Personal Tax

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.

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.

Today, HMRC announced an increase in its interest rates, due to another increase in the Bank of England base rate, from 4.25% to 4.5%.

The new rates will take effect from Monday, 22nd May 2023, for quarterly instalment payments.

The new rates will take effect from Wednesday, 31st May 2023, for non-quarterly instalments payments.

The two new increased rates of interest are:

• Late Payment Interest which is set at base rate plus 2.5%.  This will increase from 6.75% to 7% on 31st May 2023.

• Repayment Interest which is set at base rate minus 1% with a lower limit of 0.5% (known as the ‘minimum floor’).  This will increase to from 3.25% to 3.5% from 31st May 2023.

For further information, please click: HMRC late payment interest rates to be revised after Bank of England increases base rate – GOV.UK (www.gov.uk)

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.

Today, the Revenue Commissioners announced that the extended ROS Pay & File deadline date for self assessed taxpayers is 15th November 2023.

This extended deadline applies to:

• Certain self assessed Income Tax payers who both pay and file through ROS.

• Taxpayers liable to file Capital Acquisitions Tax Returns and payments, as beneficiaries in relation to gifts and/or inheritances with valuation dates in the year ended 31st August 2023.   The extension is only available to Taxpayers who both pay and file through ROS.

Please be aware that this extension is only available to taxpayers who both pay and file through ROS. In situations where only one of these actions is completed through ROS, then the deadline for submission and payment is 31st October 2023.

For further information, please click: Revenue eBrief No. 088/23

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 Special Assignee Relief Programme (“SARP”) was introduced on 1^st January 2012 to provide Income Tax Relief for eligible employees assigned to work in Ireland from abroad.  It was due to expire for new entrants on 31^st December 2022, however, Finance Act 2022 extended the relief for a further three years, up until 31^st December 2025.

Prior to 1^st January 2023, an individual was required to earn a minimum basic salary of €75,000 per annum (excluding all bonuses, benefits or share based remuneration) in order to be eligible for SARP.

From 1^st January 2023 onwards the employee must have a minimum base salary of €100,000 per annum.  This amount excludes all bonuses, commissions or other similar payments, benefits or share-based remuneration.

A number of conditions need to be satisfied for this relief to apply, as follows:

1. The individual must be an employee of either (i) a company incorporated and tax resident in a country with which Ireland has a Double Taxation Agreement/Exchange of Information Agreement or (ii) an associated company of a relevant employer. The individual must arrive in Ireland in any of the tax years, from 2012 to 2025, at the request of his/her/their employer, to perform employment duties in Ireland for that employer or with an associated company of that employer.

2. The individual must have been employed by a relevant employer for six months immediately prior to arriving in Ireland.

3. The individual must perform employment duties in the State for at least twelve consecutive months from the date of arrival in Ireland.

4. The employee must not have been tax resident in Ireland for the five tax years preceding the year of arrival.

5. The individual must be Irish tax resident, although he/she/they may also be tax resident in another country.

6. The individual must be tax resident in Ireland for all years for which he/she/they claim the relief.

7. When applying, SARP applicants must have a PPS number issued to them.

8. Within ninety days of the individual’s arrival in Ireland, the employer must submit the SARP application (SARP 1A) to Revenue’s SARP Unit, certifying that all the above conditions have been met for the relief to apply. In addition, the employer company must have complied with the normal PAYE employee commencement regulations.

9. If the individual is not Irish tax resident in the year of arrival, Relief may start from the following year.

Example

Mark arrived in Ireland from USA on 17^th October 2019 on a 5-year contract.

He was not Irish tax resident in 2019.

As Mark was tax resident in Ireland in 2020, he was entitled to claim relief under SARP.

His first year of claim was, therefore, 2020.

He can continue to claim SARP up to and including 2025 if he continues to satisfy the relevant conditions for the Relief.

SARP Relief

The relief operates by:

• exempting, from Income Tax,
• 30% of a qualifying employee’s annual employment income above a qualifying income threshold (€75,000 prior to 1^st January 2023 and €100,000 from 1^st January 2023 onwards),
• Subject to an earnings cap (since January 2019, an earnings cap of €1m has been in effect),
• for a period of 5 years.

Relief is not extended to Universal Social Charge (USC) so the individual must pay USC on the full amount of his/her/their salary.

The specified amount is not exempt from PRSI, unless the employee is relieved from paying Irish PRSI under either an EU Regulation or under a bilateral agreement with another jurisdiction.

The relief operates by providing a deduction for income tax purposes from remuneration based on the following formula:

(A-B) X 30%

A = Qualifying Remuneration i.e. total remuneration.  This includes:

• Income, profits or gains from his/her/their employment in the State with a relevant employer or associated Company.
• Allowances, benefits-in-kind, bonuses, share awards, commissions, etc.
• The following is deductible from the total remuneration figure when calculating the Relief: employee contributions to an Irish approved pension plan or a foreign pension plan eligible for Irish tax relief as well as remuneration eligible for Double Taxation Relief in Ireland.

