Income Tax

Income Tax. VAT. Capital Gains Tax. Tax Treatment of Rentals and Short-term lettings

Yesterday, Revenue eBrief No. 59/18 was published.  This comprehensive nine page document outlines the Income Tax. Capital Gains Tax and VAT treatment for income arising from the provision of short-term accommodation.

A short term letting is defined as a letting of all or part of a house, apartment or other similar establishment:

– to a tourist, holidaymaker or other visitor
– for a period which does not exceed or is unlikely to exceed 8 consecutive weeks

There are a number of different circumstances which will be covered by this new guidance material including

(i) persons staying in hotels, guesthouses, B&Bs, hostels, etc.,
(ii) persons either sharing a property with the owner or occupying the whole property for a short period of stay or
(iii) persons occupying self-catering holiday accommodation for short periods

If your rental income meets the criteria outlined in this document, you could be looking at an obligation to register for VAT depending on your turnover as well compliance obligations under Cases I or IV Schedule D.  In addition to the annual tax on the rental profits and the potential VAT exposure, you could encounter a Capital Gains Tax liability on the sale of the property generating this rental income which might otherwise have been tax exempt.

This document has clarified situations where Rent-a-Room Relief will not be available.  Specifically if you are someone who rents out one or more rooms in your home through online accommodation booking sites you will not be entitled to the Rent-a-Room Relief.  Instead you may be treated as if you are carrying on a trade with an obligation to register and account for Income Tax and/or VAT.

If you provide short term rentals to tourists, guests or visitors where the room or property is available for rent on a regular or frequent basis with a view to making a profit and involves you, the owner, carrying out some or all of  the following activities then you may be deemed to be carrying on a trade and if so, this document is relevant to you:

1. Advertising the property online on accommodation booking websites
2. Dealing with booking enquiries, reservations and payments
3. Arranging for cleaning, laundry and maintenance during and between lets
4. Providing meals
5. Providing information to visitors about local tourist attractions, restaurants etc.
6. paying staff to provide such services, etc.

According to this document:

“The provision of traditional short-term guest accommodation in hotels, guesthouses, B&Bs and hostels will generally constitute a trade. Persons who provide short-term guest accommodation, either in their home or in another property owned by them, will only be trading to the extent the activity is sufficiently frequent and regular and is carried on a commercial basis and with a view to the realisation of profit.”

For further information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-01-20.pdf

If you are renting out a room in your own home or an entire property using an online accommodation booking site and you are unsure of the correct tax treatment pertaining to your situation, why not contact us to discuss the matter further at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Irish Employment Taxes. Payroll Taxes. Employees and Employers Taxes

It’s very difficult to keep up to date with all the amendments to the Irish tax system so here is a summary of some of the employment tax changes to be mindful of in 2018:

1. Annual Membership Fees paid to a professional body (Revenue eBrief 04/18 published on 9^th January 2018)

The updated Revenue guidance notes allow an employee to claim a deduction for professional membership fees only in circumstances where:

1. There is a statutory requirement for that employee to be a member of a specific professional organisation or body or to hold a practicing certificate in order to carry out the duties of his/her employment or
2. In the absence of that professional membership or practicing certificate the individual cannot legally fulfill the full duties of his/her employment.

Where the employer pays the membership fee on the employee’s behalf and either of the above two conditions apply then no Benefit-in-Kind is deemed to have arisen.  Subsequently no payroll taxes will arise.

We would advise all employers to ensure the payment of professional membership fees on behalf of employees can be supported in the event of a Revenue Audit.

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/ebrief/2018/no-0042018.aspx

2. Increase in Employer’s Pay Related Social Insurance from 10.75% to 10.85% from 1^st January 2018.

 3. Benefit-in-Kind Exemption of Electric Vehicles for 2018. 

Finance Act 2017 introduced this exemption for electric vehicles which were available for private use for employees during the 2018 tax year.  It is not clear whether or not this scheme will be extended into 2019 which may result in a low uptake in purchasing electric vehicles by employers.

The exemption applies to cars and vans deriving their power from an electric motor.

It does not apply to hybrid vehicles.

4. PAYE Modernisation or Real Time Reporting

From 1^st January 2019 all employers will be required to accurately provide PAYE data to Revenue on a Real Time basis.

This effectively means:

• Revenue will be able to automatically review employees’ payroll information and immediately identify any discrepancies and errors.
• The PAYE information submitted to Revenue must be 100% correct.  In other words, the opportunity to amend errors at the end of the year has been eliminated.

For further information, please follow the link:

https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-892017.aspx

We would advise all employers to take the time, sooner rather than later, to ensure their payroll processes will be adequate to handle the increased obligations of the Real Time Reporting.

Here is a list of other relevant Revenue eBriefs:

Home Carer Tax Credit – Revenue eBrief No. 009/18 (29th January 2018) https://www.revenue.ie/en/tax-professionals/ebrief/2018/no-0092018.aspx

Change in Basis of Assessment – Schedule E – Revenue eBrief No. 127/17 (29th December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1272017.aspx

Taxation of payments to craft apprentices by Education and Training Boards –Revenue eBrief No. 126/17 (29 December 2017)

Benefit-in-Kind on use of Company Vans – Revenue eBrief No. 124/17 (28^th December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1242017.aspx

Exemption from Income Tax in respect of certain payments made under employment law – Revenue eBrief No. 118/17 (20th December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1182017.aspx

PAYE Services: Tax and Duty Manual Updates – Revenue eBrief No. 111/17 (01 December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1112017.aspx

Amendments to the Employment and Investment Incentive on 2^nd November 2017 – Revenue eBrief No. 99/17 (02 November 2017)
 https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-992017.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Tax Pay and File. Income Tax, Capital Gains Tax (CGT), Local Property Tax (LPT) and Employers/Payroll Taxes

Here is a brief list of relevant tax filing dates for those with pay and file obligations under Local Property Tax, Income Tax, Capital Gains Tax, Payroll Taxes, etc.

