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THE POWERS THAT BE…MORE POWERFUL

It was announced in the recently published Finance Bill that tax officials would be granted a whole new level of powers. In a move which has been considered by some to be of questionable moral grounding, as of now, tax officials will be permitted to access private financial information about individuals without being forced to inform those involved that their finances are being looked into.

 

Once a court appeal is granted, these tax officials will be able to access previously secure information from banks or other financial institutions without the knowledge of those affected.

 

Revenue themselves have also been granted additional powers in relation to searching properties and belongings for information when engaged in an investigation. Revenue have also been given more powers to utilise when dealing with those attempting to avoid Capital Gains Tax.

 

These measures are all part of a previously announced plan to increase the power afforded to the Revenue Commissioners and increase the ease and effectiveness of an extra clamp down on tax defaulters.

 

Previously, it was required that the Revenue would both need to know the identity of the suspected defaulter and that they would be required to inform those affected that their finances are being looked into, particularly when accessing secure information from parties such as banks and building societies. Now, however, these measures will no longer be necessary, providing the Revenue with a greater ease of access to the information. This may cause some boot quaking for some defaulters, which indeed may be part of the hope.

 

The only requirement with these new measures is that there must be “reasonable grounds” to keeping the information from the suspected defaulter which, given the circumstances will rarely be difficult to provide.

 

If you require assistance with your own tax and financial matters, please don’t hesitate to contact us at DCA Accountants.

BUDGET 2016: WHAT DOES IT MEAN FOR SME’S AND THE SELF-EMPLOYED?

It has been reported that SME’s now account for an enormous portion of all enterprise in Ireland. Unfortunately, SME’s and the self-employed rarely see their efforts being rewarded in any way when the time of the budget rolls around each year. Was the budget for 2016 any different? We have compiled some of the main changes that will affect both SME’s and the self-employed for your reference.

Self Employed Tax Credit               

 

It was announced in Budget 2016 that there would be a new earned income tax credit of €550 available for those who are self-employed, including farmers. Whilst this is still quite far behind the tax credits available to others, it is somewhat of a beginning for the process of not alienating the self-employed through taxation. It is suggested that this figure would be increased in future years.

Capital Gains Tax Reduction

 

There will also be a very welcome reduction in the Capital Gains Tax for 2016 for the self-employed and entrepreneurs. This reduction takes the tax from 33% to 20% on a gain up to €1 million, which could have significant positive consequences, despite still remaining quite far behind the UK and the North of Ireland in relation to this tax. The expenditure cap for Film Relief has also been increased to €70 million which is good news for this sector.

Farmers

 

Farming in particular was a sector which was more acknowledged in this budget than previous, as the general stock relief and the stamp duty exemption for young farmers was extended to 2018. It was also announced that a new succession transfer proposal would be put forward in order to increase certainty for the next generation of farmers and assist with a more long-term thinking that may not have been possible previously.

Microbreweries

 

Another sector of self-employment and SME’s that was newly acknowledged in Budget 2016 was the increasingly popular microbreweries. The excise relief for microbreweries will now be made available upfront. This is welcome news for the industry as it may help to free up some much needed cash flow which is always important for these SME’s.

In Conclusion

 

It is also hoped that the reintroduction of the Social Welfare Christmas Bonus of 75% will boost sales and income for SME’s, thus generating more revenue overall.

 

Unfortunately there have been few steps taken to support entrepreneurs in particular. Whilst these measures for the self-employed and SME’s in particular are small steps, at least these steps are finally being taken in the right direction and we would hope to see an end to the previous discrimination against these sector in future budgets, as SME’s begin to form the backbone of our modern economy.

KEY POINTS FROM BUDGET 2016

As the country watched with baited breath for what was promised to be a more forgiving budget than the previous efforts, there has been some questions over how much these changes may change things on a personal and professional level. We have compiled some of the key points to note from Budget 2016 for your convenience.

  • USC entry point raised to €13,000
  • USC reductions:

2015                            2016

1.5%                            1%

3.5%                            3%

7%                               5.5%

  • All USC bands lowered on earnings up to €70,044 per annum.
  • Minimum Wage to be raised from €8.65 to €9.15.
  • There will now be an additional €550 tax credit available to all owners of SME’s (Small and Medium Enterprises).
  • Normal tax bands will remain unchanged.
  • Child Benefit will increase by €5 per month, taking the total to €140 per child.
  • State Pension to increase by €3 per week for pensioners and carers aged 66years and over.
  • There is to be an increase in the Inheritance Tax Band relating to transfers from parents to children. The tax band will now stand at €280,000.
  • Social Welfare Christmas Bonus restored to 75%.
  • Cost of a packet of 20 cigarettes to increase by 50cent (including VAT).
  • Free GP care for children is to be extended to all under 12’s.
  • Fathers to be entitled to 2 weeks paid paternity leave as of September next year.

