Our previous article on RCT and VAT pitfalls for non-resident contractors provided a general overview of the RCT regime in Ireland. We will now look at a case study analysis of RCT and VAT treatment and explore scenarios in which we have observed mistakes commonly being made among taxpayers.

1. Supply of Labour for Relevant Operations

We have observed cases whereby contractors in the construction industry, particularly non-resident contractors, engage recruitment firms to supply labour to carry out construction operations on a site in Ireland.

While it is commonly interpreted that RCT only applies to construction operations, in fact the definition of “relevant operations” extends to both the carrying out of and the supply of labour for the performance of, relevant operations in the construction industry.

Case Study – Example 1

Company A (based in Spain) is engaged by Company B (based in Ireland) to carry out demolition works on a number of properties in Ireland. Company A, in turn, engages Company C (a recruitment firm based in the UK) to provide the personnel required to complete the demolition works in Ireland.

RCT Obligations

Company B is a Principal Contractor in respect of these works and is required to operate RCT on the payments made to Company A. This brings Company A within the scope of RCT as it is regarded as a Subcontractor carrying out construction operations in Ireland.

Whilst Company A is a subcontractor in respect of its engagement with Company B, Company A is also a Principal Contractor in respect of its engagement with Company C. Company A will be required to operate RCT on the payments made to Company C because Company C has arranged the supply of labour for the performance of the demolition works on the sites in Ireland.

This brings Company C, the non-resident recruitment firm, within the scope of RCT, as it is regarded as a Subcontractor carrying out construction operations in Ireland.

In this example, Company B must register for RCT as a Principal Contractor, Company A must register for RCT as both a Principal Contractor and a Subcontractor, and Company C must register for RCT as Subcontractor.

VAT Obligations

The provision of the services by Company C to Company A and Company A to Company B falls within a reverse charge provision for the supply of labour and construction services, which is subject to RCT.

Company C, as a Subcontractor, does not have an output VAT liability in respect of the provision of services provided to Company A. As such, Company C will issue its invoices to Company A with no VAT charge.

Company A, as a Principal Contractor, must self-account for VAT on a reverse charge basis (typically at 13.5%) on receipt of the invoices from Company C. Company A should have an entitlement to a simultaneous VAT input credit as it has used the services to make taxable supplies to Company B.

Company A, as a Subcontractor, does not have an output VAT liability in respect of the provision of the services provided to Company B. As such, Company A will issue its invoices to Company B with no VAT charge.

Company B, as a Principal Contractor, must self-account for VAT on a reverse charge basis (typically at 13.5%) on receipt of the invoices from Company A. Company B should have an entitlement to a simultaneous VAT input credit as it has used the services to make taxable supplies to Company B.

In this example, only Company A and Company B are required to register for Irish VAT. Only Principal Contractors are required to account for VAT on the receipt of construction services that fall within the RCT regime.

Company C is not required to register for VAT in respect of its supplies to Company A.

2. Mixed Contracts

A major risk with the definition of a relevant contract arises for contracts that cover both RCT-type and non-RCT-type supplies.

Case Study – Example 2

Company A engages Company B to carry out repair and maintenance works on a number of properties in Ireland.

Is the contract liable to RCT?

The definition of “construction operations” includes contracts for repair work which is interpreted as the replacement of constituent parts i.e., the repair of a broken window by installing a new pane of glass, mending a faulty boiler etc.

However, the definition of “construction operations” specifically excludes maintenance work i.e., cleaning, unblocking of drains etc.

In this example, Company A and Company B have entered into a repair and maintenance contract. This is referred to as a mixed contract. Revenue’s view on mixed contracts is that if any part of a contract includes “relevant operations” then the contract as a whole is considered a relevant contract and all payments under that contract are liable to RCT.

As Company A and Company B have entered into a mixed contract, the contract as a whole, is considered a relevant contract, and all payments made by Company A to Company B are liable to RCT.