For useful Pay & File Tips please click: https://www.revenue.ie/en/online-services/services/ros/ros-help/popular-ros-services/pay-and-file/index.aspx

For further information on tax deadline dates and to discuss your tax obligations with a qualified Chartered Tax Advisors, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Budget Ireland. Income Tax Changes. Business Tax amendments. CGT and CAT Reliefs and Exemptions, VAT

The Minister for Finance, Public Expenditure and Reform Paschal Donohoe T.D delivered his first Budget today, on 10^th October 2017, which concentrated more on expenditure than on tax changes.  The Minister announced a number of positive measures to assist small and medium sized enterprises prepare for “Brexit” as well as confirming Ireland’s commitment to the 12½% corporation tax rate. We are pleased to bring you our summary of the tax measures set out in Budget 2018 under (i) personal taxation, (ii) Income Tax, (iii) Capital Acquisitions Tax, (iv) Capital Gains Tax, (v) Business Taxes, (vi) VAT, etc.

PERSONAL TAXATION

Universal Social Charge

The USC has been cut for lower and middle income earners.

The 2.5% USC rate has been reduced by 0.5% to 2% and the band has been increased to €19,372 from €18,772 which will benefit employees earning the minimum wage.

The 5% USC rate has been reduced by 0.25% to 4.75%

Medical card holders and individuals aged 70 years and over whose combined income does not exceed €60,000 per annum will only be liable to pay a maximum USC rate of 2%.

For self-employed individuals with income of over €100,000 the 11% rate will continue to apply

Income Tax

The higher or marginal tax rate will remain at 40% for 2018.

The income tax standard rate band, however, will be increased by €750 to €34,550 i.e. the entry point at which the 40% income tax rate applies has been increased from €33,800 to €34,550 for a single person and from €42,800 to €43,550 for married couples with one income.

The marginal rate of tax for individuals earning between €34,551 and €70,044 will be 48.75%.

The marginal rate of tax for individuals earning in excess of €70,044 will remain at 52% for employees.

The marginal rate of tax for self-employed individuals earning in excess of €100,000 will remain at 55%.

Earned Income Credit

For self-employed individuals, the earned income tax credit will increase by €200 to €1,150.

No reference was made in today’s Budget speech as to when future increases to this tax credit would arise to bring it in line with the PAYE Tax Credit of €1,650.

Home Carer Tax Credit

The Home Carer Tax Credit will increase by €100 from €1,100 to €1,200.

The €7,200 income threshold remains

This tax credit can be claimed by a jointly-assessed couple where a spouse/civil partner cares for one or more dependents regardless of the number of individuals cared for.

Deposit Interest Retention Tax (DIRT)

The rate for Deposit Interest Retention Tax for 2018 will be charged at 37%.

PRSI

The National Training Fund Levy will be increased over the next three years and will apply to employees under Classes A and H by increasing Employer’s PRSI as follows:

a)      10.85% in 2018

b)      10.95% in 2019

c)      11.05% in 2020

Mortgage interest relief 

Mortgage Interest Relief for residential property owners which was scheduled to be abolished from the end of this year will continue until 2020.

This relates to home owners who took out qualifying mortgages between 2004 and 2012.

The relief will be reduced as follows:

a)      to 75% in 2018

b)      to 50% in 2019

c)      to 25% in 2020

Following a change in last year’s Finance Act, the amount of mortgage interest allowable against taxable rental income will increase to 85% with effect from 1^st January 2018.  However, there was no reference, in today’s Budget speech, to the expected increase from 80% to 85% mortgage interest relief on rented residential property.

As you may remember, in Budget 2017, it had been announced that100% mortgage interest relief for rental properties would be restored on a phased basis by 2020.

 Deductibility of pre-letting expenses

Expenses incurred prior to the first letting of a property are not deductible against rental income, with a few exceptions.

Following today’s Budget, property owners who rent out residential properties which have been vacant for a period of twelve months or more will be entitled to a tax deduction of up to €5,000 per property.

These expenses must be revenue in nature and not capital expenditure.

The relief will be subject to a clawback of the property is withdrawn from the rental market within a four year period.

This relief will be available for qualifying expenditure between now and the end of 2021.

Benefit-in-kind on motor vehicles

The minister announced a number of measures to incentivise the purchase of electric cars including:

a)      a 0% rate of Benefit-in-Kind for electric cars and the electricity used at to charge these vehicles while at work.

b)      a VRT Relief measure

CAPITAL ACQUISITIONS TAX

No changes were announced to the CAT tax-free thresholds in the Budget.

CAPITAL GAINS TAX

No changes were announced to CGT rates in the Budget.

Seven Year Exemption

The Minister relaxed the “Seven Year Exemption” which applied to land or buildings purchased between 7^th December and 31^st December 2014.

Disposals of qualifying assets between years four and seven will now qualify for the full Capital Gains Tax Exemption

VAT

VAT Compensation Scheme

A VAT refund scheme was introduced in order to compensate charities for input VAT incurred on expenditure.

This scheme will take effect from 1^st January 2018 but will be paid one year in arrears. In other words charities will be entitled to claim an input VAT credit in 2019 in relation to expenses incurred in 2018.

Charities will be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive.

The Minister also confirmed that a capped fund of €5 million will be available to fund the scheme in 2019.

For further information please visit:

http://www.budget.gov.ie/Budgets/2018/Documents/VAT_Compensation_Scheme_For_Charities.pdf

9% VAT Rate

The reduced VAT rate of 9% for goods and services, mainly related to the tourism and hospitality industry, has been retained.

VAT on Sunbed Sessions

 In line with the Irish Government’s National Cancer Strategy, the VAT rate on sunbed services will increase from 13.5% to 23% from 1^st January 2018.

BUSINESS TAXES

Corporation tax rate

The government has made a firm commitment to retaining the 12½% Corporation Tax rate to attract foreign direct investment.

 Capital Allowances for Intangible Assets

The Minister confirmed that he would be limiting the amount of capital allowances that can be claimed for intangible assets.

A tax deduction for capital allowances under Section 291A TCA 1997 on intangible assets and any associated interest cost will now be limited to 80% of the relevant income arising from the intangible asset in the accounting period from midnight of 10^th October 2017.

Key Employee Engagement Programme (KEEP)

The Minister announced plans for a new share based remuneration incentive for unquoted SME companies aimed at improving the ability of SMEs to attract and retain key staff.

This incentive will be available for qualifying KEEP share options granted between 1^st January 2018 and 31^st December 2023.

No income tax, PRSI or USC will be charged on the exercise of the share options. Instead gains from exercising these share options will only be liable to CGT @ 33%.

The tax becomes payable when the shares are sold.