If you have any queries or concerns about how budget 2016 will affect your finances, please don’t hesitate to contact us at DCA Accountants.

BUDGET 2016 TAX CHANGES BREAKDOWN

Now that the highly anticipated and much talked about budget for 2016 has been announced, the one thing on everyone’s minds is “how will this affect me, am I really any better off now?” In the hope of clearing some of the most important topics of interest from the budget up for you, we have compiled a breakdown of the major changes in terms of tax.

Most changes are expected to come into effect on 1st January 2016.

Income Tax:

  • No changes in income tax announced for 2016.

PRSI for Employees:

  • There were some cuts to PRSI announced for lower paid workers announced in this budget. Employees earning between €19,552 and €21,355 can now access relief of up to €624 per year. There will also be some relief for those earning between €21,355 and €22,048.

PRSI for Employers:

  • Employers should also see a reduction in the cost PRSI as it was announced that the 8.5% rate would be made available to those who earn up to €19,552 which is an increase in threshold of over €1,000

Universal Social Charge (USC):

  • All bands reduced on all earnings up to €70,044.

2015                                        2016

1.5%                                        1%

3.5%                                        3%

7%                                           5.5%

  • Entry threshold for USC increased from €12,012 to €13,000.
  • Threshold for 3% rate widened to over €18,688 which is an increase of over €1000.
  • Threshold for 5.5% rate widened.

Tax Credit for the Self-Employed:

  • An earned income tax credit of €500 was introduced for those who are self-employed, farmers, and those business owners who are not eligible for a PAYE credit (which stands at €1,650) on their income.

Tax Credit for Home Carers:

  • The tax credit for home carers is to increase from €810 to €1,000.

Tax Increases on Products:

  • The only tax increase seen on products in Budget 2016 is a 50cent increase on a packet of 20 cigarettes. There was no sign of the proposed tax on sugar.

That’s it for our rundown of the main tax changes for Budget 2016, stay tuned for more updates and advice from us following on from these Budget announcements.

If you have any queries or concerns about how budget 2016 will affect your finances, please don’t hesitate tocontact us at DCA Accountants.

AIB TO THE RESCUE

The only thing more stressful and daunting to new business owners than an unexpectedly large bill landing on your office doormat, is that time of year when the “I know it’s going to be large, but maybe if I pray really hard it won’t be” barrage of annual bills come flying in. This year, AIB have come up with two new solutions to this common problem that might leave you imagining the logo wearing a cape.

For most business owners, the worst evil of annual bills, is their size and the fact that they need to be paid all at once. Without an enormous stockpile of gold in your basement, these bills can often loom over you and cause an unwanted interruption in your cash flow and savings potential. This is where AIB can step in (cue the superhero soundtrack) with their new Prompt Pay and Insurance Premium finance options.

As part of AIB’s ‘Backing Brave’ initiative, Prompt Pay and Insurance Premium are two newly announced short-term financing products designed to take the sting out of annual bills. The Prompt Pay product covers all large one-off payments – apart from Insurance payments, a shortfall which is picked up by the Insurance Premium product to assist both AIB and non-AIB customers manage their monthly outgoings.

These Prompt Pay loans must be a minimum of €5000 and be paid off within 11 months. Prompt Pay can assist customers with outgoings such as:

  • Preliminary tax
  • Pension contributions
  • Commercial property rates
  • Subscription fees to professional/trade associations
  • Annual audit fees

The greatest bonus for business owners in undertaking these loans is that both are offered at a fixed interest rate. This offers the peace of mind of knowing the cost of your monthly repayments in advance. The ability to spread these usually all-in-one costs over a period of 11 months can assist you in budgeting for the year ahead and help you to manage your cash flow without these lump sum interruptions. The only extra cost incurred here is a documentation fee of €63.49 which will be charged with your first repayment.

Both Prompt Pay and Insurance Premium proclaim themselves as easy to set up through your local branch. Should you have any concerns or wish to gain advice on your eligibility and finances in general don’t hesitate to contact us here at DCA Accountants.

DCA Q&A – SHOULD I MOVE FROM SOLE TRADER TO COMPANY?

Q:I’ve been in business as a sole trader for five years now. As things have picked up in the past six months, a few people have advised me to look at establishing a limited company. The problem is, I don’t know what advantages or disadvantages there are to this set-up, or how to go about the process. Can you help me out?

 

A: The first and most obvious advantage is hinted at in the name. As a sole trader, you’re personally liable for any debts accrued by the business. However, if you are the owner of a limited company, your personal liability is limited to a set amount – so, even if things go wrong and you have to shut down the business, you won’t be hounded to pay debts that are beyond your means. Moreover, once your business’s earnings pass a certain threshold, it’s tax-efficient to keep the funds within your company, and possibly re-invest them. Indeed, there are a few schemes that actively incentivise research and development of new products or services. This is why the limited company form is favoured by businesses who have to buy large quantities of stock on credit, or research-intensive businesses.

