John O'Flynn, Tax Partner, Deloitte looks at the prominent features of this year's Budget.

As ever, speculation surrounding the Budget was rife, and as ever the Budget produced measures which will be popular and those which will not. The Minister faced delivering a Budget in a very different economic environment than in previous years. He has borrowed €1.85 billion ? the first time since 2002 that a Government has deemed it necessary to do this. This is, in his own words, 'productive borrowing which will ultimately strengthen our economy in the long term'.

The main stand-out point in this year's Budget is obviously the reform of stamp duty ? reductions in stamp duty on residential property should also assist in stabilising the economic outlook for that sector. Given the recent downturn in the residential property sector, the Minister has also signalled his intent to assist this sector by increasing expenditure on roads, schools and hospitals.

The most prominent features of Budget 2008 are:

Individuals

The Minister introduced some measure of relief for individuals that spans across a number of different taxes. As expected, there are no changes in the rates of income tax. Some of the increases in tax credits are quite generous. The main beneficiaries are first time buyers where the tax credit for mortgage interest increased from €1,600 to €2,000 for single persons and from €3,200 to €4,000 for married couples. The rent-a-room relief exemption is also being increased from €7,600 to €10,000.

Families with young children will also be pleased with the ten per cent increase (from €1,000 - €1,100) in the child care supplement. While some of the other tax credits were increased by higher amounts - notably those affecting the more vulnerable groups in society - the normal tax credits, and the standard rate tax band were all increased by around four per cent. There is to be a welcome 17 per cent increase in the home carers tax credit (from €770 ? €900). This credit is available to married persons, jointly assessed, where one spouse works at home to care for children, the aged or incapacitated person. The credit, which many omit to claim, has been at the same level for six years.

Business

The change in the R&D tax credit regime, whereby the use of the 2003 base year in calculating R&D tax credits has been extended to 2013, is to be welcomed. However, extending the base year does not go far enough in attracting inward investment and in meeting industry calls for a change to the basis of the relief from an incremental basis to a value basis.

The increase in threshold to be regarded as a small company for preliminary tax purposes is a change, which will result in fewer companies being required to calculate preliminary tax payments in advance of year end. As these calculations can prove cumbersome, this should assist to reduce the administrative burden on small companies.

When looking at the financial services industry, as a result of recent challenges, it is becoming increasingly important that the sector have clarity and certainty in relation to tax matters - something that was not addressed in the Minister's speech. Companies operating in this sector may also feel that the government needs to recognise the challenges facing the industry in the light of events that occurred earlier in the year and work with the industry to ensure that the industry continues to grow and contribute in a substantial way to the Irish economy.

Stamp Duty

Broadly speaking, the new regime introduces tapering measures that ensure that the first €125,000 of the value of any residential home will be exempt from stamp duty, with a rate of seven per cent applying to the excess over €125,000 up to a limit of € 1 million. A rate of nine per cent applies to any value over €1 million. This fundamental amendment to the Stamp Duty regime, which takes immediate effect, will ensure that the effective rate of Stamp Duty on residential houses will fall significantly compared to the position before this Budget.