This treatment applies even where no repairs are actually carried out by Company B in completing a particular job under the contract.

In this example, Company A must register for RCT as a Principal Contractor and Company B must register for RCT as a Subcontractor.

A common pitfall we see in this area is for a company to raise separate invoices for the maintenance work and the repair work. They then only treat the invoice for the repairs as being subject to RCT. This is incorrect as it is the overall contract, not the elements being invoiced, that governs whether RCT should be applied or not.

However, if there are separate contracts, one covering maintenance and one covering repairs, then only the contract covering the repairs is subject to RCT.

3. VAT Reverse Charge

VAT is normally charged by the person supplying the goods or services. However, under the RCT regime, the person receiving the goods or services (i.e., the Principal Contractor) accounts for VAT as if they had supplied the service and pays it directly to Revenue. This is known as the VAT Reverse Charge.

We commonly see the VAT Reverse Charge being applied incorrectly in cases where a subcontractor supplies goods or services, other than construction services, as part of the overall contract.

Contractors must be aware that while the overall contract may fall within the RCT regime, that does not mean that the VAT Reverse Charge applies to all goods or services invoiced under that contract.

Case Study – Example 3

The facts are the same as in Example 2. See below for reference:

Company A engages Company B to carry out repair and maintenance works on a number of properties in Ireland.

In this case the repair and maintenance contract in place between the parties provides that a separate charge will apply where repairs are carried out.

Company B has now completed repair and maintenance works for Company A and is looking to raise a sales invoice to Company A for the following:

  1. Repair Works – €4,500 (exclusive of VAT)
  2. Maintenance Works – €10,000 (exclusive of VAT)
VAT Obligations

Generally, the VAT Reverse Charge only applies to payments that are in respect of construction operations which in this case, are the repair works.

Company B must therefore issue two VAT invoices as follows:

  1. An invoice for the repair works of €4,500 on which the VAT Reverse Charge applies. Company A will be required to self-account for VAT at 13.5% on the receipt of this invoice from Company B.
  2. An invoice for the maintenance works (i.e., not considered a construction service) of €10,000 on which VAT at the 13.5% rate is applied. Company A will be required to pay Company B the total invoice value including VAT amounting to €11,350.
RCT Obligations

As set out in Example 2, where a contract is for repair and maintenance, RCT applies to all payments under the contract.

As such, Company A is required to notify the total payment to Revenue. This should include the VAT exclusive payment for the repair works plus the VAT inclusive payment for the maintenance works. Assuming for the purposes of this example that only one payment is to be made by Company A to Company B for the works, Company A would file a Payment Notification with Revenue as follows:

  1. Repair Works (VAT Exclusive) – €4,500
  2. Maintenance Works (VAT Inclusive) – €11,350
  3. Total Payment Reported to Revenue – €15,850

It is important to note that if a repair and maintenance contract provides for a single consideration for all works completed under the contract, then the VAT Reverse Charge must be applied to the full consideration.

Should you require any assistance in this area, please contact us.

The Tax Appeals Commission’s (TAC) objective is to fulfil the obligations placed on it by the Finance (Tax Appeals) Act 2015 and the Taxes Consolidation Act 1997 (“TCA 1997”). To fulfil these, the TAC facilitates taxpayers in exercising, where appropriate, their right of appeal to an independent body against decisions and assessments of the Revenue Commissioners and the Criminal Assets Bureau.

The Issue for Determination

Recently, the TAC issued a determination regarding an Appellant’s complaint about the treatment of an IQA allowance he received in respect of his contributory pension for the years 2019 and 2020. The Appellant was dissatisfied with how he was assessed in relation to his contributory pension, in respect of which he received an increase for his spouse as a Qualifying Adult (Increase for a Qualifying Adult, or “IQA”).