 

The downside to setting up as a limited company is that you need to file more paperwork on a regular basis with the Companies Registration Office (CRO). If you’re used to simply sending in your tax returns and availing of user-friendly VAT payment services, then having to file annual accounts as well as forms when you change directors, premises or business names will come as a shock. The burden of red tape increases when you establish yourself as a limited company. While the costs of setting up with the CRO and filing paperwork aren’t prohibitive, they are higher. As a general rule, we advise traders to seriously consider the limited company form once they’re paying themselves a salary that they’re comfortable with. It then makes life easier from the point of view of hiring staff, securing credit, and tapping investment if you need to.

 

The CRO process is relatively straightforward – you submit the Form A1, along with your memorandum and articles of association. While some highly experienced entrepreneurs will know what form of limited company they want, and be able to draft articles of association in your sleep, those without an in-depth knowledge should really invest in professional advice at this stage. Aside from making sure that everything is legally watertight, you can also get a more tax-efficient structure in place for your business as you grow. If you like, just contact us to set up an initial, no-obligation meeting where we can run through your options in more detail.

 

Declan Dolan

DCA Q&A – SHOULD I MAKE AN UNPROMTED DISCLOSURE?

Q: My business struggled in the past with meeting tax obligations, and has been selected for an audit covering 2011 and 2012. Having gone through the accounts for these years, I’m pretty confident that there are no problems. However, I’m concerned about a claim made for the 2010 tax year – new guidance issued by Revenue on allowable expenses and subsistence makes me worry that there would be an issue with it. The amount isn’t huge – I could afford to pay any tax bill arising from it – but I’m now somewhat worried that it could result in a significant fine or more problems. Should I disclose it, and what would the likely attitude be.

 

A: Yes. It might sound glib to say, but paying your taxes is the right thing to do – and, if you leave this to lie, it will be a constant source of stress.

 

There are very few arguments to support not disclosing the matter. If I were to play Devil’s Advocate, I’d say that Revenue are unlikely to look back into your 2010 accounts if 2011 and 2012 prove squeaky clean. But you’d be taking a major chance – and the longer it lies, the worse it will look.

 

If Revenue you make this as an unprompted disclosure, then you may be surprised at how flexible they can be. As you explain it, this appears to be a genuine mistake arising  from your misinterpretation of the law in lieu of Revenue guidance – I can’t speak without knowing all the details, but I would be optimistic about your chances of a settlement to pay any outstanding amount with some interest rather than a fine.

 

If you have been are preparing for this audit and disclosure yourself until now, I’d highly recommend getting professional advice. At DCA, we often go through a client’s books and help clear up issues like this. Don’t hesitate to get in touch if you would like an initial, no-obligation meeting to discuss your options.

 

Declan Dolan

Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.

DCA Q&A: HOW DO I REPORT MY CONCERN?

Q: I have been working at my employer for a few years, and recently got promoted to a position where I see the company accounts on a month-to month basis. What I’ve seen has me very concerned.

I’m not an expert, but it appears that there is income coming in to the company that is not reported – in the most recently-filed accounts, I’ve identified several discrepancies. Now, I’m worried that my employer is engaging in tax evasion, and quite stumped as to what I do next.

Do I have a legal obligation to report this matter? Could I face prosecution if, having failed to report the issue, it subsequently comes to light? What should my next move be?

 

A: You’re right to be anxious, and to seek advice – the wrong move at this point could be damaging for you. To answer your first question, the legal obligations on reporting evasion fall largely on accountants and tax advisers. If you’re not in this role at your employer, then the situation is a little less clear, and any prosecution for sitting on your hands is less likely.

 

However, if you are a Director in the business, you could face restriction from acting as a Director in another firm if this comes to light and the company collapses – quite apart from the impact on your career and reputation. That’s even before you consider the moral imperative not to let tax evasion stand unchallenged.

 

There is one caveat, however: as you say, you’re not an expert, and this could be a simple misunderstanding on your part. Is there a person in the organisation who you trust, who also has access to the accounts and a level of expertise to understand them? If you can, ask them if everything is kosher. This may call for some subtlety, and there is a risk of your employer lashing out against you – for that reason, be careful not to share information with anyone who shouldn’t officially have access to it, as that could form a pretext for disciplinary action or dismissal. If your employer does look to get rid of you, having evidence that you dealt with the perceived problem internally and through proper channels will be important.

 

If you are not getting satisfactory answers – or if your employer goes on the defensive, then you can of course report the matter to Revenue. You can find contact details here for the Investigations and Prosecutions Division to pass on your concerns.

