation to the definition of ‘finance lease’ in s.YA 1 of the ITA07.’ It applies to lessors and lessees who may have agreed to extend lease terms (or intend to do so) because supply chain constraints resulting from Covid-19 have made it difficult to obtain new assets or replacement assets when existing leases expire.
The variation applies to a person who has entered into an operating lease of an asset, but the lease term has been extended beyond 75% of the estimated useful life of the asset. In the absence of this variation, the operating lease would be reclassified as a finance lease for tax purposes with associated complexity and compliance costs.
The variation is subject to the conditions that:
- The lease was entered into before 14 February 2020,
- The lease term was not more than 75% of the estimated useful life when the lease was entered into,
- The term of the lease has been increased through one or more extensions agreed between 14 February 2020 and 30 September 2022,
- The lease term is extended to no longer than 30 September 2023, and
- The lease was extended due to supply chain constraints resulting from the impact of Covid-19 and the lessee’s business has experienced significant difficulty in obtaining new assets or replacement assets (eg motor vehicles) necessitating extensions to current lease terms.
Business & Share Valuations
These are often required by business owners for purchases or sales of businesses or shares, mergers, transfer of interest between shareholders, relationship property matters, succession planning, employee share ownership plans, intellectual property, or calculations of direct or consequential loss.
Special reports on new legislation
You may recall that I dedicated last week’s edition to the new Tax Bill passed, the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (No 10 of 2022), which received the Royal assent on 30 March 2022.
IR have released the following special reports to provide early technical coverage of two measures in the Act:
- Interest limitation and additional bright-line changes, and
- A measure providing employers with a new option for calculating fringe benefit tax.
You can find these two reports within IR’s Tax Policy section of their website.