State Aid approval will be required to introduce this scheme.

Accelerated capital allowances for expenditure on energy-efficient equipment

Following a review of the accelerated capital allowances scheme for energy efficient equipment, the current scheme is being extended for a further three years to the end of 2020.

STAMP DUTY

Stamp Duty on commercial property

The rate of stamp duty on commercial property transactions will have increased from 2% to 6% with effect from midnight of 10^th October 2017.

A stamp duty refund scheme is also being introduced for commercial land acquired for the development of housing, on condition that the development must begin within 30 months of the purchase of the land.

It is expected that further details of the relief and the conditions will be outlined in the Finance Bill.

FARMING AND THE AGRI-SECTOR

Stamp duty

The Stamp duty rate of 1% remains for inter-family farm transfers for a further three years.

The Stamp Duty exemption for Young Trained Farmers on agricultural land transactions will also be retained.

Leasing land for solar panels

The leasing of agricultural land for the use of solar panels will continue to be classified as agricultural land for the purposes of the CAT Agricultural Relief and the CGT Retirement Relief providing the solar panel infrastructure does not exceed 50% of the total land holding..

BREXIT

Brexit Loan Scheme 

A new Brexit Loan Scheme has been announced. A loan scheme of up to €300 million will be available at competitive rates to SMEs to assist them with their short-term working capital needs, with particular attention given to food industry businesses.

Details of this scheme will be provided by the Tánaiste and Minister for Business, Enterprise and Innovation, and the Minister for Agriculture, Food and the Marine.

Plans were also announced to hire over 40 additional staff across the Department of Business, Enterprise and Innovation and enterprise agencies in 2018 to respond to the issues arising from Brexit.

Increased funding

The Minister announced increased funding of €64 million to support the agri-sector. Of this, a further €25 million is to be provided to the Minister for Agriculture, Food and the Marine to develop further Brexit loan schemes for the agri-food sector in addition to the loan scheme discussed above.

OTHER CHANGES

Sugar Tax

 From 1^st April 2018 two rates of tax on sugar-sweetened drinks will be introduced subject to State Aid approval.

The first will apply at a rate of 30 cent per litre where the sugar content is above 8g per 100ml.

The second rate of 20 cent per litre will apply where the sugar content is between 5g and 8g per 100ml.

Drinks with less than five grams of sugar won’t attract a sugar tax.

Vacant site levy

The vacant site levy has been increased from the current 3% levy in the first year to 7% in second and subsequent years to encourage land owners to develop vacant sites rather than “hoarding” land.

The vacant site levy is due to come into effect in 2018.

An owner of a property on a vacant site register who does not develop their land in 2018 will be liable to the 3% levy in 2019 and a further 7% levy in 2020 and each year thereafter until the land is developed.

From 1^st January 2017, each local authority is obliged to maintain a register of vacant sites to include on the register, details of any site, which they believe, has been vacant for the previous twelve month period.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Spanish Tax Advice. Personal and Income Tax. Spanish Tax Compliance. International and Cross Border Tax Services for residents, non-residents, employees, individuals, etc.

The Spanish system has two types of Personal Income Tax: (i) PIT for Spanish resident individuals and (ii) NRIT for individuals who are not resident in Spain.  Spanish resident individuals are generally liable to PIT on their worldwide income wherever it arises  Non-resident individuals are chargeable to NRIT on their Spanish source income only.

RESIDENCE

An individual is liable to Spanish tax based on his or her residence.

An individual is deemed to be Spanish resident if he or she spends more than 183 days in the tax year (i.e. the calendar year) in Spain or if the individual’s main centre of business or professional activities or economic interests is located in Spain.

It is important to bear in mind that temporary absences from Spain are ignored when calculating the number of days for the purposes of establishing residency except where tax residence in another jurisdiction can be proven.

Where the individual does not satisfy the above 183 day rule, he or she will not be considered Spanish tax resident for the calendar year in question and as a result, Spanish source income including capital gains will be liable to NRIT.

In situations where an individual may be deemed to be tax resident in two jurisdictions in the same tax year, it is essential that the individual consult the relevant Double Taxation Agreement to establish what relief or exemption from Spanish Tax may be available.

Generally speaking, the credit for Spanish tax withheld on foreign source income and capital gains tax will be the lower of:

a)      Actual foreign tax withheld on the foreign source income which is equivalent to the Spanish PIT or NRIT

b)      Average effective PIT rate applied to the foreign source income taxed in the other jurisdiction.

 COMPLIANCE

Individuals must file a Tax Return and pay the relevant taxes within six months of the end of the calendar year i.e. 30^th June following the year end, being 31^st December.

Married couples may elect to file their tax returns either jointly or separately.

There are strict filing deadlines for non-resident individuals.  Please be aware that there are no deadline extensions available.

There are a number of penalties to consider including:

a)      Penalties for the underpayment of taxes range from 50% to 150% of the unpaid tax liability.

b)      Penalties for the late payment of taxes range from 5% to 20% where such payments are made on a voluntary basis and not as part of an audit or investigation.

c)      Statutory Interest on late payments will also apply.

WORK PERMITS / VISAS

Individuals entering Spain from outside the E.U., as either employees or self employed individuals, must obtain a work and residence permit prior to commencing their self employed or employment activity in Spain.

The Work and Residence permits are issued for a twelve month period.

It is possible to renew this permit two months in advance of its expiry date and always advisable to do so before the permit has expired.

For individuals entering Spain from E.U. member states, there is no requirement to possess a Work and Residence Permit.

For E.U., EEA or Swiss individuals who wish to remain in Spain beyond a three month period, they are required to register with the Spanish Authorities and obtain the Central Registry for Foreigners Certificate.

TAXES

For general taxable income received by Spanish resident individuals, progressive tax rates ranging from 19% to 48% are applied. These rates depend on the Autonomous Community in which the individual is deemed to be tax resident.  As a result, tax liabilities can vary from one autonomous region to another.

Dividends, Interest, Capital Gains and Savings Interest are taxed at the following rates:

• 19% for the first € 6,000 of taxable income.
• 21% for the following €6,000 up to €50,000 of taxable income.
• 23% for income exceeding €50,000.

Non resident individuals are taxed at a flat rate of 24% on Spanish source income.  This rate is reduced to 19% for individuals who are tax resident in an EU member state or an EEA country with which there is an effective exchange of tax information treaty in place.

