Best Tax Consultants Near Me | Best Tax Advisors Dublin | Best Tax Accountants Ireland | Best Business Tax Advice

The Income Tax Return filing deadline is 31st October 2024.

That deadline date is extended to 14^th November 2024 provided you file both (a) your Income Tax Return and (b) your Income Tax Balance due for 2023 plus your 2024 Preliminary Tax.

When preparing your 2023 Income Tax Return, here are some Tax Reliefs you may not have considered before:

Childminders Tax Relief Scheme

You could be entitled to the Childminder’s Tax Relief if:

• You mind three or fewer children in your own home at any one time and

• You earn no more than €15,000 per annum.

• You must have informed the HSE that you will be providing such services in your own home.

• You must be registered as self employed and registered under self assessment.

No tax will be payable on the childminding earnings received, provided the amount is not more than €15,000 per annum.

As you cannot deduct any expenses, there is no requirement to maintain and keep detailed accounts.

If another person provides childcare services with you in your home, the €15,000 income limit is divided between you.

Despite the fact that you may have no Income Tax liability, you are obliged to file a Form 11 Tax Return by 31^st October 2024 or 14^th November 2024, whichever is relevant to you.

If, however, the childminding income exceeds the €15,000 annual threshold, the total amount will be taxed as normal under the self-assessment rules.

For further details, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-29.pdf

Irish rent tax credit

The Rent Tax Credit was introduced in Budget 2023 which is available for the tax years 2022 to 2025 inclusive.

In Budget 2024, the Rent Tax Credit was increased by €250.

When completing your 2023 Form 11 Tax Return the rent tax credit is worth a maximum of €500 per year from 2023 for a single individual and €1,000 for a married couple.

The rent tax credit is calculated as 20% of the rent paid in the year and is capped at €500 for a single person or €1,000 for a couple who are jointly assessed to tax.

When calculating your 2024 Preliminary Tax liability, the rent tax credit increases to €750 for a single individual and €1,500 for a married couple.

Please be aware that the claim must relate to rental payments which both (a) fell due and (b) were actually paid during the tax year of assessment.

This tax credit will only be available to taxpayers who are not in receipt of any other housing supports.

For further details, please click: https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-credit/index.aspx

Training Course Fees

Relief is available for fees between €317 and €1,270 paid in respect of Information Technology and Foreign Language courses which are on Revenue’s list of approved Courses.

To check the eligibility of your course, please click the following links:

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/documents/education/s476-approved-languages-2009-10.pdf

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/documents/education/s476-approved-it-courses-2014.pdf

These courses must be at least two years in duration and must not be a postgraduate course. Instead postgraduate courses in foreign languages or information technology may qualify for tuition fees relief.  For further details, please click the following link: https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/tuition-fees-paid-for-third-level-education/index.aspx

This relief applies to fees if you are the student or if you have paid fees on behalf of another person.

For complete information, please click: https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/foreign-language-and-it-courses/index.aspx

To get your tax return filed before the income tax deadline, 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.

As you’re aware, the Income Tax / self-assessment Tax Return filing deadline is 31st October 2024.

There is an extension to 14th November 2024 providing you file both (i) your 2023 Income Tax Return and (ii) the Income Tax Balance due for 2023 as well as your 2024 Preliminary Tax payments though ROS.

You should register for Income Tax self-assessment if:

1. You are self-employed.
2. Your only or main source of income is from (a) Rental income, (b) Investment income, (c) Foreign income, (d) Maintenance payments, (e) Fees that are exempt from PAYE or (f) if you have profited from share options or share incentives.

You are obliged register for Income Tax purposes if

• Your taxable non-PAYE income exceeds €5,000 or
• Your gross non-PAYE income exceeds €30,000.

If you do not use ROS to file your Income Tax Return , the tax deadline remains 31^st October 2024.

What’s new in the 2023 Income Tax Return?

NON RESIDENT LANDLORDS

The Non-Resident Landlord Withholding Tax (NLWT) system came into operation on 1^st July 2023.

Collection agents of non-resident landlords may opt to use the NLWT system.

