Revenue has recently clarified the taxation of couriers, specifically the tax treatment of motor cycle and bicycle couriers. The following treatment applies from 1 January 2019. Previous agreements will come to an end on this date.

Motor cycle and bicycle couriers are generally engaged under a contract for service i.e. they are self-employed individuals. Whilst the facts of each case may differ, this is the general view adopted by Revenue.

From 1 January 2019 motor cycle and bicycle couriers engaged under a contract for service i.e. self-employed individuals, will need to file a tax return self-assessment.

Expenses

Self-employed couriers can make a claim for any expenditure incurred wholly and exclusively for the purpose of their courier activity, for example, motor expenses & telephone/internet bills.

Revenue’s previous agreement of flat rate deductions for expenses (20%,40% or 45%) will no longer apply with effect from 1 January 2019.

Voluntary PAYE

Voluntary PAYE systems of tax have been implemented by several courier firms to assist couriers in ensuring that they are tax compliant. Revenue has no issue with these arrangements continuing, however Revenue has reiterated that income tax, USC & PRSI should be applied on gross income.

Van Owner-Driver Couriers

Similar to motor cycle and bicycle couriers, Revenue are of the view that van owner-driver couriers are engaged under a contract for service and thus they are self-employed individuals.

Pay and File System for Income Tax Self-Assessment

Under self-assessment there is a common date for the payment of tax and filing of tax returns. You must file your tax return on or before 31 October in the year after the year to which the return relates.

This system, which is known as Pay and File, requires you to:
• file your return for the previous year
• make a self-assessment for that year
• pay the balance of tax for that year
• pay preliminary tax for the current year.

For example, by 31 October 2019 you must:
• pay your preliminary tax for 2019
• file your 2018 self-assessment tax return
• pay any Income Tax (IT) balance for 2018.

When you pay and file through the Revenue Online Service (ROS), the 31 October deadline is extended to mid-November.

For more information please contact us.

Exit tax regimes seek to impose a tax on unrealised capital gains where companies migrate their tax residency or transfer assets offshore.

Prior to Budget 2019, Ireland had a limited exit tax regime that was subject to several exceptions. While it was expected that new exit tax rules would be introduced before 1 January 2020 to comply with the EU’s Anti-Tax Avoidance Directive (ATAD), the implementation of new rules from 10 October 2018 was earlier than anticipated.

Old exit tax regime

Under the old exit tax regime, where a company changed its tax residence so that it was no longer within the scope of Irish tax, it was treated as disposing and reacquiring its assets at market value. This triggered a charge to tax at the rate of 33%, the standard capital gains tax rate.

The exit tax did not apply where the assets continued to be used in the State by a branch or agency of the migrating company or where the company was ultimately controlled by residents of a tax treaty country. The exit tax could also be avoided if the company transferring its residency was a 75% subsidiary of an Irish resident company and certain conditions were met for 10 years after the migration.

New exit tax regime

The new rules tax the unrealised gains of corporate entities where the following events occur:

  • A company transfers assets from its permanent establishment (PE) in Ireland to its head office or to a PE in another territory;
  • A company transfers the business (including the assets of the business) carried on by its PE in Ireland to another territory; or
  • An Irish resident company transfers its residence to another country.

The rate of tax applicable will generally be 12.5%. However, there is an anti-avoidance measure that applies a rate of 33% where the event triggering the tax forms part of a transaction to avail of the 12.5% rate rather than the standard capital gains tax of 33%.

Key points on the operation of the exit tax:

  • The exit tax will not apply to the transfer of assets that will revert to the PE or company within 12 months of the transfer, where the assets are:
    • Related to the financing of securities;
    • Given as security for a debt; or
    • Where the asset transfer takes place to meet prudential capital requirements or for liquidity management.
  • The tax may be paid in 6 annual instalments where the company migrates to an EU or EEA state.
  • Where a company ceases to be resident and an exit tax charge is imposed, the tax may be recovered from an Irish tax resident company within the group or from an Irish tax resident controlling director.

While the exit tax rate has been reduced, the new rules have significantly broader application than the old regime and transactions that previously would not have been subject to an exit tax may now trigger a tax charge.

For more information please contact a member of our Tax Department.

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.

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@blacknighthosting.com

Crowleys DFK are currently running a series of CPD accredited VAT on Property briefings for solicitors in Cork and Dublin. The purpose of the seminars, presented by Tax Partner Siobhán O’Hea, is to raise awareness of common VAT pitfalls in property transactions.

VAT on property can be a complicated area but it is vital to thoroughly investigate the potential VAT impact before embarking on any property transaction, Siobhán advises.

“We are seeing problems crop up in many different situations. For example, more people have got involved in letting property in recent years and this is an area where VAT issues can often arise. While lettings are exempt from VAT, landlords can opt to tax the letting and charge 23% VAT on the rent. This can be advantageous if the landlord wants to claim repayment of VAT incurred on the acquisition or development of the property, however it is important to be aware that there are restrictions. For example, you cannot opt to tax the letting if the property is occupied for residential purposes or occupied by the landlord or a person connected with the landlord.