The Background

The Appellant’s complaint related to how the Revenue Commissioners had interpreted an IQA allowance he received in respect of his contributory pension. According to the appellant, “this allowance [was] paid directly to his spouse”, who had “full and sole discretion over how it [was] expended”. In the appellant’s opinion, “whoever actually receives the money should pay the Tax on it. To expect someone else, who received none of that money, to pay the tax on it is unbelievable and very unfair”.

On 30 November 2021 and 6 December 2021, the Appellant received P21 Balancing Statements for the years 2019 and 2020. These indicated underpayments of income tax in the amounts of €3,660.36 and €3,810.69 respectively. On 16 December 2021, the Appellant duly appealed the P21 Assessments to the Commission, arguing that:

“Revenue’s position is that I am deemed to be the beneficiary of the Pension, plus the Increase for a Qualified Adult. They are clearly wrong in that stance. I am the beneficiary of the Pension only and my Wife is the beneficiary of the Qualified Adult Increase. Surely, the beneficiary has to be the person who actually receives the money and not somebody else? Regardless of what way the Government tricks around with the wording of the Acts, it cannot change that fact, which should override everything else.”

By contrast, the Revenue Commissioners’ position was that the IQA allowance was deemed to be the Appellant’s income for tax purposes, pursuant to section 126(2B) of the TCA 1997.

Opposing Arguments

The Revenue Commissioners submitted that “…it is incumbent upon [the Appellant] to demonstrate that Revenue has erred in the way he was taxed with regard to the QAD portion of his pension. Respectfully, the Respondent would argue that the assertion that Revenue is ‘clearly wrong’ does not meet that burden in a matter where the wording of the legislation is quite clear.”

For the Revenue Commissioners, that the appellant claimed “the government has tricked around with the wording of the Acts” implied dissatisfaction with the legislation itself, rather than with the Revenue Commissioners’ interpretation of the legislation.

Determination

The TAC in its determination considered all the facts and information presented, paying particular attention to the following:

  • Past case law examples – Lee v Revenue Commissioners [IECA] 2021 18 & Stanley v The Revenue Commissioners [2017] IECA 279.

The Commissioner determined that the Appellant had failed in his appeal and had not succeeded in demonstrating that the tax was not payable. It was noted that there is no discretion as regards the application of section 126(2B) of the TCA 1997 and the Revenue Commissioners were correct in their approach to the IQA income for the years under appeal.

Success Fees

The Tax Appeals Commission’s (TAC) objective is to fulfil the obligations placed on it by the Finance (Tax Appeals) Act 2015 and the Taxes Consolidation Act 1997 (“TCA 1997”). To fulfil these, the TAC facilitates taxpayers in exercising, where appropriate, their right of appeal to an independent body against decisions and assessments of the Revenue Commissioners and the Criminal Assets Bureau.

The Issue for Determination

Recently, the TAC issued a determination addressing a taxpayer’s assertion that their amended assessment for tax year 2016, issued by Revenue Commissioners in January 2018, was incorrect. The taxpayer’s assertion related to certain payments received following the termination of his employment. The taxpayer contended that this payment – “success fees” – was a payment linked to the termination of his employment, taxable under S123 TCA 1997 (to which certain reliefs can be applied via S201 and Schedule 3 of TCA 1997). The amended assessment, however, had treated the payment as being a payment made in connection with his employment and therefore liable to income tax under S112 TCA 1997 (Schedule E).

The Background

Prior to the above complications, the taxpayer had been a senior employee of a company, (“his Employer”) by way of employment contract, since 2010, holding an annual salary of €150,000 and certain conditional share option entitlements.  In July 2015, having had differences of opinion with the Chairman regarding the future strategic direction of the company, the taxpayer and his employer entered a further written agreement (“termination agreement”). The termination agreement included dates for the earliest termination of the employment. While the potential date of termination was dependent on certain deliverables, the final date for this was to be no later in any event than March 2016. The termination agreement stated that “your salary and other contractual benefits will be paid up to the Termination Date less tax, employee PRSI, USC and any other deductions required by law”.