The 2023 Form 11 Income Tax Return contains a new section that should be pre-populated, providing the gross rental income figure and the withholding tax which have been processed through the NLWT.

For further information, please click: https://www.revenue.ie/en/property/rental-income/nlwt/index.aspx

For complete information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

MORTGAGE INTEREST TAX CREDIT

This credit was introduced for 2023 only.

This tax credit is for taxpayers who have made payments in respect of a qualifying loan for a principal private residence.

A new section has been added to 2023 Form 11 Tax Return for the purposes of claiming of the Mortgage Interest Tax Credit.

The relief is available to homeowners, who as of 31^st December 2022, with an outstanding mortgage balance of between €80,000 and €500,000 and meet the necessary conditions.

For further information, please click: https https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/mortgage/index.aspx

For complete information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-11B.pdf

What happens if you miss the Tax filing date?

If you fail to meet the October 31^st Income Tax Return deadline, you could be liable to an interest charge for each day you’re late.  Statutory Interest on the overdue tax liability is calculated at 0.0219% per day or part thereof.

This is in addition to a surcharge:

1. If you file your 2023 Form 11 Tax Return after 31st October 2024 but before 31st December 2024 the surcharge will be calculated as the lesser of (a) 5% of the tax due or (b) €12,695.
2. If, however, your 2023 Tax Return is submitted after the 31st December 2024, the surcharge will be (a) the lesser of 10% of the tax liability due or (b) €63,485.

Important Points to keep in mind:

1. Any underpayment of your Income Tax liability will result in interest penalties arising.

2. In order to avoid interest on overdue taxes, you must ensure that your Preliminary Tax is both (a) correct and (b) paid on time. If, for example, you pay a sufficient amount of Preliminary Tax but it’s paid after the tax deadline, then interest may accrue.

3. A late filing surcharge is computed on the full tax liability arising in the year of assessment. It does not take into consideration any advance payments / payments on account.

To get your tax return filed before the income tax deadline, 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.

On 24^th  December 2023, the EU Delegated Directive (2023/2775/EU) came into force which increased the total balance sheet and turnover thresholds for micro, small, medium and large companies, including groups, as set out in the Companies Act 2014 by approximately 25% to account for inflation.

E.U. member states have until 24^th December 2024 to bring this legislation into effect.

Today, 19th June 2024, Minister for Enterprise, Trade and Employment, Peter Burke, TD signed into law the European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 (S.I. No. 301 of 2024) which comes into operation on 1st July 2024.

These size thresholds are contained in sections 280A to 280I of the Companies Act 2014.

Company size is typically determined by the company meeting two out of the three size criteria. Other relevant factors also apply.

These adjustments will result in more companies being categorised as micro or small which will, as a result, benefit from the abridgement and audit exemption.  These changes are to apply to financial years commencing on or after 1^st January 2024.

The increased size criteria/thresholds are as follows:

• Micro Company –a balance sheet total not exceeding €450,000, a net turnover not exceeding €900,000 and no more than 10 average employees.

• Small Company – a balance sheet total not exceeding €7.5 million, a net turnover not exceeding €15 million and no more than 50 average employees.

• Small Group- group balance sheet total not exceeding €7.5 million net (or €9 million gross), group turnover not exceeding €15 million net (or €18 million gross) and no more than 50 average employees.

• Medium Sized Company – a balance sheet total not exceeding €25 million, a net turnover not exceeding €50 million and no more than 250 average employees.

• Medium Group- group balance sheet total not exceeding €25 million net (or €30 million gross), group turnover not exceeding €50 million net (or €60 million gross) and no more than 250 average employees.

• Large Company – a balance sheet total not exceeding €25 million, net turnover not exceeding €50 million and more than 250 average employees.

FINAL POINTS

• The legislation comes into effect from 1st July 2024

• The measures apply for financial years beginning on or after 1^st January 2024.

• Companies may elect to apply the measures on or after 1^st January 2023.

• Large company continues to be one that does not qualify as micro, small or medium in accordance with the above.

• All other qualifying conditions remain the same.

