DFK International Ranked 6th Largest Association in the World

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DFK International has been ranked as the 6th largest association in the world in the International Accounting Bulletin’s (IAB’s) annual 2022 World Survey Report.

Crowleys DFK has been a proud member of DFK International for twenty-nine years.

The report is based on collective fee income, with DFK International members firms achieving a turnover of $1.532 billion.

DFK has sat in seventh place for 10 years but has moved up the list after achieving a growth rate of 3% compared to the previous year.

The association now has 230 member firms, 1,413 partners, 13,919 staff members and 455 offices in 94 countries.

Martin Sharp, executive director of DFK International, said:

“We are very proud to be among the leading associations worldwide.

Moving up to sixth place demonstrates that despite the pandemic, DFK remains one of the strongest associations in the world and our member firms have continued to grow, which is a fantastic achievement.

We have seen growth across all services lines, particularly in North America, which shows that our members have continued to provide outstanding support to their clients in a challenging environment and in-turn have expanded their practices.

We now look forward to another successful year as we continue to do business and share knowledge and best practice to achieve further growth.”

Being a part of an association with a strong global presence has greatly widened Crowleys DFK’s intellectual resources, allowing us to offer local advice supported by a broader knowledge of international financial reporting.

This breadth of knowledge is a critical resource for our clients, which include leading firms in industries such as information and communications technology, e-commerce, life sciences, manufacturing and consumer products.

These clients find that our expert team provides fundamental advice on structuring their Irish operations, on securing Government funding, and dealing with tax and legal obligations.

As Ireland continues to be a vital hub for international business, our understanding of the challenges faced by companies moving into Ireland will continue to be a critical resource.

Eddie Murphy, Head of Tax and FDI Services at Crowleys DFK, said:

“At Crowleys DFK, we understand the challenges faced by our SME and owner-managed business clients. We are proud of the reputation and long-term relationships we have built with them over the years.

Whether it’s getting advice on taking on two employees in Germany, accessing capital markets in London or New York or helping technology companies expand into San Francisco, we connect our clients with trusted professionals throughout the world.

In many cases our clients prefer to deal with us and in these instances, we instruct the other DFK firms. This means clients can concentrate on their business and don’t need to spend time developing new relationships abroad.”

To learn more about DFK International visit www.dfk.com.

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A Guide to Avoiding the Most Common RCT & VAT Pitfalls for Non-Resident Principal Contractors

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An area that has continued to cause challenges and risks for businesses is the operation of Relevant Contracts Tax (RCT) and VAT.

The most common mistakes we see being made in this sector are by non-resident principal contractors who engage a subcontractor to carry out construction works in Ireland.

This article will focus on the most common pitfalls that we see occurring within this sector by non-resident principal contractors and the steps that can be taken to avoid making costly mistakes.

1. Compliance Obligations for Non-Resident Principal Contractors

When a non-resident principal contractor engages a subcontractor to carry out construction works in Ireland, the RCT system must be applied to payments made to the subcontractor.

The first potential pitfall for a non-resident principal contractor is not taking the reasonable care to familiarise themselves with their tax obligations under the RCT regime. In such a case, the non-resident principal contractor will eventually be contacted by Revenue, informing them of their failure to operate the RCT regime. This usually occurs following the commencement of the works in Ireland, at which point the mistakes have already been made and costly penalties can be imposed by Revenue.

As such, it is very important that a non-resident principal contractor is aware of their tax obligations prior to the commencement of any construction works in Ireland so that the necessary administrative steps can be taken to ensure that they are set up for the RCT system and fully compliant in operating RCT on payments to subcontractors.

The administrative steps to be taken by a non-resident principal contractor include registering for RCT on Revenue’s Online Service (ROS) and operating the RCT regime throughout the duration of the project in Ireland (further detail on this below).