The termination agreement set out various types of payments to be made on termination. These included payments in excess of €500,000 (“success fees”), on the successful raising of finance by the taxpayer for the employer.

Opposing Arguments

The taxpayer argued that the “success fees” were not contingent in fact on the raising of finance for the company as this work was already substantially completed. The taxpayer argued that the termination agreement in this respect was drafted to give the Board of the company a belief that they were getting most value for money for the large termination payment.

The Revenue Commissioners argued that the “success fees” were intrinsically linked to the performance of the taxpayer’s employment and were not termination-related payment.

Both sides quoted differing Irish and UK cases and indeed the Revenue Taxes and Duties Manual (part 05-09-19) to aid their respective positions.

Determination

The TAC in its determination considered all the facts and information presented, paying particular attention to the following:

  • The termination agreement expressly stated that all payments were conditional upon the taxpayer agreeing to all the terms of the agreement. These terms included the termination of his employment and no future right to sue his employer
  • The termination agreement drew a distinction between the taxpayer’s entitlements in connection with the termination and those from his employment contract
  • The taxpayer’s circumstances within in the company gave the taxpayer no option but to leave the company

The TAC determined that the taxpayer was entitled to succeed in his appeal, that he was overcharged to income tax, and that the Notice of Assessment be reduced accordingly.

Exit Strategy

Passing on your business and developing your exit strategy is one of the most important business decisions you will ever have to make.

Many of the tax reliefs one may wish to claim on a transfer of assets can be subject to very stringent conditions, such as minimum periods of ownership or active involvement in the business. Succession planning can often seem like something which should be considered close to retirement. However, the risk of waiting is that many of the key tax reliefs available to business owners are not accessible when the time comes to pass on assets, as the relevant conditions cannot be met.

What can help avoid this problem is advance planning. Through preparation, a business owner can identify some of the key conditions required to avail of certain tax reliefs, allowing them sufficient time to take the necessary steps to qualify for these reliefs. Therefore, it is not unusual to see a succession plan being put in place 5 to 10 years prior to its implementation.

The transfer of a business can trigger several taxes such as:

  • Capital Gains Tax (CGT) which is a tax payable by the person selling or transferring an asset. The current rate of CGT is 33%.
  • Capital Acquisitions Tax (CAT) which is a tax payable by the person in receipt of a gift or inheritance. The current rate of CAT is 33%.

This article will focus on the key tax reliefs available to business owners and their family members on the transfer of their business.

CGT Reliefs

In order to mitigate or eliminate the CGT liability on the transfer, there are two main reliefs which may be availed of provided certain conditions are met. These are:

  • Retirement Relief
  • Entrepreneur Relief

Retirement relief provides for relief from CGT on the disposal of qualifying assets.

To qualify for this relief, the main conditions are that the individual must be aged 55 or over and must be disposing of or transferring qualifying business assets. In addition, the individual must have been a working director of the company for 10 years and a fulltime working director for at least 5 of the years prior to the transfer. The latter condition can be a stumbling block for many individuals seeking to claim this relief. For example, an individual may be a director of more than one company and therefore may not meet the full-time working director requirement. This is why it is so important to prepare a succession plan early in your lifetime.

If retirement relief is not available, the individual may qualify for Revised Entrepreneur Relief which limits the rate of CGT to 10% on the first €1m of gains on the disposal of certain business assets. In contrast to retirement relief, this relief has no age requirement and the individual can qualify for it at any stage provided the relevant criteria is met.  To qualify for the relief, the individual should have owned the shares in the business for a continuous period of 3 of the last 5 years and spent 50% or more of their working time as an employee or director of the company.

CAT Reliefs

An individual can receive gifts/inheritances up to a certain amount tax-free throughout their lifetime. Currently, a child can receive a gift or an inheritance up to €335K from his/her parents.