Please click for Regulations: https://www.irishstatutebook.ie/eli/2024/si/301/made/en/pdf

For associated articles, please click:

Annual Return for Companies – Ireland – Accounts Advice Centre

CRO mandatory requirement for company directors to provide PPSNs from 11th June 2023 – Accounts Advice Centre

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.

On 20^th October 2023, the Supreme Court delivered its unanimous decision in The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza [2023] IESC 24 (the “Karshan Case.”  It was held that delivery drivers of Domino’s Pizza should be treated as employees and not independent contractors.  Today Revenue published their “Guidelines for Determining Employment Status for Taxation purposes” which outlines a five step decision making framework to determine the employment status of individuals for tax purposes: eBrief No. 140/24

According to Revenue:

“Where an individual is engaged under a contract of service, i.e., as an employee taxable under Schedule E, income tax, USC and PRSI should be deducted from his or her employment income through their employer’s payroll system on or before when a payment is made.

Where an individual is engaged under a contract for service, i.e., as a self-employed individual taxable under Schedule D, he or she will generally be obliged to register for self-assessment, to pay preliminary tax and file their own income tax returns using the Revenue Online Service (ROS).”

The guidance material asks the following questions:

1. Does the contract involve the exchange of a wage or other remuneration for the work carried out?

In other words, there must be an exchange of work for wage/remuneration before a working relationship can be categorised as a “contract for service.”

A contract is considered to be an engagement where there is a payment by the business to the individual regardless of whether or not there is a written contract in place.

2. If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?

This test distinguishes between a situation where a worker provides services to a business personally versus where it’s possible for that worker to engage others to provide the services on his/her/their behalf.

3. If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?

The court judgment placed a strong emphasis on the degree of freedom the individual has to decide how the work is carried out.

It is essential to establish the level of control the business has over the individual worker.  For example, can it decide what the particular duties are, as well as how, when and where the work should be carried out?

Is the worker carrying on the business of the organisation he/she/they work(s) for or is this individual working on their own account?

In other words, to what degree is the worker/individual integrated into the business?

4. If the above three requirements are satisfied, the decision maker must then determine whether the terms of the contract between employer and worker and the related working arrangements are consistent with an employment contract, or with some other form of contract.

Apart from reviewing any written agreement in place, it is vital that the facts of the working arrangement are examined to establish if the individual is working for the business or is providing services on his/her/their own account.

5. Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.

If the answer to any of the first three questions set out above are “No”, a contract of employment is not deemed to exist and the individual should not be treated as an employee.

If, however, the answer to the first three questions is “Yes”, then questions 4 and 5 of the framework must be considered to determine if a contract of employment exists.

The Guidelines also include nineteen practical examples which demonstrate the application of the five step framework to assist in determining how workers, in a number of different situations, will be taxed.

Conclusion:

• If required by Revenue, taxpayers must be able to demonstrate, using the five step framework, how they determined that a worker should be treated as self-employed rather than as an employee.

• If a business previously treated a worker as self-employed rather than as an employee, but having reviewed the five-step framework it would appear that this individual is in fact an employee for tax purposes, the business must immediately rectify the situation by operating payroll taxes.

• If the business has incorrectly treated the worker as a self-employed contractor rather than as an employee, the Revenue Commissioners may seek the repayment of uncollected payroll taxes, Employer’s PRSI as well as interest and penalties.

• It is advised that businesses carry out an urgent and comprehensive review of the five step framework to determine employment status of their workers.

If you require any assistance, please contact us.

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.

As part of Budget 2024, the government signed off on a package of €257 million for the Increased Cost of Business (ICOB).  The main aim of this Grant is to support small and medium sized businesses by contributing towards their rising business related costs including energy, labour, rent, etc.

To Qualify for the ICOB Grant

To qualify for the ICOB grant your business must meet the following conditions:

• It must be a commercially trading business, currently operating directly from a property that is commercially rateable.

• It must have been trading on 1st February 2024 and your intention must be to continue trading for at least three months.

• Your commercial rates bill must be equal to or less than €30,000 for 2023.