B = €100,000 (prior to 1st January 2023 it was €75,000)

Example:

Thomas arrived in Ireland on 1st January 2023 and meets all the above conditions to qualify for SARP relief.

His salary is €120,000, his bonus is €15,000 and he receives a benefits in kind (e.g. medical insurance) valued at €3,000.

A = €138,000 i.e. €120,000 + €15,000 + €3,000

B = €100,000 i.e. qualifying Income Threshold

SARP Deduction = (€138,000 – €100,000) = €38,000 @ 30% = €11,400

Thomas’s marginal Income Tax rate in Ireland is 40%, therefore his Income Tax saving is €4,560 i.e. €11,400 x 40%

It’s important to keep in mind that 8% USC and 4% PRSI, if applicable, will apply to this employment income.

Important Points to keep in mind:

1. Revenue recently clarified that employees must have at least one Irish workday each month in the first twelve months. Therefore, all employees eligible for SARP should take account of this when making travel arrangements in their first year in Ireland so as to ensure their SARP Relief isn’t withdrawn.

2. In the case of new applicants arriving in Ireland from 1^st January 2023 onwards, please be aware that the portion of employment income which is eligible for Relief is 30% of their annual employment income above €100,000. For qualifying employees who arrived in Ireland before 1^st January 2023, however, their relief calculated as 30% of their annual employment income above €75,000.

3. Employees who qualify for SARP Relief are also eligible to receive certain travel expenses and certain costs associated with the education of their children in Ireland tax free.

4. Employees who have started their Irish role before actually arriving in Ireland, will not be entitled to claim SARP relief, unless (i) the employee was prevented from travelling to Ireland to take up his/her/their position here due to unforeseen circumstances beyond his/her/their control and (ii) the Irish employment duties carried out by the individual abroad do not exceed five “workdays” in the six months period prior to his/her/their arrival in Ireland.

5. Employees must have a PPS number when making their application.

6. Individuals should register their employment with Revenue before applying for SARP.

7. The SARP Relief cannot be claimed by new hires with no previous group employment history.

EMPLOYEES

SARP relief can be claimed by the employee in one of two ways:

1. Through the year-end Tax Return

An employee who receives SARP Relief is considered to be a “chargeable person” for Income Tax purposes.  He/she/they is/are required to submit an Income Tax Return to the Irish Revenue Commissioners in respect of each year for which relief is claimed.   The Form 11 Tax Return may be filed by way of a paper form or through the Revenue’s On-Line Service (ROS).

Employees who have registered and qualify for SARP must file a Form 11 Tax Return by 31st October following the end of the tax year.

2. Through payroll

By completing Part C of Form SARP 1A and submitting it to Revenue, SARP Relief can be granted at source through the employee’s payroll.

The employer is required to make this application only once.

Relief can be granted at source through payroll for the duration of the assignment, up to a maximum of five years, providing the employee continues to satisfy all the relevant conditions.

If you would like further information on the new SARP regime, please contact us to make an appointment.

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.

Today, Minister for Finance, Paschal Donohoe T.D., and Minister for Public Expenditure and Reform, Michael McGrath T.D. presented Budget 2023.

GLOBAL MOBILITY & EMPLOYMENT

Minister Donohoe announced an extension to a number of existing personal tax reliefs including:

• Special Assignee Relief Programme (SARP) is to be extended to the end of 2025.  The minimum income threshold for an employee to qualify for SARP is being increased from €75,000 to €100,000 for new entrants.  Existing claimants will not be affected by this change.  In other words, this higher qualifying threshold will not apply to current claimants availing of the relief.  For associated articles, please click SARP – 2023 Update – Accounts Advice Centre

• Key Employee Engagement Programme (KEEP) is to be extended to the end of 2025.  The lifetime company limit for KEEP shares will be raised from €3 million to €6 million.  KEEP is also being modified to provide for the buy-back of KEEP shares by the company from the relevant employee.

• Foreign Earnings Deduction (FED) which is a relief for employees who are tax resident in Ireland and who travel out of the State to temporarily carry out employment duties in certain qualifying countries was extended for a further three years to the end of 2025. FED provides relief from income tax on up to €35,000 of income.

• Another significant development was the doubling of the Small Business Exemption from €500 to €1,000 effective from 2022. Employers will also be permitted to grant an employee two vouchers/non-cash awards in a single year, provided the cumulative value of the two vouchers does not exceed €1,000.

PERSONAL TAX

Key measures include:

• A significant increase in the Standard Rate Cut-Off Point to €40,000 for single individuals and €49,000 for married couples with one earner. This means that a single person can now earn an additional €3,200 before paying tax at the 40% Income Tax rate.