2. Operation of the RCT System

Once a principal contractor is registered for RCT with Revenue, there are a number of steps that must be taken each time a principal contractor enters into a relevant contract with a subcontractor and each time a payment is made to the subcontractor. These steps are summarised as follows:

a. Contract Notification

  • The first step is to input a “Contract Notification” through Revenue’s online RCT system. A principal contractor must notify Revenue each time it enters into a new relevant contract with a subcontractor. The Principal will then receive a contract reference number and an indication of the applicable RCT deduction rate for the subcontractor.

b. Payment Notification

  • Before making a payment to a subcontractor, the principal must notify Revenue’s online eRCT system of the intention to make the payment and provide details to Revenue of the gross amount to be paid. This process is known as “Payment Notification”. This must be done for each payment made to the subcontractor.

c. Deduction Authorisation

  • Revenue will issue a deduction authorisation to the principle contractor which will specify the rate and amount of tax to be deducted from the payment to the subcontractor. This process is known as “Deduction Authorisation”. The principle is required to provide a copy of this authorisation to the subcontractor.

d. Deduction Summary (RCT Return)

  • Revenue’s eRCT system prepares a pre-populated period end return known as a “Deduction Summary (i.e. RCT Return)”, which is based on the deduction authorisations issued during the period. The due date for payment of the RCT withheld is the 23rd day after the end of the period covered by the return.

The most common pitfall we see occurring in practice are inconsistencies in notifying Revenue of each and every payment made to a subcontractor by the principal contractor. This can be a costly mistake for the principal contractor as the penalties Revenue can impose for failure to operate the RCT system in this way range between 3% to 35%, depending on the RCT deduction rate applicable to the subcontractor.

To put this into perspective, if a subcontractor has been assigned a 35% RCT deduction rate and the principal contractor makes a payment of €25,000 to the subcontractor without first notifying Revenue of the payment and deducting the appropiate withholding tax, Revenue can impose a penalty of €8,750 (i.e. 35% of the invoice value) on the principal contractor for its failure to operate the RCT system.

These penalties can become very costly for a business where they fail to operate the RCT system on high value invoices.

3. Operation of RCT and Reverse Charge VAT

Typically, VAT is normally charged by the person supplying the goods or services. However, under the RCT regime, the person receiving the goods or services (the principal contractor) calculates the VAT due on the invoice from the subcontractor and pays it directly to Revenue. This is referred to as Reverse Charge VAT and it is common area in which mistakes are made by non-resident principal contractors.

The following should occur when a subcontractor invoices a principal contractor for construction services that are subject to RCT:

  1. The subcontractor raises an VAT invoice with the zero rate of VAT applied;
  2. The invoice should include the VAT registration number of the principal contractor and include the narrative “VAT on this supply to be accounted for by the principal contractor”;
  3. The principal contractor calculates the VAT due on the invoice value and records it as VAT on sales (Box T1) on its VAT return. Where it is entitled to do so, the principal contractor can claim a simultaneous VAT input credit (Box T2) on the VAT return, thus resulting in a VAT neutral position.

Although the RCT system can seem like a heavy administrative burden on a business, it can be managed relatively smoothly with the proper administration. Our tax specialists look after all administrative issues regarding RCT, provide effective advice and answer questions you may have regarding RCT.

Should you require any assistance, please contact us.

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Crowleys DFK Celebrates DFK’s 60th Anniversary

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DFK's 60th Anniversary

Crowleys DFK is celebrating global independent accountancy association DFK’s 60th anniversary. We are proud to have been members for the past 29 years.

Reflecting on the 60th milestone, Martin Sharp, executive director of DFK International, said:

“In 1962 the founders of DFK International envisaged setting up an association of independent firms that could support their clients to do business internationally and provide an alternative to the big networks which were being set-up.

Although DFK has grown considerably and the international business landscape has changed, the principles and ethos on which DFK was established still remain.

Beyond this, DFK provides a forum to share knowledge and best practice between like-minded individuals who are keen to support their clients and help fellow member firms.

We have a strong family atmosphere which has grown over the years to give member firms the opportunity to build relationships with people from different countries and different cultures.

This year we celebrate this success and look forward to continuing to build these relationships in the years to come.”

James O’Connor, Managing Partner at Crowleys DFK commented:

“There is no doubt that joining DFK in 1993 has been a significant catalyst in the success and growth of our firm. Since then, we have grown to become a 10 Partner and 115 staff practice and one of the leading independent practices in Ireland.

There is great comfort in being able to connect our clients with trusted friends all around the world when they need help and advice abroad.”

The association provides us with a platform to share knowledge, ideas and best practice as well as information about the latest technology to ensure we remain at the forefront of the sector.

It is also a pioneer in training and development, creating programmes to specifically develop young professionals in the industry as they progress in their careers.

DFK International has 229 member firms which have a combined total of 441 offices across 93 countries.

The association strives for equality, diversity and inclusion, promoting a culture that celebrates difference, challenges prejudice and ensures fairness.

We are proud to have been part of such a magnificent organisation for such a long time and look forward to continuing to be part of the DFK family.