• You must submit confirmation of your bank details to the relevant Local Authority.

• The business must be considered rates compliant. This includes businesses with phased payment plans in place.

• It must possess a valid Tax Registration Number.

• It must be tax compliant.

The Grant Amount

The ICOB grant is a once-off payment based on the value of the 2023 commercial rates bill.

The grant is 50% of the commercial rates bill for eligible businesses with a 2023 bill of less than €10,000.

The grant is €5,000 for eligible businesses with a commercial rates bill of between €10,000 and €30,000.

Businesses, however, with a commercial rates bill over €30,000 are not eligible to receive this ICOB Grant.

Please be aware that Public institutions and financial institutions will not be eligible for the grant, except for Credit Unions and specific post office services.

Vacant properties will also not be eligible for the ICOB Grant.

It is important to keep in mind that this ICOB Grant is not a Commercial Rates waiver. Rateable businesses are still required to pay their commercial rates to their local authority.

Today, the Government issued two important updates concerning the Increase in Grant Scheme (ICOB):

• They specifically targeted businesses in the Retail and Hospitality sectors. Businesses operating within these sectors are now eligible for a second grant payment which is equivalent to the initial ICOB Grant amount.

• The closing date for eligibility confirmation which was 1st May 2024 has now been re- opened from 15^th May to 29^th May 2024.

Local Authorities are expected to begin paying out the ICOB Grant to eligible businesses in the coming weeks.

For further information, please follow the links:

https://www.mycoco.ie/icob

https://www.dlrcoco.ie/sites/default/files/2024-03/ICOB%20User%20Guide.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.

The Chancellor of the Exchequer, Jeremy Hunt delivered his UK Spring Budget 2024 today.

As you are aware, the Furnished Holiday Letting (FHL) regime provides tax relief for property owners letting out furnished properties as short term holiday accommodations.  From 6^th April 2025, however, the Chancellor is removing this tax incentive in an attempt to increase the availability of long term rental properties.

What is a Furnished Holiday Letting (FHL)?

According to HMRC’s guidance material, a furnished holiday let is deemed to be a furnished commercial property which is situated in the United Kingdom.

It must be available to let for a minimum of 210 days in the year.

It must be commercially let as holiday accommodation for a minimum of 105 days in the year.

Guests must not occupy the property for 31 days or more, unless, something unforeseen happens such as the holidaymaker has a fall or accident or the flight is delayed.

Currently, FHLs benefit from the following tax advantages:

• There is a full deduction of interest on borrowings from FHL income.

• Currently, profits from furnished holiday lettings are treated as relevant earnings. Therefore, profits generated from FHLs can be treated as earnings for the purposes of making tax advantaged pension contributions.

• Capital Allowances on items such as furniture, fixtures and equipment can be claimed on your Furnished Holiday Let. You can also claim tax relief on certain refurbishment costs.

• On the disposal of the FHL, Business Asset Disposal Relief (10% CGT rate), Business Asset Rollover Relief and Gift Hold-over Relief may apply.

• Provided there is sufficient business activity to demonstrate a trading activity, FHL properties can qualify for Business Property Relief thereby reducing the value of the business for Inheritance Tax purposes by up to 100%.

So, what happens from 6^th April 2025?

• Mortgage Interest Relief will be given as a 20% tax credit. This will result in a reduction in tax relief from 40% for higher rate taxpayers and 45% for additional rate taxpayers.

• The normal residential property CGT tax rate of 24% will apply.

• Relief may be available for the replacement of domestic items in line with the regulations for long term lets.

• FHL profits will no longer be treated as relevant earnings for the purposes of making pension contributions.

• Properties will no longer qualify for Business Property Relief, thereby increasing Inheritance Tax liabilities.

What actions can you take?

You may wish to consider your options before the rules are abolished in April 2025.

Options include:

• Continue renting your property as before but without the current tax advantages.

• Sell the property with the aim of benefitting from the 10% CGT rate.

• Gift the property with the aim of benefitting from Business Asset Disposal Relief and Gift Hold-over Relief.