In the context of a business, a child may, on receipt of a relevant business property, qualify for what’s known as Business Relief. This reduces the value of the gift or inheritance being received to 10% of the market value of the business property, resulting in a significant tax saving. Similar to the reliefs already discussed, there are certain conditions that need to be met around ownership and the level of involvement in the business.

Farmers may qualify for Agricultural Relief on the receipt of a gift or inheritance of agricultural property. Agricultural property includes agricultural land, crops and trees growing thereon and farm buildings appropriate to the property. By qualifying for this relief, the market value of the property being received will be reduced by 90%. This makes it a very valuable relief.

There are two tests that need to be passed before a person can avail of the relief:

  1. The farmer test requires 80% of the beneficiary’s assets to be agricultural property immediately after receipt of the inheritance.
  2. The trading test requires the individual to farm the land themselves for at least 6 years or alternatively lease the land out to a qualifying farmer for 6 years.

If a CAT liability arises with or without claiming any of the CAT reliefs, it may be possible to reduce or eliminate the liability by claiming a credit for the CGT paid by the parent on the transfer of property.

Although there are many commercial considerations to be made when passing on wealth as well as discussions with family members as to suitable successors, tax plays a key role in informing the business owner as to the extent of any tax liability. Knowing this information prior to implementing a succession plan enables the owner to make more informed decisions and allows for maximising the amount of reliefs that may be claimed. This will reduce the overall tax costs of the transfer.

For more information on tax reliefs related to your exit strategy, please contact us.

Global Mobility - Tax Obligations of Outbound Workers

As the expansion of remote working continues, more employees are no longer obliged to work at their employer’s premises or, indeed, even in the same country as their employer’s premises. This presents a number of opportunities and challenges for employers. In the first of our global mobility series, we will examine the tax compliance obligations for Irish employers with employees working abroad.

Situation One – an Irish employer hires a new employee based abroad

An Irish employer does not need to operate Irish payroll taxes on the salary of an employee who:

  • is not resident in Ireland for income tax purposes
  • was recruited abroad
  • carries out all the duties of their employment abroad
  • is not a director of your company; and
  • has no Income Tax liability in Ireland.

For any employee in these circumstances, an Irish employer does not have to apply for a PAYE Exclusion Order to Irish Revenue and is not required to include the employee on the employer’s payroll submissions to Revenue. Employers should maintain a record of each such employee with a record of any payments made to them each year.

This is a useful exemption for Irish employers who recruit employees to work abroad as it means the non-resident employee does not need to apply for a PPS number.

Situation Two – an existing employee of an Irish employer moves abroad

An Irish employer may find that an existing employee, who lives and works in Ireland, decides to move abroad indefinitely while retaining their existing employment. In this instance, the tax obligations for the Irish employer depends on the employee’s tax residence in Ireland. This must be reviewed each year.

An individual is tax resident here if they are in Ireland for 183 days or more in the calendar year or for 280 days or more across the current and preceding calendar years. An individual is not tax resident in Ireland if they are here for 30 days or less in any calendar year.

a. The employee is tax-resident in Ireland in the year of departure

An Irish employer can apply to Irish Revenue for a PAYE Exclusion Order where an employee:

  • leaves Ireland during the year
  • becomes tax resident elsewhere
  • will carry out their employment duties wholly outside of Ireland, and
  • will be resident outside Ireland in the following tax year.

Once issued in these circumstances, the PAYE Exclusion Order will relieve the employer from the obligation to deduct Irish income tax and USC from that employee’s salary from the date of departure.

b. The employee is not tax-resident in Ireland

An Irish employer can apply to Irish Revenue for a PAYE Exclusion Order where an employee:

  • is not resident in the State for tax purposes for the relevant tax year, and
  • carries out the duties of the employment wholly outside of Ireland.