DFK International Conference 2019 in Singapore

Eddie Murphy & James O’Connor DFK International Conference 2019, Singapore

Happy 60th Birthday DFK!

To learn more about DFK International visit www.dfk.com.

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Social Inclusion and Community Activation Programme (SICAP) Audits

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SICAP Audits

The Social Inclusion and Community Activation Programme (SICAP) 2018 –2022 provides funding to tackle poverty and promote social inclusion and equality through local engagement and partnerships with disadvantaged individuals, community organisations and public sector agencies.

The programme has two goals that focus on supporting communities and individuals:

Goal 1: Supporting Communities – To support communities and target groups to engage with relevant stakeholders in identifying and addressing social exclusion and equality issues, developing the capacity of local community groups and creating more sustainable communities.

Goal 2: Supporting Individuals – To support disadvantaged individuals to improve the quality of their lives through the provision of lifelong learning and labour market supports.

SICAP is managed and administered by the Local Community Development Committees (LCDCs) in each local authority area, which may be delivered at a local level by external party/(ies).

From 2018, the role of conducting audit / verification checks on the external parties receiving SICAP funding has been subsumed into the internal audit function of each Local Authority.

How can Crowleys DFK help?

Crowleys DFK has the expertise to conduct SICAP audits / verification checks for Local Authorities’ Internal Audit Units and LCDCs.

Our subject matter specialists have taken part in SICAP training programmes delivered by both POBAL and the Department of Housing, Planning and Local Government and our audit team are fully trained on the usage of SICAP’s data management system IRIS.

We understand that the audits must have a financial focus and can provide assurance that grant monies are spent for the purposes intended in accordance with programme rules and contractual conditions. The audits must also include a review of internal financial controls and corporate governance arrangements.

Contact Vincent Teo or Tony Cooney for more information on how Crowleys DFK can assist you with your SICAP audits.

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Central Bank Announces New Lending Rules for Credit Unions

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The Central Bank have issued new regulations regarding new lending rules for Credit Unions. These will come into effect in January 2020.

As a result of the new regulations, the existing lending maturity limits which cap the percentage of their lending for periods of greater than five and ten years will be removed. These maturity limits will be replaced by new concentration limits on a tiered basis, for home mortgage and business loans, expressed as a percentage of total assets.

This means credit unions with the financial strength, competence and capability, will have the flexibility to undertake increased longer term lending. This includes home mortgage and business lending.

“The changes being announced today follow a comprehensive review of the lending framework for credit unions. This forms part of our commitment to ensuring a responsive regulatory framework. It is important that the lending framework remains appropriate for credit unions taking account of their risk management, capabilities, expertise and financial resilience,” said Patrick Casey, Registrar for Credit Unions.

You can read the Central Bank’s press release here.

At Crowleys DFK, we provide a variety of services to credit unions. For further information, please contact Tony Cooney, Partner & Head of Risk Consulting.

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Crowleys DFK Support Cork SMEs’ Global Success

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Edward Murphy, Head of Tax, was featured in Cork Chamber’s 200th anniversary magazine. He discusses Cork, the local Cork SME sector and it’s success on the domestic and global stage.

You can read the full interview below.

Q:   What’s it like to do business in Ireland’s fastest growing city region?

A:   It’s hard not to be excited by the hive of activity in Cork in recent years – from the myriad of new developments, a growing workforce and a thriving third-level education sector to the region’s continued success in attracting high-value overseas investment. However, it’s the global success of our indigenous Cork SME sector that is, perhaps the most exciting.

Q:   Why have indigenous Cork SMEs been so successful locally and globally?

A:   While Cork has a well-earned reputation in attracting and retaining foreign direct investment, the support it offers homegrown entrepreneurs and SMEs is second to none. Innovation and the ambition to think globally is nurtured through an excellent support ecosystem of start-up incubators, accelerator programmes and research, development and innovation hubs; backed by local business organisations, third-level institutions, and public and private investors.

Q:   What are the key challenges facing SMEs looking to expand overseas?

A:   The continued uncertainty surrounding Brexit is currently the biggest challenge facing SMEs that trade with the UK. However, a constant challenge relevant to all markets is access to local, trusted and reliable professional connections and advice overseas. This is a key step in any global expansion strategy and is often a major stumbling block for many businesses. Understanding how to do business in a new jurisdiction can be time consuming and expensive when you don’t have a local relationship or know where to go to get the proper advice.

Q:   Can you describe how Crowleys DFK can help SMEs with their international growth strategies?