Income Tax is levied on the gross Spanish source income but there are no deductions or tax credits available for offset with the exception of certain expenses for E.U. tax resident individuals.

Investment income (i.e. Interest and dividends) arising for non resident individuals are liable to 19% tax although this figure may be reduced depending on the Double Taxation Treaties in place.  It is important to bear in mind that Interest for EU residents in tax exempt.

From 2016 onwards Capital gains will be taxed at 19% if arising from the transfer of assets.

Royalty income is liable to tax at 24%

Pensions are taxed at progressive rates ranging from 8% to 40%.

SOCIAL SECURITY

As a general rule, all employees working in Spain must be registered with the Spanish social security administration. The employer is obliged to make employer and employee contributions depending on the category of each employee and social security contributions are paid on salaries/wages.

The general contribution rate for employees is 6.35%.

The general contribution rate for employers is 29.9% in addition to a variable rate for general risk.

These rates depend on the activities engaged in by the companies as well as the employee’s employment and educational category.

Inbound assignees may continue to make social security contributions in their home countries in line with International Social Security Agreements and E.U. regulations and as a result claim an exemption from paying social security contributions in Spain.

To qualify for the exemption E.U. nationals must obtain the necessary official certification from the relevant Social Security Authorities in their country of origin.

There are three situations in which an exemption from Social Security in Spain may be claimed:

1. In situations where a social security agreement between Spain and the individual’s country of origin exists which provides for such an exemption.

2. Where the individual continues to be employed by an employer resident in the country of origin and as a result he/she continues to contribute to the social security system of his/her home country.

3. Where the individual remains in Spain for between one and five years depending on the conditions of the social security agreement in place between Spain and that individual’s country of origin.

For further information, please click: https://sede.agenciatributaria.gob.es/Sede/en_gb/irpf.html

If you have Spanish Rental Properties or you wish to employ Spanish resident individuals to work remotely, please contact us for a range of cross border personal and business tax services at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Budget Ireland, Personal Tax, Business Tax, Capital Gains Tax (CGT), Corporation Tax, Cross Border Taxes

Today the Minister for Finance Michael Noonan T.D. delivered Budget 2017.  Until the Brexit negotiations begin, it is impossible to know the impact for Ireland.  However today’s Budget gave Minister Noonan the opportunity to affirm the stability of Ireland’s tax policies, while at the same time introducing measures to promote economic growth.  Unless otherwise stated, the following tax changes will take effect from 1^st January 2017.  We will be examining them under Personal Tax, Business Taxes, Capital Acquisitions Tax, Property Taxes, etc.

PERSONAL TAX

1)   USC Reductions

There will be a half per cent reduction to the first three USC rates i.e. 1%, 3% and 5.5% to 0.5%, 2.5% and 5% respectively.  The aim is to ease the tax burden on low and middle income earners earning up to €70,044 per year.

There will also be an increase in the entry point to the 5% band from €18,668 to €18,772.

There has been no change to the 8% or 11% USC rates.

While the reduction in USC rates is a welcome reduction in the overall tax burden, the top marginal rate for employed individuals with earnings over €70,044 is still 52% and 55% for self-employed individuals with income in excess of €100,000.

2)   Home Carer Credit

There is an increase in the Home Carer Tax Credit by €100, to €1,100 for 2017.

An individual who cares for one or more dependent persons may claim the Home Carer Tax Credit.  These include children, an older person, an incapacitated individual, etc.

Who can claim it?

A jointly-assessed couple in a marriage/civil partnership where one spouse/civil partner cares for one or more dependent individuals.

3)   Earned Income Tax Credit

The Earned Income Credit has increased from €550 to €950.

The tax credit is expected to increase to €1,650 in 2018.  This will see self-employed individuals being on a par with employees, who are currently entitled to a PAYE tax credit of €1,650.

Budget 2016 introduced an Earned Income Tax Credit of €550 for self-employed individuals and includes proprietary directors, with earned income who were not otherwise entitled to the PAYE Tax Credit.

 4)   Deposit Interest Retention Tax (“DIRT”)

The rate of DIRT has been reduced from 41% to 39%.

In his Budget speech, Minister Noonan also committed to reducing the DIRT rate by a further 2% in the next three years until it reaches 33%.

 5)   Fisherman’s Income Tax Credit

Fishermen can claim a new income tax credit of up to €1,270.  This is provided they spend at least 80 days in the tax year, fishing for wild fish or shellfish.

Capital Acquisitions Tax thresholds

The Group A tax-free threshold, which applies primarily to gifts and inheritances from parents to their children, is being increased from €280,000 to €310,000.

Group B threshold, which applies primarily to gifts and inheritances to parents, brothers, sisters, nieces, nephews, grandchildren, etc., is being increased from €30,150 to €32,500.

The Group C threshold, which applies to all relationships other than Group A or B, is being increased from €15,075 to €16,250.

PROPERTY

1.    Help to Buy Scheme

Minister Noonan announced the new “Help to Buy” scheme for First Time Buyers of newly-built houses today.  This new tax incentive is aimed at assisting first time buyers in meeting the acquisition deposit limits set by the Central Bank.  Under this scheme, first-time buyers will receive a rebate of income tax of the previous four years.  The rebate will be up to 5% of the value of a newly constructed home, up to a maximum value of €400,000.

A full rebate (which will be calculated on a maximum of €400,000) will apply to houses valued between €400,000 and €600,000.  In other words, where the new house is valued between €400,000 and €600,000, the rebate will still apply but it will be capped at €20,000.

A rebate cannot be claimed on house purchases in excess of €600,000.

The scheme will be back-dated to cover new houses acquired between 19^th July 2016 and December 2019.

A number of conditions must be met as follows:

The property must be a new build or a self-build.  It must have either been purchased or built as the First Time Buyer’s main or primary residence.

Second-hand properties will not qualify for this relief.

The First Time Buyer must take out a mortgage of at least 80% of the purchase price.

 2.    Interest on rental properties

For landlords of residential property, 100% relief for mortgage interest incurred on the acquisition or development of residential rental properties will be restored on a phased basis over the next five years.

The Relief will increase by 5% per annum, beginning with 80% interest relief in 2017. This change will apply to both new and existing mortgages.