• Change your rental strategy by renting your property on a long term basis.

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.

Gift and Inheritance Tax Advice

With effect from today, a new mandatory Capital Acquisitions Tax filing obligation is imposed on the recipients of certain loans from close relatives.

It applies to existing loans as well as new loans made since January 2024, irrespective of whether or not any gift or inheritance tax is due.

Until 31^st December 2023, there was no requirement to file a Capital Acquisitions Tax Return in respect of this type of loan, until 80% of the recipient’s group class threshold had been exceeded.

The aim of this new requirement is to provide the Revenue Commissioners with greater visibility with regard to loans between close relatives in circumstances where the loans are either interest free or are provided for below market interest rates.

The individual is deemed to have received the benefit on 31^st December each year which means the relevant return must be filed on or before 31^st October of the following year.  Therefore, the first mandatory filing date will be 31^st October 2025.

What is a “Close Relative”?

A close relative of a person, includes persons in the CAT Group A or B thresholds, and is defined as follows:

• a parent of the person,

• the spouse/ civil partner of a parent of the person,

• a lineal ancestor of the person,

• a lineal descendant of the person,

• a brother or sister of the person,

• an aunt or uncle of the person, or

• an aunt or uncle of the spouse/ civil partner of a parent of the person.

What about Loans from Private Companies?

There are certain “Look Through” provisions which must be applied to such loans.  In other words, loans made to or by private companies will be “looked through” to determine if the loan is ultimately made by a close relative.  Generally private companies are under the control of five or fewer persons.  The holding of any shares in a private company is sufficient for these provisions to apply, including where the shares in the company are held via a Trust.

If someone receives an interest free loan of say €500k from a close relative’s company, the recipient of the loan would be deemed to take the loan from their close relative. As this exceeds the €335k threshold, this loan would be reportable.

These mandatory tax filing obligations apply in the following situations:

1. Where the loan is from a private company to a person in circumstances where the beneficial owner of the company is a close relative of the borrower.

2. Where the loan is from a person to a private company in circumstances where the beneficial owner of the company and the lender are close relatives.

3. Where the loan is from one private company to another private company in circumstances where the beneficial owners of both companies are close relatives.

What Loans must be Reported?

A mandatory filing obligation arises for the recipient of the loan where:

• there is a loan between close relatives,

• he/she is deemed to have taken an annual gift,

• no interest has been paid on the loan within six months of the end of the calendar year and

• the total balance on the loan and any other such loan exceeds €335,000 on at least one day during the calendar year.

Whether or not a person exceeds the €335,000 threshold would need to be considered in relation to each calendar year.

A loan is deemed to be any loan, advance or form of credit. It need not necessarily be in writing.

All specified loans must be aggregated.  Therefore, if a person has multiple loans from a number of different close relatives, the amount outstanding on each loan, in the relevant period, must be combined to determine if the threshold amount of €335,000 has been exceeded.

The first returns must be submitted by 31^st October 2025 in respect of the calendar year ending 31 December 2024.

What Information must be Reported?

The CAT return must include the following information in relation to reportable loan balances:

1. The name, address and tax reference number of the person who made the loan,

2. The balance outstanding on the loan and

3. All other such information as the Revenue Commissioners may reasonably require.

 For further information, please click: https://www.revenue.ie/en/gains-gifts-and-inheritance/filing-obligations/index.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.

Ireland has legislated for the Pillar Two rules with effect from:

• 1^st January 2024 for the Income Inclusion Rule and
• 1^st January 2025 for the Under Taxed Profits Rule

The Pillar Two rules provide that income of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis.

These rules apply where the annual global turnover of the group exceeds €750m in two of the previous four fiscal years.

Ireland signed up to the OECD Two Pillar agreement in October 2021.

The new minimum tax rate, which is effective from the 1^st of January 2024, sees an increase from the previous corporate tax rate of 12.5% to 15%, for certain large companies.

Ireland will continue to apply the 12½% corporation tax rate for businesses outside the scope of the agreement, i.e. businesses with revenues of less than €750 million.