Once issued in these circumstances, the PAYE Exclusion Order will relieve the employer from the obligation to deduct Irish income tax and USC from that employee’s salary for the full tax year.

PAYE Exclusion Orders have an expiry date. An employer may apply for another PAYE Exclusion Order if the employee continues to work abroad after that date and continues to be non-resident.

It is important to note that the PAYE Exclusion Order does not cover PRSI. Determining the country in which social insurance is to be paid by and on behalf of the employee is a separate issue.

Situation Three – an existing employee of an Irish employer splits their year between working in Ireland and working abroad

This situation is arguably the most complex for an Irish employer. If the employee remains tax-resident in Ireland, Irish Revenue will not issue a PAYE Exclusion Order. As a result, the employer must continue to apply Irish payroll taxes to the employee’s salary as normal.

However, the country in which the employee is working may require the employer to apply local payroll taxes on that part of the salary that relates to work carried out in that country.

Where there is no relief available, employers may have dual payroll withholding responsibilities in both Ireland and the foreign country. They will often run what is known as a “shadow payroll” in respect of an employee’s salary. Shadow payroll is run to ensure that tax compliance obligations are met in both countries without affecting the employee’s net take-home salary.

Running shadow payroll is an extra compliance burden for the employer. Furthermore, the Irish employer must contribute payroll taxes to the Revenue authorities in both countries. This can come as an unpleasant surprise to both employers and employees.

It is therefore crucial that an Irish employer recognises if they will have to operate shadow payroll before an employee carries out any work abroad.

If shadow payroll is required, an employer must establish what is required in both countries and must agree with their employee how any duplicate deduction of payroll taxes can be reclaimed.

Often, to reclaim some or all of the payroll taxes withheld, the employee will be required to submit an income tax return. In this instance, any refund due will issue from the Revenue authorities to the employee. This can leave the employer out of pocket if a clear agreement is not put in place with the employee at the outset.

Conclusion

We have seen here the Irish tax compliance obligations for employers. An Irish employer with employees working abroad should always check their tax and social security obligations in the country where the employee is working. Often, the employer will be required to register for payroll taxes in the employee’s country and apply local payroll taxes on the employee’s salary.

In addition, depending on the number of employees that the employer has in that country and the type of duties that they carry out, the presence of these employees in that country may create a “permanent establishment” of the employer in that country. If an employer has a branch or permanent establishment in a foreign country, it may be obliged to pay local income or corporation tax on the profits of that branch.

For more information, please contact Siobhán O’Hea, Partner, Tax Services.

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.

On the 6th April, the DPC issued a Guidance Note (GN) on Cookies and other tracking technologies. This Guidance note follows an examination by the DPC of the use of cookies and other similar technologies on a selection of websites across a range of sectors. The DPC will allow a period of 6 months from the publication of the guidance for controllers to bring their products, including websites and mobile apps, into compliance, after which enforcement action will commence.

ePrivacy Regulations and GDPR

The GN outlines the requirements under the ePrivacy Regulations 2011 and GDPR for the use of cookies and other tracking devices for the processing of personal data, including the law on cookies and it’s purpose, requirements for consent, provision of “clear and comprehensive information” about the use of cookies and the requirements for cookie banners.

Third Party Processors

Consideration is also given to the need to assess relationships with third parties whose assets are deployed on a website, for instance the use of “like buttons”, plugins, widgets, pixel trackers or social media sharing tools. There is a requirement to be aware of the information that is collected and disclosed to these third parties, in particular engaging a third party to process payments where a controller-processor contract will need to be in place with that organisation to meet the requirements of Art 28(3) of the GDPR.

Record of Processing Activities

It is important to note that it is not necessary that a cookie contain personal data in order that the user’s consent be required to set it. Under Art 30 of the GDPR, there is a requirement to maintain a comprehensive record of each specific type of processing as part of your record of processing activities, which includes processing relating to cookies and other tracking technologies.

