Archive for category: DCA News & Views

As we have stressed many times in the past, SMEs (small and medium-sized enterprises) form the backbone of the Irish working landscape, but often struggle to find the supports they need to stay on track.
On May 15, 2024, the Government announced a new business support package worth up to €150 million, aimed at bolstering these types of companies. This initiative is designed to reduce costs, foster innovation, and ensure long-term sustainability for Irish businesses.
This new initiative introduced a range of measures aimed at immediately supporting SMEs. Key measures include:

• Reopening the Increased Cost of Business (ICOB) Scheme for another 14 days and introducing a second payment of ICOB for businesses in the retail and hospitality sectors.
• Doubling the Innovation Grant Scheme to €10,000, encouraging more extensive R&D and technological advancements.
• Increasing the maximum amount under the Energy Efficiency Grant Scheme to €10,000 and reducing the business contribution rate from 50% to 25%, promoting sustainable practices.
• Raising the lending limit for Microfinance Ireland loans to €50,000 from €25,000, providing greater access to capital for small businesses.
• Expanding the Digital for Business Consultancy Scheme to all sectors with up to 50 employees, supporting digital innovation and efficiency.
• Introducing the National Enterprise Hub online platform for SMEs to access comprehensive information on government business supports.
• Implementing an enhanced ‘SME Test’ to evaluate the impact of new regulations on small businesses.
• Raising the employer PRSI threshold from €441 to €496 from October 1, 2024, to relieve financial pressure on employers with minimum wage workers.
• Utilizing the €1.5bn surplus in the National Training Fund to future-proof workforce skills in SMEs, ensuring access to lifelong learning opportunities.
• Waiving fees for outdoor dining for hotels, restaurants, and pubs until December 31, 2024, saving establishments approximately €125 per table.

Minister Burke emphasized the importance of these measures, stating:

“Our small businesses are the backbone of our local economy and provide much-valued employment in communities across the country. These measures represent agreement from across the government on the need to support our SMEs in the face of rising costs – while also balancing critical progress in terms of working conditions.”
Finance Minister Michael McGrath praised the package, stating:

“The package of measures being announced today is fair and balanced, and underlines the recognition across the government of the crucial role SMEs play in our economy and in communities across Ireland.”
The initiative aims to create a robust, dynamic, and resilient economy, while also continuing to support businesses which have suffered following lockdown. This comprehensive approach not only supports current SMEs but also lays the groundwork for long-term prosperity, ensuring Ireland remains competitive on the global stage. Fingers crossed we will continue to see dedicated and comprehensive supports for SMEs.

The Finance Act 2022 was enacted on 15 December 2022. Amongst other changes to pensions, the Act confirmed that the Benefit in Kind for an employee, which was previously triggered by an employer contribution to a Personal Retirement Savings Account (PRSA), has been removed.

This change has come into effect on 1 January 2023 and is considered to be one of the most important changes in the pensions industry, since ARF’s.

Changes for Employees

It now means that ordinary employees, saving into a (PRSA) will now be given the same tax treatment as occupational pension scheme members in relation to any employer contributions to their pension scheme. Previously where an employer paid into the PRSA, that employer contribution used up part of the employee’s own scope within their age-related limits. This is no longer the case, as employer contributions are now un-constrained. Employee contributions however, are still subject to the age-related contribution limits and the Earnings Cap (currently €115,000).

Changes for Business Owners

The real change however has impacted the ability of business owners to fund pensions substantially. Currently the interpretation is that the new legislation does not place any upper limit on an employer contribution to a PRSA as would have traditionally existed in the old executive pension, these changes have removed the salary and service rules which restricted how much could be invested into pension on an annual basis.

This now means someone could draw a salary of €30,000 from their business and make a pension contribution of €2,000,000. This may seem extreme however it is currently allowed under the legislation.

An employer can only make a contribution to a PRSA for a bona fide employee. That is defined as someone who is registered as an employee of that entity in receipt of salary with taxation applied at source. Thereafter the level of salary paid, service to date and level of pension benefits already in place are irrelevant. This also opens up the business to make substantial pension contributions for the spouse/partner and any family member working in the business irrespective of salary, service, or shareholding.

The key issues that now apply relate to the to the Pension Fund Threshold, currently this is at €2,000,000 and the employer’s capacity to fund a sizable contribution from their business accounts.

The impact on current financial advice

Many company directors will be funding their retirement using an executive pension arrangement. For many, the funding rules within those schemes will allow more than enough scope for the contributions they wish to make for their retirement. For directors on low salaries who have large cash balances or profits, they can now extract these and obtain tax relief immediately in year one.

Another aspect of the PRSA that is attractive is the fact that the funds can be paid in full to the estate of the deceased member in the event of death whereas occupational pension schemes place restrictions on the maximum allowable tax-free lump sum payable with residual funds being used to provide a pension via an Annuity or purchase an Approved Retirement Fund (ARF) for a spouse or dependents.

20% Directors of investment firms

The Revenue has been very clear that a 20% director of a company that is treated for tax purposes as an investment company, was precluded from funding a pension from that business, that it was in affect non pensionable employment. That continues to be the case for executive pension however no such restriction currently exists in respect of the PRSA. As a result, where a 20% director of an investment company is registered as an employee of that company and receiving a salary, then the employer could make an employer contribution to a PRSA for the benefit of that director.