Under this new measure, the relief will be increased by 5% every year over the next five years.  This will ultimately bring the relief in line with that currently available to landlords of commercial property.

3.    Rent-a-Room relief

The annual tax free income limit for Rent-a-Room Relief is being increased by €2,000 from €12,000 to €14,000 per annum for 2017 and subsequent years.

4.    Home Renovation Incentive

The Home Renovation Incentive which offers a tax incentive of up to approximately €4,000 for homeowners wishing to renovate a property has been extended for another two years until the end of 2018.

It was originally introduced in Finance Act 2013 and was due to expire at the end of 2016 but Minister Noonan announced today that this will now be extended to the end of 2018. This is seen as of great benefit to the Irish construction industry.

The rate of credit and the expenditure thresholds remain unchanged.

 5.    Living City Initiative

This Initiative provides tax relief on the refurbishment of properties in designated areas in Ireland’s six cities.

The conditions of the Living City Initiative are being amended as follows:

• Landlords can qualify for the relief where they let qualifying residential property.
• The current cap on the maximum floor space of a residential property has being removed.

BUSINESS TAX

There were a number of welcome changes for business owners in today’s budget:

I.          Revised Entrepreneur Relief

Minister Noonan announced a reduction in the preferential Capital Gains Tax rate, from 20% to 10%, for those qualifying for Entrepreneur Relief on the disposal of certain business assets, including shares, provided conditions are met.

There was no change to the €1m lifetime limit on chargeable gains.

II.     Foreign Earnings Deduction (“FED”)

This scheme which was due to expire in December 2017 has been extended until the end of 2020.

The minimum number of qualifying days spent abroad for Foreign Earnings Deduction Relief has been reduced from 40 days to 30 days.

The list of qualifying countries has been extended to include two additional countries: Colombia and Pakistan.

III.          Share-based remuneration regime for SMEs

The Minister signalled his intention to develop a SME focused, share based incentive scheme which would be introduced in Budget 2018.

The Minister noted that any new regime would have to satisfy EU State Aid rules.

IV.            Start Your Own Business scheme

The Start Your Own Business relief, which was due to expire on 31^st December 2016, has been extended for a further two years.

The cap on eligible expenditure is being increased from €50 million to €70 million, subject to State Aid approval.

AGRI SECTOR

The following changes were introduced for individuals operating in the Agri sector in light of the challenges posed from Brexit:

• The flat-rate addition for VAT unregistered farmers is being increased from 5.2% to 5.4% from 1^st January 2017.

• The extension of the scheme of accelerated capital allowances for energy efficient equipment to sole traders and non-corporates.  Previously this scheme only applied to companies who could claim relief for expenditure on qualifying plant and equipment.

A new income tax payment option for farmers was introduced whereby farmers can opt to ‘step out’ of income averaging to allow for “unexpectedly poor income” and pay tax based on their actual profits in that year.

The tax deferred must be paid in subsequent years however the period over which the deferred tax must be paid is as yet unclear. Therefore this is a tax deferral scheme and not an actual tax saving.  Farmers can opt to avail of this “step out” in 2016.

A new low cost loan fund is to be established for farmers, with an interest rate of less than 3% per annum. These loans will enable farmers to improve their cashflow management and reduce the cost of their short term borrowings.

The CGT relief for farm restructuring was introduced to facilitate sales, purchases and swaps of land parcels and to ensure more efficient farm structures.  Although the terms of the relief remain unchanged, this relief, which was due to expire on 31^st December 2016, has been extended to 31^st December 2019.

Payments under the raised bog restoration incentive scheme will be exempt from Capital Gains Tax.

INTERNATIONAL TAX

Special Assignee Relief Programme (“SARP”)

The SARP regime, which was due to expire at the end of 2017, has been extended for a further three years until the end of 2020.

This Relief exempts 30% of the income of between €75,000 and €500,000 of employees assigned to work in Ireland for a minimum of twelve month provided certain conditions are satisfied.

No other changes were announced in relation to SARP.

Tackling offshore tax evasion

The Irish Revenue will be carrying out a comprehensive programme of targeted compliance interventions.  They will be focused on offshore tax evasion.

Revenue will be paying attention to information it receives under FATCA, EU and OECD information exchange initiatives etc.

From 1st May 2017, individuals involved in illegal offshore tax planning will not have the opportunity to make a qualifying voluntary disclosure.

Also, legislation will introduce a new strict liability offence, for failure to return details of offshore assets/accounts.

Consultation on modernising PAYE

Minister Noonan announced a Revenue consultation regarding the proposed modernisation of the PAYE system to take effect from 1^st January 2019.

The consultation process will begin today regarding the implementation of a real time PAYE / Tax reporting regime for employers.   He advised that it would be similar to that which currently operates in the UK.

 OTHER MEASURES

• There was no change to the VAT rates.  The 9% VAT rate applying to tourism related activities remains unchanged.

• The Minister intends to extend mortgage interest relief to 2020. The details of the extension will be set out in Budget 2018.

• A tax on sugar-sweetened drinks will be introduced in 2018.  This will coincide with a similar regime in the UK. A public consultation on the form and implementation of the tax was released today by the Department of Finance. It will run until 3^rd January 2017.

• The excise duty on a packet of twenty cigarettes will increase by 50c (VAT inclusive) from midnight tonight.  A corresponding pro-rata increase will also apply to other categories of tobacco products including smoking tobacco, cigars, etc.

• There is no change to the excise duty on alcohol or fuel.

• The qualifying limit on excise duty for Microbreweries was extended. This will reduce the standard rate of tax (alcohol products tax) by 50% on beers produced in Microbreweries where the output is 40,000 hectolitres or less per year.  Previously the limit was 30,000 hectolitres.

• VRT relief on the purchase of electric vehicles is extended by five years.  The VRT relief for hybrid vehicles is to be extended by two years.

• Relief from carbon tax is being introduced to promote the use of “green fuels.”   In other words, solid fuels that include a biomass element.

For further information, please click: https://www.gov.ie/en/department-of-finance/collections/budget-2017/

If you are looking for an experienced, independent, professional and qualified Chartered Tax Advisor to effectively handle your tax affairs and provide you with peace of mind, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information.  However, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Income Tax, Corporation Tax, Capital Gains Tax, Capital Acquisitions Tax, VAT, Stamp Duty, Revenue Audits and Investigations

Are you aware of how many changes to our tax system have been implemented between 1st January 2016 and today?