There are special rules for intermediate parent entities and partially owned parent entities as well as certain exclusions.

It is understood that Revenue estimates approximately 1,600 multinational entity groups with a presence in Ireland will come in scope of Pillar 2.

In addition, the EU Minimum Tax Directive (2022/2523) provides the option for Member States to implement a Qualified Domestic Top-up Tax (QDMTT).

A domestic top-up tax, introduced in Ireland from 1^st January 2024, allows the Irish Exchequer to collect any top-up tax due from domestic entities before the application of IIR or UTPR top up tax.

The QDTT paid in Ireland is creditable against any IIR or UTPR top up tax liability arising elsewhere within the group.

It is important to keep in mind that IIR or UTPR top up tax may not apply in relation to domestic entities in circumstances where the domestic top-up tax has been granted Safe Harbour status by the OECD.

As there will be separate pay and file obligations and standalone returns for IIR, UTPR and QDTT, Revenue guidance material will be provided, in due course, in relation to all administrative requirements.

For further information, please click: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022L2523

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.

Finance (No. 2) Act 2023 introduced a new Capital Gains Tax relief – “Relief for Investment in Innovative Enterprises.”

Its objective is to encourage investment in innovative small and medium start-up businesses entities.

This new relief provides a 16% CGT rate where a qualifying investor makes a qualifying investment in a qualifying company and subsequently disposes of those shares.

This new CGT Relief applies an effective rate of 16% on qualifying gains up to twice the value of their initial investment if the investment is made by an individual or 18% if the investment is made through a partnership.  As you can see both rates are very attractive when compared to the standard 33% rate of Capital Gains Tax.

There is a lifetime limit of €3 million for the Relief.

The Relief, calculated as 33% – 17% for individuals or 33% – 15% for partnerships, is available on the lowest of the following:

1. the chargeable gain,
2. twice the amount of the qualifying investment in the eligible shares disposed of or
3. the €3m lifetime limit less chargeable gains from all claims made under this Relief.

Conditions for the Relief include the following:

1. To qualify, the scheme involves a certification process whereby the investee company must obtain a Certificate of Going Concern and a Certificate of Commercial Innovation from the Revenue Commissioners. In addition, the company must be incorporated and tax resident in Ireland, an EEA state or the UK, be an innovative enterprise (i.e. based on a business plan, approved by Enterprise Ireland and demonstrate compliance with GBER), carry on or intend to carry on certain trading activities in Ireland and hold a tax clearance certificate.
2. The company must exist wholly for the purpose of carrying on relevant trading activities or holding shares in certain subsidiaries.
3. The company must not be controlled by another company and must be an unquoted SME.
4. Each company, which is a member of the relief group of which the company is a member, must be unlisted.

The criteria governing certificates of qualification are provided for under s600F TCA 1997.

For the investor, a qualifying investment under the terms of the relief includes:

1. A minimum qualifying investment is €20,000 or
2. An investment in the form of fully paid up newly issued shares in the qualifying company valued at a minimum of €10,000 where the investment represents at least 5% of the company’s ordinary share capital.
3. The investment cannot be for more than 49% of the qualifying company’s ordinary share capital, entitlement to profits available for distribution, voting rights and assets available for distribution.
4. The eligible shares have been held for at least three years from the date of the investment.

For the purposes of this Angel Investor Relief, the investor must not be “connected” with the investee company or any other company within the Relief Group.  In other words, in order to claim this Relief, the investor cannot be a partner, director or employee of the relevant company or have any interest in the share capital of this or any company which is a member of the Relief Group.  The investor must subscribe for shares in the investee company (i) for consideration wholly in cash, (ii) by way of a bargain at arm’s length and (ii) for bona fide commercial reasons.

IMPORTANT POINTS

• An investment will not be a qualifying investment unless it is based on a business plan and the company seeking to raise funds from the investor (i.e. the individual or partnership) must be able to provide a certificate of going concern and a certificate of commercial innovation issued by the Revenue Commissioners.

• Please be aware that the 5% shareholding threshold does not apply in circumstances where the qualifying investment is €20,000 or more.