• An increase of €75 in the Personal Tax Credit, Employee Tax Credit and the Earned Income Tax Credit (all currently set at €1,700). For the tax year 2023 onwards the new tax credits be each be €1,775

• An increase of €100 in the Home Carer tax credit. From 2023 it will be increased to €1,700.

• A reintroduction of the rent tax credit of up to €500 for renters in the private sector for 2023 to 2025. It will be possible to claim this tax credit on a retrospective basis in relation to rent paid in 2022.  One credit per person can be claimed per year.

• The Sea-going Naval Personnel Tax Credit has been extended to the end of 2023.

• An increase in the ceiling of the 2% USC rate from €21,295 to €22,920.

• The exemption from the top rate of USC for medical card holders, and those aged over seventy years earning under €60,000 will continue beyond 2022. In other words, the reduced rate of 2% USC will be extended until the end of 2023.

• There is no increase to Employer’s PRSI rates.

ENTERPRISE

• The Temporary Business Energy Support Scheme (TBESS) was introduced to support trading businesses. The scheme will be open to businesses carrying on a Case I trade that are tax compliant and have experienced a significant increase in their natural gas and electricity costs. Businesses carrying on trading activities will be eligible for a refund of 40% on the increase in electricity and gas prices, subject to a monthly cap of €10,000 per trade.  Detailed information on the scheme has not yet been published, however, it is believed the scheme will operate by comparing the average unit price for the relevant period in 2022 with the average unit price for the corresponding period in 2021. If the increase in average unit price is more than 50% then the business will be eligible for the scheme. Businesses will be required to register for the scheme and to make claims within the required time limits.  This scheme is subject to State Aid approval from the EU.

• Amendments will be made to the R&D tax credit regime with respect to how repayments are made under the scheme which will ensure the regime is regarded as a “qualifying refundable credit” for the purposes of the Pillar Two Model Rules. Currently the R&D tax credit is firstly offset against current and prior year corporation tax liabilities followed by repayment over three instalments. The current system is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D Tax Credit or to request for it to be offset against other tax liabilities. In other words, the changes will enable taxpayer companies to call for the payment of their R&D tax credits in cash or for these to be offset against its tax liabilities in this three-year fixed period. The existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year.  Transitional measures will be introduced for one year for those that already engaged in R&D activities and claiming the credit

• An extension to the Knowledge Development Box regime for a further four years to 31^st December 2026. Currently the KDB provides for a 6.25% effective rate of corporation tax on profits generated from exploiting certain assets, including patents and software developed through R&D activities carried out in Ireland. In preparation for the changes under the OECD Pillar Two agreement, the effective rate under the KDB regime is to be increased from 6.25% to 10%.  The policy document released by the Department of Finance states that the commencement of this rate will be determined by reference to international progress on the implementation of the Pillar Two Agreement but it is expected in 2023.

• The extension of the Film Corporation Tax Credit until December 2028. Film relief is granted at a rate of 32% of qualifying expenditure which is capped at €70 million.

PROPERTY

Help-to-Buy Scheme

The scheme will continue at current rates for another two years and will expire on 31^st December 2024

Vacant Homes Tax (“VHT”)

A VHT will apply to residential properties which are occupied for less than 30 days in a 12 month period.

Exemptions will apply where the property is vacant for “genuine reasons.”

The applicable tax rate is three times the existing local property tax (“LPT”) rate

Residential Development Stamp Duty Refund Scheme

The stamp duty refund scheme will continue until the end of 2025.

The stamp duty residential land rebate scheme allows for a refund of eleven-fifteenths of the stamp duty paid on land that is subsequently developed for residential purposes. was due to expire on 31 December 2022. It has been extended to the end of 2025.

Pre-letting Expenses on Certain Vacant Residential Properties

The limit for landlords claiming allowable pre-letting expenses is to be increased from €5,000 to €10,000.

The vacancy period is to be reduced from 12 months to 6 months.

Levy on Concrete Blocks, Pouring Concrete and other Concrete Products

A 10% levy was announced in response to the significant funding required in respect of the defective blocks redress scheme. A 10% levy will be applied to concrete blocks, pouring concrete, and certain other concrete products

This levy applies from 3rd April 2023.

VAT

9% VAT rate for hospitality and tourism sector

The 9% VAT rate currently in place to support the tourism and hospitality sectors will continue until 28^th February 2023.

9% VAT rate on electricity and gas supplies

The temporary reduction in the VAT rate applicable to gas and electricity supplies (from 13.5% to 9%) will be extended to 28^th February 2023.

Farmers’ Flat-Rate Addition

The flat-rate addition is being reduced from 5.5% to 5% in accordance with criteria set out in the EU VAT Directive.

This change will apply from 1^st January 2023.

Zero-rated supplies

From 1^st January 2023 VAT on newspapers, including digital editions will be reduced from 9% to 0%.

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.