The Irish tax system is constantly evolving.  The Revenue Commissioners are consistently revising their tax guidance material under all tax heads including Income Tax, CGT, CAT, VAT, PAYE/PRSI/USC, Corporation Tax, Stamp Duty, PSWT, etc.

• eBrief No. 52/2016: Requirement for Security Bonds Section 960 S TCA 1997

• eBrief No. 51/2016: Rental Income

• eBrief No. 50/2016: Recent enhancements to VAT Return of Trading Details (RTD) in ROS

• eBrief No. 49/2016: Tax Treatment of Flight Crew Members

• eBrief No. 48/2016: Non-Filing of Returns – Prosecution and Penalty Programmes

• eBrief No. 47/2016: Revised tax treatment of royalty income, with effect from 1 January 2016, under the terms of the Ireland-Estonia Double Taxation Convention 1997

• eBrief No. 46/2016: Corporation Tax (CT1) Returns for 2015 and 2016, Forms 46G (Company)

• eBrief No. 45/2016: Mandatory eRepayments

• eBrief No. 44/2016: Tax and Duty Manual Part 17-01-03 (Profit Sharing Schemes)

• eBrief No. 43/2016: Clarification of circumstances where a CGT clearance certificate is not required

• eBrief No. 42/2016: VAT – “Cancellation of a registration number – special provisions for notification and publication” (section 108D)

• eBrief No. 41/2016: Termination of carry forward of certain unused capital allowances beyond 2014

• eBrief No. 40/2016: High Income Individuals Restriction – Specified Reliefs

• eBrief No. 39/2016: Disclosure by Revenue of taxpayer information – Finance Act 2015 changes

• eBrief No. 38/2016: Surcharge for Late Submission of Returns

• eBrief No. 37/2016: New appeals process – issuing of Revenue ‘settlement’ letters

• eBrief No. 36/2016: Payment and Receipt of Interest without Deduction of Income Tax

• eBrief No. 35/2016: Tax and Duty Appeals Manual

• eBrief No. 34/2016: Change of Responsibility for e-Tax Clearance from 1st April 2016

• eBrief No. 33/2016: Increased compliance interventions in the construction sector – application of the Reverse Charge for VAT and other matters

• eBrief No. 32/2016: Guidelines for Using the Court Process to Pursue Tax Liabilities

• eBrief No. 31/2016: ROS – Extension of Pay & File Deadline for ROS Customers for 2016

• eBrief No. 30/2016: Commencement of new tax and duty appeals process

• eBrief No. 29/2016: Sub-Postmasters and Social Welfare Branch Managers – Tax and PRSI

• eBrief No. 28/2016: Credit in respect of tax deducted from emoluments of certain directors and employees – Section 997A TCA 1997

• eBrief No. 27/2016: Health Expenses section 469 Taxes Consolidation Act 1997

• eBrief No. 26/2016: Taxation Treatment of Termination Payments on Retirement or Removal from Office or Employment

• eBrief No. 25/2016: Gross Roll-Up Life Assurance Policies

• eBrief No. 24/2016: Order of offset of income tax reliefs, allowances and deductions

• eBrief No. 23/2016: Bus, Rail, and Ferry Passes

• eBrief No. 22/2016: Return by employer of employees who availed of relief under the Special Assignee Relief Programme (SARP)

• eBrief No. 21/2016: Transition to the reformed tax and duty appeals process

• eBrief No. 20/2016: Revenue launches dedicated Tax Avoidance webpage

• eBrief No. 19/2016: Procedures to follow when Issuing S110 VAT Estimates/Amended Estimates

• eBrief No. 18/2016: Agents Guide to Collector-General

• eBrief No. 17/2016: Average Market Mid-Closing Exchange Rates v Euro

• eBrief No. 16/2016: Guidelines for Phased Payment/Instalment Arrangements

• eBrief No. 15/2016: Exemption in respect of certain payments under employment law

• eBrief No. 14/2016: Relief from tax for certain start-up companies

• eBrief No. 13/2016: Finance (Local Property Tax) (Amendment) Act 2015

• eBrief No. 12/2016: VAT on eServices Scheme (VOES) / Electronic Services Scheme (ESS)

• eBrief No. 11/2016: Guidelines on PAYE/PRSI/USC/LPT monthly and annual estimates

• eBrief No. 10/2016: Exemption in respect of water conservation grant

• eBrief No. 09/2016: Exemption in respect of certain expenses of State Examinations Commission examiners

• eBrief No. 08/2016: Exemption in respect of certain expense payments for relevant directors

• eBrief No. 07/2016: ROS Digital Certificate renewals 2016 – reminder to save your new Certificate

• eBrief No. 06/2016: Exemption in respect of fuel grant

• eBrief No. 05/2016: Home Carer Tax Credit

• eBrief No. 04/2016: Taxation of Community Midwives employed by the Health Service Executive

• eBrief No. 03/2016: Finance Act 2015 – Stamp Duty Provisions

• eBrief No. 02/2016: eRCT payments to subcontractors for 12-month period 1 January 2015 to 31 December 2015

• eBrief No. 01/2016: Tax Treatment of Married Couples

If you are looking for a qualified Chartered Tax Advisor to help you navigate through the complexities of the Irish tax system, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Capital Gains Tax (CGT), Share Buy Back, Limited Company, Income Tax Treatment, Distributions

What happens in a Share Buy Back Situation?

Providing the shareholder meets the necessary statutory conditions, the company can buy back its shares from that shareholder thereby allowing them to get the benefit of the Capital Gains Tax treatment as opposed to the more costly Schedule F Treatment.  In other words if the CGT Treatment doesn’t apply, any payment for the shares in excess of the amount the company originally received for the subscription of those shares will be treated as a distribution under Section 130 TCA 1997 and will be liable to Income Tax at the shareholder’s marginal rate plus PRSI plus Universal Social Charge.  Generally the only occasions where funds can be extracted from a limited company without the recipient being exposed to tax at his/her marginal rate of income tax are:

(i) on a repayment of capital at par or

(ii) on the sale/disposal of the shares or

(iii) on a liquidation.

What are the typical scenarios?

1. The departure of a disgruntled Shareholder.

2. The retirement of a controlling shareholder who wishes to stand aside and make way for new management/the next generation.