Special Categories of Personal Data

If your organisation is processing special categories of personal data through information derived from cookies, this is subject to stricter rules under Art 9 of the GDPR. The only legal basis your organisation is likely to have for the processing of any special category data derived from the use of cookies or other tracking technologies is the explicit consent of those individuals whose data you are processing.

Storage Limitation Principle

The DPC also noted that the lifespan of a cookie should be proportionate to its function. This is in line with the storage limitation principle under the GDPR. Organisations should check their current practices and make the necessary changes to comply with this principle.

Location Tracking

The GN also outlines the requirements regarding the use of cookies and other technologies to track the location of a user i.e. the need for consent. The Court of Justice of the EU recognised the sensitivity of location data because it can be used to derive very precise information about individuals and their behaviour, including daily movements and activities, places of residence, social relationships and the social environments they frequent.

Now that the DPC has issued guidance, organisations should ensure that their approach is compliant.

Our Data Protection Support Services team can assist you in implementing a successful data protection programme, achieving and maintaining compliance with EU data protection requirements while delivering security, productivity, risk management and cost-efficiency benefits. View our GDPR Service Offering for more information.

To read the guidance note, click below:

For a summary of the DPC findings and recommendations, see report below:

 

 

With the recent outbreak of COVID-19, employees throughout the country have been asked to work from home. While these are challenging times for both employers and employees, Revenue offer a measure of relief for employers and employees who are engaged in “eWorking”. Revenue have today confirmed in their eBrief No. 045/20 that the current Government recommendations for employees to work from home as a result of COVID-10 meet the conditions for the “eWorking” tax relief.

Revenue define eWorking as where an employee works:

  • at home on a full or part-time basis
  • part of the time at home and the remainder in the normal place of work

eWorking involves:

  • logging onto a work computer remotely
  • sending and receiving email, data or files remotely
  • developing ideas, products and services remotely.

Employers can make a payment of €3.20 per workday to an employee who is working from home without deducting PAYE, PRSI or USC. This payment is to cover expenses such as heating, electricity and broadband costs. Amounts paid in excess of €3.20 are subject to tax as normal. Records of payments made must be retained by the employer for the purpose of any potential future Revenue compliance intervention.

In addition, where employers provide any of the following equipment to their employees, no benefit-in-kind arises as long as it is primarily for business use:

  • computer, laptop or computer equipment (eg. printers, scanners)
  • software to allow you to work from home
  • telephone, mobile and broadband
  • office furniture.

There is no obligation on employers to make this payment. If employers do not make this payment, employees can instead make a claim online at the end of the year by filing a tax return. Employees are not entitled to claim the round sum of €3.20. They are entitled to claim for vouched expenses that are incurred wholly, exclusively and necessarily in the performance of their duties of the employment. For most office workers this would be their home heating and electricity costs.

Any reimbursement of these expenses that has already been paid by the employer should be deducted from the claim amount. While receipts are not required to file the return, Revenue can request these for a period of up to six years after the year in which the claim relates, so employees should always keep a record of these.

In the case of utility bills, Revenue have advised that they are willing to accept that the average proportion of the house attributable to a home office is 10%. Therefore, for every day an employee works at home as a result of the current Government recommendations, they are able to make a claim for 10% of the utility bills for that day.

It is important to note that outside of the current Government recommendations regarding working from home, the eWorking relief does not apply to workers who bring work home outside of normal working hours, ie. evenings and weekends.

If any further information is required or if you have questions on the above, please don’t hesitate to contact our dedicated COVID-19 Client Response Team or our Tax Department.

Section 129(1) of the Companies Act 2014 requires every company in Ireland to have a company secretary. Outlined below is a short description of the role of the company secretary followed by a brief introduction into a company secretary’s duties and obligations.

A company secretary is an officer of a company. The company secretary may also act as a director of the same company, but not act in dual capacity when signing documents on behalf of the company. The role differs from that of a Director of a company, in that the role focuses on tasks delegated by the board of the company.