A:   At Crowleys DFK, we understand the challenges faced by our SME and owner-managed business clients. We are proud of the reputation and long-term relationships we have built with them over the years. They represent a diverse range of today’s most innovative and high-performing industries and sectors, including information and communications technology, life sciences, manufacturing and consumer products.

We have been a member of DFK International since 1993. This worldwide association of independent accounting, tax and business advisory firms has over 220 member firms covering 92 countries. We have a long history of working with other DFK Firms. It’s through these strong relationships that we can deliver a complete international service to clients.

Whether it’s getting advice on taking on two employees in Germany, accessing capital markets in London or New York or helping technology companies expand into San Francisco, we connect our clients with trusted professionals throughout the world. In many cases our clients prefer to deal with us and in these instances, we instruct the other DFK firms. This means clients can concentrate on their business and don’t need to spend time developing new relationships abroad.

We have all the right connections to help businesses achieve their ambitions – locally and globally.

Contact us today for expert advice on growing your SME.

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Help to Buy Incentive

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The Help to Buy (HTB) incentive is a scheme to help first time property buyers. It helps with the deposit needed to buy or build a new house or apartment. In order to claim the HTB scheme, you must:

  • Be a first-time buyer
  • Take out a mortgage that is at least 70% of the purchase value of the property
  • Be tax compliant
  • Live in the property for a minimum of 5 years after purchase

To qualify, you must have not bought or built a house or apartment previously on your own or jointly with any other person. You will still qualify for HTB if you have previously inherited or have been gifted a property.

The HTB scheme is back dated to include homes bought from 19 July 2016 and will be available to 31 December 2019. If the property was purchased between 19 July 2016 and 31 December 2016, the price of the property must be €600,000 or less. If the property is bought between 1 January 2017 and 31 December 2019, the property must cost €500,000 or less.

The amount you can claim is the lessor of the following:

  • €20,000
  • 5% of the purchase price of the new home.
  • The amount of Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in the previous 4 tax years.

Regardless of the amount of people who enter into the contract to buy or build the property, the cap of €20,000 applies. Universal Service Charge (USC) and Pay related Social Insurance (PRSI) are not considered when calculating the amount you are entitled to claim.

If you purchased or built the property between 19 July 2016 and 31 December 2016, the refund will be issued directly to you. If you buy a new build between 1 January 2017 and 31 December 2019, the refund will be issued to your contractor. The contractor must be approved by Revenue. If you self-build, the refund is paid to a bank account held with your mortgage provider.

Revenue may clawback the refund if:

  • You do not live in the property for 5 years
  • You do not complete the process to buy the house
  • You were not entitled to the refund
  • The property is not completed

Once the property is built or bought, you have the sole responsibility of complying with the conditions for the HTB refund.

If you require any assistance with HTB or  further details on the above, please contact us.

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Revenue Warns Airbnb Hosts over their Tax Compliance

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Revenue have recently written to over 12,000 taxpayers who are in receipt of income from the letting of short-term accommodation through Airbnb. Airbnb have provided Revenue with details of payments made to customers in the years 2014, 2015 and 2016 in respect of the provision of short-term accommodation.

The letters issued by Revenue are reminders to taxpayers to include this income in their tax returns. Revenue have confirmed that they will be carrying out a range of follow up compliance checks to ensure that tax returns are filed on time and completed correctly.

Income received from the letting of short-term accommodation is treated differently for tax purposes to income received from renting a property under a landlord and tenant arrangement. In addition, income from a trade of short-term letting is subject to different tax treatment to income from the provision of accommodation on an occasional basis.

When preparing your income tax return, please be aware of the following points when calculating profits from the occasional letting of short-term accommodation:

  1. A deduction against profits may only be made in respect of incidental costs directly associated with the service provided to guests. Examples of incidental costs include commission paid to online accommodation booking sites, cleaning fees, the cost of providing breakfast to guests as well as a reasonable apportionment of electricity, gas and heating utilised by guests;
  2. A deduction against profits is not allowable for annual costs associated with a property such as insurance, TV licence and general maintenance costs;
  3. Capital allowances on the cost of furniture and fittings for the property are not available against the profits;
  4. No deduction is allowable against profits in respect of expenditure incurred in advance of a property/room being made available for guest accommodation.

For income earned in 2017, the required date to submit your income tax return on Revenue’s Online Service (ROS) is 14 November 2018.