3. Situations where one shareholder wants to continue carrying on the trade, the other shareholder would prefer to exit the business and the company has the necessary funds to buy back its own shares.

4. Access to company surplus funds as part of succession planning

5. An outside shareholder who initially provided equity finance but who now wants the return of that finance.

6. A marriage break-up, etc.

What are the rules as outlined in the Taxes Consolidation Act 1997?

Where an Irish resident company repurchases/redeems/acquires/buys back its own shares then any amount paid to the shareholder in excess of the original price paid at issue will be treated as a distribution under Section 130 TCA 1997.

A more beneficial Capital Gains Tax treatment can be applied under Section 176 TCA 1997 providing certain conditions are met.

S176 – 186 TCA 1997 contain the legislative provisions relating to share buybacks as follows:

• The company must be an unquoted trading company or the unquoted holding company of a trading group.
• The shareholder participating in the share buyback must be both Irish resident and ordinarily resident in the tax year in which the share buyback takes place
• The redemption, repayment or repurchase of the shares must be made wholly or mainly for the benefit of a trade carried on by the company or any of its 51% subsidiaries.  It cannot form part of any scheme or arrangement, the purpose of which is tax avoidance.  In cannot be used to enable the shareholder to extract the profits of the company, or any of its 51% subsidiaries, and avoid being treated as having received a dividend.
• The shareholder must own the shares for a period of at least five years ending on the date of the disposal.
• There must be a substantial reduction in the shareholder’s interest following the buy back. Don’t forget, you must include the shares of (a) the shareholder whose shares have been brought back and (b) any associates of that shareholder.  For completeness, the term “associate” includes husband, wife, civil partner and minor child.  The term “substantially reduced” means that there is a reduction in the nominal value of the participating shareholder’s shares of at least 25%.  Another way of saying it is that the shareholder’s remaining shareholding, following the redemption of the shares, cannot exceed 75% of its value pre Buy Back.
• The shareholder must no longer be connected with the company i.e. the shareholder and his/her associates, together, must own less than 30% of the company post buy back.

Under Section 186 TCA 1997, they cannot hold or be entitled to acquire more than 30% of [s186]:

(a) the ordinary share capital of the company

(b) the loan capital and issued share capital of the company

(c) the voting power in the company or

(d) the assets on a winding up in the company.

Let’s go back to the Trade Benefit Test

The repurchase of its shares by a limited company must be made “wholly or mainly for the purpose of benefiting a trade carried on by the company or any of its 51% subsidiaries”.

Tax Briefing 25 provides guidance on the “Trade Benefit Test:”

(i) It must be shown that the sole or main purpose of the buyback is to benefit a trade carried on by the company or of one of its 51% subsidiaries.
(ii) The Trade Benefit Test would be breached if the sole/main purpose was to benefit the shareholder by reducing his/her tax liability as a result of the more beneficial CGT treatment.
(iii) From the company’s perspective, the test would not be met if the sole/main aim was to benefit any business purpose other than a trade.

Situations where the Buy-Back will benefit the trade include:

Where there is a disagreement between the shareholders of the company over its management and that disagreement is or will negatively impact on the company’s trade if the situation were to continue.  Enabling the shareholder to cease his/her association with the company without having to sell his/her shares to a third party would benefit the company’s trade.

Revenue has listed a number of examples which involves the shareholder selling his/her entire shareholding in the company and making a complete break from the company which would benefit the trade.

Revenue also recognises that the shareholder may wish to significantly reduce his/her shareholding and retain a limited connection which the company.  For example, a shareholder with a majority shareholding  wishes to pass control to his/her children but intends to remain on as director as an immediate departure from the business would have a negative impact on the trade.  In such circumstances it may still be possible for the company to show that the main purpose is to benefit its trade.

In circumstances where a company isn’t certain as to whether the proposed “Buy Back” is deemed to be for the benefit of the trade and providing all the other legislative requirements have been meet, Revenue will issue an advance opinion on whether the Buy Back satisfies the “Trade Benefit Test” if requested.

Are there any situations where the above conditions don’t apply?

The conditions as outlined in Section 176 – 186 TCA 1997 will not apply where the shareholder uses the entire proceeds received from the redemption of the shares to:

(a) Settle his/her inheritance tax liability in respect of those shares.  This must be done on or before 31st October in the year in which the CAT is payable in relation to the inheritance of those shares or

(b) Discharge a debt which arose in order to settle this CAT liability within one week of the buy-back;

AND where the shareholder could not otherwise have discharged the tax liability without incurring undue hardship.

Administration

In the event of a company buying back its own shares or those of its parent company it must file a Return within nine months of the accounting period in which the redemption occurred or within thirty days if requested in writing by the Inspector of Taxes.

The Return must include all payments liable to the Capital Gains Tax Treatment.

If any individual connected with the company is aware of any scheme to avoid the “Connected Person’s Rule” they must notify Revenue within sixty days of becoming aware of that information.

Are there any other issues to be considered?

A liquidation instead of a share buyback might be considered for succession planning purposes.

CGT Retirement Relief and CAT Business Property relief can be used to minimise (a) the tax on the transfer of the business/company by the parent and (b) the gift tax for the child receiving it.

For further information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-06/06-09-01.pdf

For all your Capital Gains Tax queries, especially in relation to Share Buy Backs, please contact us on queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Business Tax. Corporation Tax. Finance Act. Research & Development. Capital Allowances.

CORPORATION TAX

For all those individuals currently preparing his/her own 2015 Corporation Tax Return, please be aware of the significant changes in Finance Act 2014, especially in the areas of:

1. Research & Development Tax Credits
2. Capital Allowances for the Provision of Specified Intangible Assets
3. Three Year Relief for Start-up Companies
4. Employment and Investment Incentive (EII)
5. Company Residence

Research and Development (R&D) Tax Credit

Up to 1st January 2015, Section 766 TCA 1997 provided that the 25% tax credit applied to the amount of qualifying Research and Development (R&D) expenditure incurred by a company in a given year that was in excess of the amount spent in 2003 (i.e. the base year).

For accounting periods beginning on or after 1st January 2015, the base year restriction has been removed which means the credit is now available on a volume basis as opposed to an incremental basis.