Where can PRSA’s invest?

It is possible for non-standard PRSA’s to hold an investment property, direct equities, managed or protected funds.
Another key benefit of PRSA’s is no entry or exit costs plus a fixed and transparent management charge.

Summary

The new legislation for PRSA’s presents a unique and golden opportunity for employers and employees alike. This legislation could change and with it a golden opportunity. Our suggestion is to get advice and see how PRSA pensions can work for you and your family.

 

Revenue has recently made updates to its share options webpage, reflecting changes introduced by the Finance (No.2) Act 2023, which came into effect on January 1, 2024. These changes significantly impact how individuals report their income tax related to share options, particularly for those under self-assessment.

Here’s a breakdown of what you need to know:
Before January 1, 2024:

If you exercised, assigned, or released a share option before January 1, 2024, any income tax due on these transactions was chargeable under self-assessment. This means your employer wouldn’t deduct tax through payroll, and you were responsible for reporting it yourself.
After January 1, 2024:

The landscape has now shifted. If you engage in any of the aforementioned activities on or after January 1, 2024, you won’t be considered a chargeable person. Instead, your employer will deduct any income tax due directly from your payroll. This simplifies the process for you, as you won’t need to file an income tax return regarding these share option transactions.
What This Means for You:
The most significant implication of these changes is the reduction in administrative burden for individuals who previously had to file Form 11s solely because of share options. Starting in 2024, if your only reason for filing Form 11s or RTSO returns was related to share options, you’re off the hook. The responsibility for compliance and filing now lies squarely on the employer, streamlining the process for everyone involved.
Why It Matters:
By updating its regulations, Revenue is aiming to simplify tax reporting for individuals involved in share option transactions. This move not only reduces the compliance burden on taxpayers but also ensures more accurate and efficient reporting through employer-managed payroll deductions.
Stay Informed:
It’s crucial to stay updated on these changes to ensure you remain compliant with tax regulations. Revenue’s revamped share options webpage provides detailed information and guidance to help navigate these new rules effectively.
In conclusion, the recent updates to Revenue’s share options regulations represent a positive shift towards simplifying tax reporting for individuals. With the burden of compliance now shifted to employers, taxpayers can expect a smoother, more streamlined process moving forward.

We have some important updates regarding the recent changes introduced by the Revenue Commissioners, impacting the way we report certain expenses and benefits to employees and directors.

As of January 1, 2024, the Enhanced Reporting Requirement (ERR) is in effect, requiring employers to report specific details of payments through the ROS system, similar to the current payroll reporting process. As always, we aim to ensure that you are as up to date as possible.

 

What to Report: Small Benefits and Remote Working Allowance.

• Small Benefits:
  If you provide small benefits such as gift vouchers, gifts for special occasions, or long-term service awards, you must report the date and value of these benefits. The cumulative value should not exceed €1,000 in a tax year. Only the first two qualifying benefits that are exempt. Any subsequent benefit must be taxed and the employer should make the necessary deduction under the PAYE system and report through payroll.
• Remote Working Allowance: 
  The non-taxable daily allowance for remote workers, aimed at offsetting remote work-related costs, must be reported. This includes the number of days, amount paid, and payment dates.

Travel and Subsistence Payments: Ensuring Compliance.

• Travel Vouched and Subsistence Vouched: 
  Report date and amount for vouched travel and subsistence expenses, including receipts.
• Travel Unvouched and Subsistence Unvouched: 
  Specify ‘Flat rate allowances’ within Civil service rates and provide details.
• Site-Based Employees: 
  Expenses for travel and subsistence may be tax-free for site-based employees, subject to specific rates. Ensure compliance with the 32km (20 miles) requirement.
• Emergency Travel:
  Report emergency travel expenses at Civil Service rates.
• Eating on Site Allowance:
  Paid without tax deductions, report this allowance – €5.00 per day.

Please note the Travel and subsistence expenses paid directly through company credit cards where no reimbursement has taken place, this is not in the scope of Enhanced Reporting Requirements

 

How to Report: Choose Your Method

Revenue offers three reporting options:

1. Third-party software:
   Interface directly with Revenue.
2. Upload via ROS:
   Submit an expenses/benefits file through ROS.
3. Manual Submission via ROS:
   Manually submit expenses/benefits through ROS.
   It is important to ensure that all payments are reported separately from payroll, and employees can view submissions in their Revenue myAccount. No receipts need to be uploaded, but we would advise that you retain them in case of any Revenue intervention.

 

Why is Revenue Implementing ERR?

The additional information aims to provide Revenue with better oversight of payroll management. Following the 2022 overhaul of the Compliance Intervention framework, electronic resources will be used to target taxpayers for compliance intervention, resulting in increased desktop compliance checks on payroll taxes.

 

Non-Compliance Consequences: Avoid Penalties

Failure to comply may result in a €4,000 penalty per breach. Correct any misfiled returns before the due date to avoid penalties.

 

Preparing for ERR: Action Points for Employers

1. Review payment categorisation and record-keeping practices.
2. Assess the frequency of payments for efficient reporting.
3. Align policies with legislation and rules.
4. Establish controls for tracking vouchers and non-cash benefits.
5. Identify responsible parties for timely and accurate reporting.