If you have any queries or concerns relating to the letter issued by Revenue, please contact our Tax Department.

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Credit Union Director Duties

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Credit unions have come under increasing scrutiny in recent years with more attention than ever focused on the duties of directors and the board. At a time of rapid change both within the credit union sector, and in the wider economy, keeping up to date is critical, explains Fiona O’Sullivan, Director, Audit & Assurance.

A Central Bank report published earlier this year shows that governance and risk management continue to challenge credit unions. The board of each credit union is responsible for its control, direction and management and must ensure that directors have the skills and expertise to adequately oversee operations — this includes being aware of the rules and regulations governing who can serve on the board, in what capacity, and for how long. Individual directors must be able to devote sufficient time to their roles and responsibilities and must keep up to date with their legal and regulatory obligations.

Improving standards

While governance standards are generally improving, the Central Bank report shows that 60 percent of risks identified in credit unions relate to governance and operational issues. Typically, these include failure to challenge internal audit, failure to adequately monitor the quality of risk management and compliance, and failure to adequately review the performance of individual directors, management and key staff. These problems occur in credit unions of all sizes, not just in smaller entities.

The report provides a useful summary of supervisory expectations:

  • An effective and comprehensive governance framework should be evident in the credit union, including clear accountabilities and an appropriate performance management framework for relevant officers and staff.
  • Effective engagement with internal audit, risk management and compliance functions should be evident. Boards should have an awareness, challenge and undertake action in relation to findings and issues identified by these functions.
  • Clear separation between the roles of the board (non-executive) and management (executive). This separation should be underpinned by clear roles, responsibilities, reporting lines and accountabilities.
  • A strategic, forward-looking focus at board level, with quality discussion and challenge of strategic plans and associated targets evident at board meetings. The ongoing monitoring and tracking of metrics to assess the implementation and effectiveness of the strategic plan is key to effective governance and driving the future direction of the credit union.
  • Appropriate and timely reporting to the board in order to support decision-making on key strategic issues. Such reports should be well understood at board level and there should be evidence of discussion, challenge and follow-up from the board in relation to such reports.

Risk governance

The report highlights the importance of internal audit, risk management and compliance, stating:

“Those credit unions demonstrating stronger governance have typically moved beyond a mere ‘tick-box’ compliance attitude to exhibiting a more integrated risk governance culture, with a strong awareness and understanding of the impact of unmanaged risk. Such credit unions are more likely to leverage appropriately the important supports to the board provided for in the 2012 enhanced governance framework of internal audit, risk management and compliance in order to provide them with an improved understanding of the risk profile of their credit unions so that they can drive the necessary changes and improvements.”

Directors should keep in mind that, as in other sectors, the risks that credit unions face continue to evolve as circumstances change.  Risk registers and policies must be regularly reviewed and updated to take account of regulatory, sectoral, economic and technology-related developments. Recent regulatory developments include the changes to the investment and liquidity framework being implemented in 2018. Emerging economic risks include Brexit while cyber risks include vulnerabilities in areas such as fintech, cloud computing, mobile technologies, the Internet of Things and ‘big data’. Directors are responsible for ensuring that these, and other existing and emerging risks are identified and documented and that appropriate plans are devised and implemented to mitigate them.

How we can help

Understandably, with the regulatory and compliance burden increasing and new and complex challenges emerging, credit unions and their directors need help to keep pace with developments. Crowleys DFK has more than 25 years’ experience advising clients in this sector and offers a broad range of specialist services, including governance support, to assist boards and directors to meet their legal and regulatory obligations.

For more information and to find out how we can help, please get in touch.

Talk to us

 

Fiona O’Sullivan
Director, Audit & Assurance Services
fiona.osullivan@crowleysdfk.ie

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Crowleys DFK Partner meets Minister Bruton

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Crowleys DFK Partner and Chairman of the Ireland Malaysia Business Association, Vincent Teo, had the pleasure of meeting Minister Richard Bruton, Minister for Education and Skills, and Ambassador Eamon Hickey, Irish Ambassador to Malaysia, at Enterprise Ireland’s business breakfast in Kuala Lumpur on Thursday, 20th September.

Minister Bruton addressed the local network of business and education leaders for Enterprise Ireland’s business breakfast as part of his five day education and trade mission to Malaysia and Indonesia.

“I am delighted to have the opportunity to greet an Irish Minister in my home country,” Vincent commented, “Congratulations to Ambassador Hickey and Enterprise Ireland on hosting a successful business breakfast.”

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