Capital Allowances for the Provision of Specified Intangible Assets

 This provides capital allowances for expenditure incurred by a company on the provision of certain intangible assets for use in a trade.

Up to 1st January 2015 the use of such allowances in any accounting period was restricted to a maximum of 80% of the trading income from the “relevant trade” in which the assets were used.  Another way of wording this is, for accounting periods ending on or before 31st December 2014 only 80% of the income from the “relevant trade” could be sheltered by the capital allowances and interest.

Finance Act 2014 introduced an amendment to this rule stating that for accounting periods beginning on or after 1st January 2015 the restriction has been removed meaning all the “relevant trade” income can now be sheltered.

Finance Act 2014 also introduced the following:

1. a flat five year period for all disposals on or after 23rd October 2014.
2. an amendment to the “connected party” rules stating that from 23rd October 2014 the purchaser can claim capital allowances on the lower of (a) the purchase price paid or (b) the tax written down value.

Three Year Relief for Start-up Companies

 This relief from corporation tax on trading income (and certain capital gains) of new start-up companies in the first three years of trading has been extended to new business start ups in 2015.

Employment and Investment Incentive

The EII is being amended as follows:

1. The amount a company can raise in a lifetime has been increased from €10 million to €15 million (s. 491(2) TCA 1997).
2. The amount a company can raise in EII funds in any one year had been increased from €2.5 million to €5 million (s. 491(4) TCA 1997).
3. The scheme has been expanded to include medium sized enterprises in certain non-assisted areas, the management of nursing homes and IFSC services, subject to certain conditions.
4. The period for which shares in an EII company must be held by an investor to avoid a clawback of the relief has been extended to four years (s. 496(1) and s.488(1) TCA 1997).
5. any claim for EII relief will not be allowed unless, at the time the claim is made, the company in which the investment is made qualifies for a tax clearance certificate

Previously income tax relief was given for 30/41 of the investment made. The remaining tax relief of 11/41 was given in the year after the holding period ended. Finance Act 2014 amended the income tax relief which will now be 30/40 and 10/40 respectively.

Company Residence

Finance Act 2014 introduced amendments to the corporate tax residence rules to address concerns about the “double Irish” structure.

The new rules state that an Irish-incorporated company will be regarded as Irish tax resident here unless it is deemed to resident in another country under the terms of a Double Taxation Agreement.  Therefore if, under the provisions of that treaty, an Irish-incorporated company is considered to be tax resident in another jurisdiction then the company will not be regarded as Irish tax resident.

These changes are in addition to the existing “central management and control test” which means that the new legislation does not prevent  a non-Irish incorporated company that is managed and controlled in Ireland from being considered resident for tax purposes in Ireland.

The new provisions take effect from 1st January 2015 for companies incorporated on or after 1st January 2015.

For companies incorporated before 1st January 2015, the new provisions will come into effect from 1st January 2021.

As an anti-avoidance measure, however, the new legislation take effect for companies incorporated before 1st January 2015 where there is (a) a change in the ownership of the company as well as (b) a major change in the nature or conduct of the business of the company within the time-frame that begins one year before the date of the change of ownership and ending five years after that date i.e. occurring within a period of up to six years.

The aim of this anti-avoidance provision was to restrict the incorporation of companies between 23rd October 2014 and 31st December 2014 to 1st January 2015 where the primary intention was to avail of the extension.

It is always essential to keep up to date with changes to the Finance Act especially if you are preparing your own tax returns.

For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/vat/vat-guidance-notes-fa2014.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Tax Advice for Revenue Audits, Compliance Interventions, Reviews, Investigations under all Tax Heads

Today, 20^th November 2015, the Revenue Commissioners published eBrief 112/15, the updated and new version of the Code of Practice for Revenue Audit and other Compliance Interventions.  It covers types of intervention, audit procedures, tax and duty defaults, tax avoidance, prosecution, etc.

The main changes include the following:

• Paragraph 1.10.5 states that a Revenue officer may, under Section 851A TCA 1997, disclose taxpayer information to a professional body to report a tax agent/practitioner in situations where the Revenue officer is satisfied that the work carried out by the agent/practitioner does not comply with the professional standards of that representative body.

• Paragraph 3.16 details the term “full cooperation.” There is a list of what constitutes “full cooperation” as well as what is deemed to be a lack or failure to cooperate fully with Revenue.  This revised Audit Code focuses on the importance of “full cooperation” in this paragraph as well as in the tables of penalties.

• New chapter 8 outlines tax law, Revenue policy and procedures for regularising tax and duty liabilities that arise due to certain types of tax avoidance. Paragraph 8.6 deals with the concept of a Qualifying Avoidance Disclosure.  This is separate and distinct from the information on disclosure as outlined in Chapter 3.

• Paragraph 5.4.1 of the Code has been revised to reflect the amendment in Finance Act 2014 in relation to the Surcharge for Late Submission of Returns (Income Tax, Corporation Tax and Capital Gains Tax). It states “Section 1084 also provides that the filing, on time, of an incorrect return, either carelessly or deliberately, is deemed to be late filing.”

• Inclusion of Legislation for Tax Avoidance Surcharge in Appendix III. It states that under Section 811D TCA 1997 “Where a ‘tax avoidance surcharge’ is not agreed or an agreed ‘tax avoidance surcharge’ is not paid, a relevant court will make a determination regarding liability to a ‘tax avoidance surcharge’. While the surcharge applied by Section 811D TCA 1997 is not a penalty it is collected as a penalty.”

• In cases where compliance intervention notices have been given but have not been settled before the 20th November 2015, the taxpayer has the option of choosing whether the settlement be made under the terms of the 2015 Code of Practice for Revenue Audit and other Compliance Interventions or the Code of Practice for Revenue Audit and other Compliance Interventions of 14th August 2014.

For further information, please click:https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-audit-2015.pdf

What can we do for you?

Revenue Compliance Interventions, Audits and Investigations arise mainly due to inaccuracies and inconsistencies in taxpayers’ submissions.  An automated process can also randomly select individuals and businesses in a small number of cases.  They can be costly and may result in publication on the Revenue’s Tax Defaulters list or even prosecution.  We offer a pre-audit review or compliance check as well as full and comprehensive support throughout the entire Audit process.  Our aim is to assist in minimizing the consequences of any tax underpayments and to achieve the best possible outcome.

For further information, please contact us on queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.