 

 

HEADER: DCA Q&A – WILL A GIFT HAVE TAX IMPLICATIONS?

Q: My nephew is in a precarious financial situation at the moment and, while I have provided for him in my will, I feel the money would be a lot more useful now rather than when I die. I believe I could set aside some €40,000 for him, which would give him and his family huge piece of mind. Before I approach him, however, I want to make sure that this won’t come with any negative tax implications. If he’ll have to pay tax on the gift, how does he do it, and is there any way to reduce the tax he has to pay?

 

A: You’re not the first person with cash to spare and a desire to help out relatives before you pass on. That’s why, while the Revenue Commissioners do levy Capital Acquisitions Tax (CAT) on gifts of cash, property, shares, vehicles and other high-value items, there are generous exemptions available to cut down this liability.

Because you are related to the recipient, he will be able to claim a large gift tax-free. Unfortunately, in your case, your gift will fall above the tax-free threshold of €30,150 allowed for gifts to siblings, grandchildren and nieces or nephews. If you want to give 40,000 to your nephew, he will need to pay 33% tax on €9,850 of the gift.  He can do this by filing an IT38 Return through the Revenue Online Service website. If he’s struggling with the paperwork, a useful guide is available here. [http://www.revenue.ie/en/tax/cat/leaflets/it39.html].

In terms of reducing the liability, your options are unfortunately limited. You can’t, for example, give your nephew €30,000 now and €10,000 in 2015 to avoid CAT – the exemption thresholds apply over a person’s full life, and apply to any gifts your nephew receives from grandparents, siblings or other uncles and aunts. Even if you reserve €10,000 for him in your will, it will still count towards the exemption threshold, so CAT will have to be paid on that.

Based on the information available, the only option I can see is gifting money to his own children, if he has them. If you go down this road, of course, the money will have to be transparently set aside for those kids. Even so, knowing that cash is there will doubtless ease financial pressure for the whole family.

Of course, depending on your circumstances, there may be other options for helping out your nephew – and generally managing your finances – in a tax-efficient way, and tax planning is a big part of what we do. If you would like to talk in a bit more detail, don’t hesitate to contact us [link] for an initial, no-obligation meeting.

 

Do you have a question for DCA’s experts? Contact us or connect with us on Twitter.

AVOIDING THE AUDIT

No company wants to be selected for a Revenue Audit, but how can you keep your firm chugging along without the taxman’s intrusion?

 

Even firms that do everything meticulously by the book find Revenue audits a pain: aside from the risk of uncovering liabilities (with added interest), audits take up a huge chunk of valuable management time. Fortunately, the Revenue Commissioners don’t look to put compliant firms through the wringer. In fact, they adopt certain procedures designed to target companies with a heightened risk of intentional or unintentional non-compliance. If your business can avoid raising Revenue’s red flags, you can minimise your risk of an audit and all the hassle that goes with it.

 

Be Timely

One of the easiest ways to show up on Revenue’s radar is a late filing, or a late payment. Delays in paying and filing present two possible scenarios – a business that is struggling, or a business that isn’t as organised as it should be. Either instance increases the risk, in Revenue’s eyes, that a company is deliberately or accidentally making inaccurate returns. For that reason, it’s important to make sure that any required documents are submitted in a timely manner, and that you pay liabilities when they are due. If, for whatever reason, you are unable to do so, you should make contact with Revenue to explain the situation rather than having them chase you – if you can’t be on time, be pro-active at least.

 

File Correct Paperwork

Similarly, a company making mistakes in its paperwork raises certain red flags: a businessperson who submits the wrong form is more likely, in Revenue’s eyes, to misreport their income or fail to keep correct records. So, when you are making any filing to Revenue or the CRO, check the paperwork exhaustively. And, when you’re sick of the sight of a document, check it again.

 

Keep Overheads Proportionate

Revenue know all the tricks there are to reduce liabilities: claiming 100% business use for a vehicle, inflated home-office costs, and claiming personal leisure as a business expense. Unfortunately, because some people abuse the system to write off their personal expenses and reduce their tax bill, it puts the onus on honest businesspeople to prove that their listed business expenses are legitimate.

If your overheads are significantly larger than the average for your industry, you are running a heightened risk of an audit. Unfortunately, Revenue don’t have a way of discriminating between honest businessperson working with high costs and someone abusing the system without taking a look at the books. If you can’t do anything to control your overhead costs, make an extra effort to ensure that every expense is documented properly.

 

Even if you follow all these steps, your business can still be selected for an audit. However, having all your paperwork in order and keeping records will make the process far simpler, and also make officials look on any honest errors that the process uncovers more sympathetically. At DCA, we advise many companies seeking to prepare for a Revenue audit or, better yet, to avoid one by having all their paperwork in order. To see how we can help, just contact us for an initial, no-obligation meeting.