A day in the life of a company secretary

The tasks for a company secretary can be varied. While the role of the company secretary predominantly consists of tasks delegated by the board of directors, the role of the company secretary goes beyond effectively and, efficiency communicating decisions of the board to the relevant bodies and may take on a much more advisory role within a company.

Often the role of the company secretary can consist of advising companies and boards on the best practices of corporate governance. Corporate governance embodies a wide variety of concepts and guidelines from the leadership involved to achieve a well-functioning board of directors, effectiveness of the board, accountability of officers of a company, inducting new directors and advising them on the board dynamics, remuneration and the importance of maintaining a transparent, functioning rapport with both the stakeholders and shareholders of company through effective general meetings. Thus, it is often the task of a company secretary to ensure that the directors of a company discharge their obligations in accordance with the Companies Act 2014.

A company secretary must also fulfil the more unsung tasks with regards to maintaining statutory registers coupled with the onerous task of attending board meetings in order to preserve and effectively record the minutes of that meeting.

It is important to note that while a company secretary doesn’t have as many codified duties as a director in terms of their common law and fiduciary duties, the role of a company secretary amounts to an officer of a company and thus is still subject to sanctions under the 2014 Companies Act.

In short, the day to day life of a company secretary depends on the need of a company and its board – whether it’s relaying the decisions of a board of the directors to the Companies Registration Office by registering changes in the boards structure, advising the board on a pressing corporate governance issue, attending board meetings or engaging with stakeholders or shareholders with regards to a general meeting or corporate event such as dividends.

For further information on the role of the company secretary, please contact Emma Dunne, Assistant Manager of our Corporate Compliance Department.

Section 160-166 of the Companies Act 2014 (“the Act”) governs both board meetings and committee meetings by laying down guidelines, that can be amended or omitted from a company’s constitution and mandatory provisions, that must be adhered to. For the purpose of this article, board meetings will be the main point of discussion.

Every director is entitled to reasonable notice of the meeting, a meeting can be called by a director alone or by a company secretary at the requisition of a director. The quorum necessary for the transaction of business is fixed as 2 directors. However, where there is a sole director, one director is accepted to meet the requirements of a quorum. A Chairperson of a board meeting can be fixed for a specific period. However if the chosen Chairperson is not present and a period of 15 minutes has elapsed, the directors may choose one of their own to chair the meeting. The majority of votes may pass a resolution. If there is an equal vote, the Chairperson shall be the casting vote.

Section 161 provides for the option to pass a written resolution signed by all the relevant directors (i.e. directors who are entitled to notice of the meeting) in lieu of a board meeting. This has the same effect as physically holding the board meeting with the directors. This section also stipulates the manner in which a board meeting can be held and extends the scope of what it means to attend a board meeting through electronic communication. The section also provides a guide for the location of the board meetings, subject to the company’s constitution:

  • Where the largest group of those participating are assembled
  • If no such group exists, the next suitable location is the where the chairperson is
  • If neither of the above apply, then it falls to any such place that the meeting decides

The Act also covers the requirements for minute taking of the board minutes in section 166. The accurate and efficient recording, drafting and maintenance of minute taking is imperative to ensure administrative compliance. Section 166(1) states that minutes must be maintained for the following purposes:

  • All appointments of officers made by directors
  • The names of all the directors present at each meeting of its directors
  • All resolutions and proceedings at all meetings of its directors

Typically the Chairperson, once approved by the board, signs the minutes at the following board meeting. The board minutes can also be subject to inspection by the Director of Corporate Enforcement. If a company fails to comply with the Director of Corporate Enforcement regarding the request of the company’s minutes, the company and any officer in default shall be guilty of a category 4 offence, i.e. a fine not exceeding €5,000.

For further information, please contact David Morris, Senior Consultant in our Corporate Compliance Department.