• Angel Investor Relief is currently applicable in relation to the disposal of eligible shares issued on/before 31^st December 2026.

• New Angel Investor Relief will work with other CGT Reliefs including Retirement Relief and Revised Entrepreneur Relief. This means, priority will be given to either Retirement Relief or Revised Entrepreneur Relief if it provides a higher amount of tax relief to the qualifying investor than Angel Investor Relief. It is not possible, however, to claim Angel Investor Relief in conjunction with Revised Entrepreneur Relief or Retirement Relief.

• It is not possible to avail of Angel Investor Relief as well as E.I.I. in relation to the eligible shares.

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.

From 1^st January 2024 employers will be required to report, collect and remit Income Tax, USC and PRSI, under the PAYE system, on any gains arising on the exercise, assignment or release of unapproved share options by employees and/or directors.  From 1^st January 2024, the tax collection method for share option gains will become a real-time payroll withholding obligation for the employer instead of the individual self-assessment system known as the Relevant Tax on Share Options (RTSO) system.

These new rules are a welcome development for employees and directors who, from 1^st January 2024, will no longer be responsible for filing and submitting Income Tax, USC and PRSI arising on the exercise of their share options.

Employees may still, however, be required to file an Income Tax Return for a relevant tax year, if that individual remains a “chargeable person.”

The due date for such returns is 31st March 2024 and there are different returns required depending on the type of share scheme operated / share remuneration provided.

Penalties for failure to file Returns may apply.

The following Forms are required for the following share schemes:

1. Form RSS1 for share options and any other rights to acquire shares or assets awarded to employees and Directors. https://www.revenue.ie/en/employing-people/documents/form-rss1.xlsm

2. Form KEEP1 – Key Employee Engagement Programme (KEEP) – Details of qualifying share options granted. https://www.revenue.ie/en/employing-people/documents/form-keep1.xlsm

3. Form ESOT1 – Employee Share Ownership Trust (ESOT) – Details of approved Employee Share Ownership Trust (ESOT) schemes. https://www.revenue.ie/en/employing-people/documents/form-esot1.pdf

4. Form ESS1 for details of Approved Profit Sharing (APSS) schemes. https://www.revenue.ie/en/employing-people/documents/form-ess1.xlsm

5. Form SRS01 for details of Save As You Earn Schemes (SAYE) https://www.revenue.ie/en/employing-people/documents/form-srso1.pdf

6. Form ESA – Restricted Stock Units (RSUs), Discounted / Free / Matching Shares, Employee Share Purchase Plans (ESPP), Restricted Shares, Convertible Shares, Forfeitable Shares, Phantom Shares, Stock Appreciation Rights, Growth/Hurdle/Flowering Shares and other Shares. https://www.revenue.ie/en/employing-people/documents/form-esa.xlsm

In circumstances where employers have globally mobile employees working outside Ireland for part of the year, the gains arising on the exercise of the stock option may need to be apportioned based on the number of days those employees worked in Ireland during the grant to vest period.  Employers will need to monitor the Irish workdays for these employees throughout the entire vesting period of the options.  Employers will also need to determine whether the stock option gain is exempt from PRSI.

Consideration must be given as to how the tax liabilities will be funded, especially in situations where there is insufficient income to cover the payroll taxes, where the globally mobile employee is not subject to Irish tax at the date of exercise but a portion of the gain has given rise to an Irish tax liability or where the employee or director has ceased their employment with the organisation. For example, by introducing a “sell to cover” mechanism.

In Summary:

• The RTSO system will be abolished with effect from 1^st January 2024.

• From 1^st January 2024, taxes arising on stock option gains will be collected through the payroll system.

• Currently there are no proposed changes that affect the obligation to file an annual RSS1 informational return by the employer. Therefore, the reporting obligations for share options by employers remain due on or before 31^st March of the following tax year.

• Share Option gains realised before 31^st December 2023 will be liable to tax under the self-assessment system with the employee being responsible for filing a Form RTSO1 along with the relevant tax payment within 30 days of the date of exercise.

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.