“On sales of commercial property, liability to VAT depends on whether the property is considered ‘new’. There are Revenue rules governing the definition of ‘new’ for property VAT purposes. Generally, the supply of older properties is exempt from VAT however, in some circumstances, the vendor and purchaser may jointly opt to have the transaction subject to VAT.

“Where property is supplied in connection with an agreement to develop the property, these transactions are always taxable.

“In our experience, there are VAT pitfalls in many every day property transactions and these can prove very costly for clients. This is why Crowleys DFK are running these seminars for solicitors. It’s an opportunity to raise awareness and to help ensure common mistakes are avoided,” Siobhán concluded.

For further information on Crowleys DFK VAT briefings, please get in touch.

Talk to us

Siobhán O’Hea
Partner, Tax Services
siobhán.ohea@blacknighthosting.com

Choosing an appropriate location for a company’s registered office arises under the Companies Act 2014. It is the duty of each director and secretary of a company to ensure the requirements for a Company’s registered office are complied with.

The location of a Company’s registered office is disclosed publicly on the Companies Registration Office website.

A Company’s registered office address must be an actual physical location within the State. A post office box number is not sufficient.

Company statutory registers must be kept at a Company’s registered office and members of the public can inspect registers at that location. Documents may be delivered by hand to the registered office.

A Company’s registered office address is the address to which all legal notices, including correspondence from the Companies Registration Office and at times the Revenue Commissioners, may be sent.

Any document will be validly served on a company by leaving it at, or sending it by post to the Company’s registered office.

Crowleys DFK corporate compliance team have been providing a professional registered office facility for a number of years through offices located in Cork and Dublin.

For further information on our registered office service, please contact:

 

David Morris
Company Secretarial Consultant
david.morris@crowleysdfk.ie

Many companies fail to realise that their Research and Development activities could qualify for valuable tax incentives, explains Edward Murphy, Partner and Head of Tax Services.

Ireland has a well established reputation as a friendly environment for innovative businesses. Government strategy, set out in Innovation 2020, is to nurture excellent research in strategically important areas that benefit the economy and society. A key ambition is to increase investment in research and development and, to this end, Government works with, and funds, various programmes through agencies such as Enterprise Ireland, Science Foundation Ireland, IDA Ireland, InterTrade Ireland and the Higher Education Authority. In addition, research and development tax incentives are available to help develop business and attract high quality jobs. Two of the most important of these incentives are the Research & Development Tax Credit regime and the Knowledge Development Box.

R&D Tax Credit

If your company spends money on research and development activities, you may qualify for a Research and Development (R&D) Tax Credit. This scheme is administered by the Irish Revenue Commissioners and is open to companies who are liable to Irish tax and carrying out qualifying R&D activity in Ireland and/or the European Economic Area (EEA).

The credit is calculated at 25% of qualifying expenditure and is used to reduce your company’s liability to Corporation Tax.

If you have insufficient Corporation Tax against which to claim the R&D tax credit in a given accounting period, the credit may be set against the Corporation Tax for the preceding period. It can also be carried forward indefinitely or, if your company is a member of a group, it can be allocated to other group members.

In some circumstances, the R&D credit can also be claimed as a payable credit.

Qualifying research and development activities must meet certain conditions, such as:

  • involve systemic, investigative or experimental activities
  • be in the field of science or technology
  • involve basic research and/or applied research and/or experimental development
  • seek to make scientific or technological advancement
  • involve the resolution of scientific or technological uncertainty.

To claim the R&D tax credit, it is not necessary to hold the intellectual property rights resulting from the R&D work. It is also not necessary for the R&D work to be successful. The credit is claimed using the Revenue Online Service (ROS). However, before submitting a claim it is important to check that you meet the requirements and have all the necessary supporting documentation. While this may appear onerous, a good tax advisor can guide you through the process. Paying attention to detail when submitting your claim can help avoid Revenue queries and/or a Revenue audit.

Knowledge Development Box

The Knowledge Development Box (KDB) is a tax relief which reduces the Corporation Tax payable on a company’s income from qualifying patents, computer programmes and, for smaller companies, certain other certified intellectual property (IP). Ireland’s KDB was the first IP regime to be fully compliant with new international tax standards and ranks favourably with similar schemes in other countries.

If your company qualifies for the KDB regime, you can avail of a deduction equal to 50 percent of your qualifying profits. In effect, this reduces the normal Corporation Tax rate of 12.5 percent to 6.25 percent on qualifying profits.

For KDB purposes, qualifying assets are those created from R&D activities such as:

  • a computer programme
  • an invention protected by a qualifying patent
  • IP for small companies which is certified by the Controller of Patents as patentable, but not patented.

Marketing related IP such as trademarks, brands, image rights and other intellectual property used to market goods or services are not considered to be qualifying assets.

To apply for the KDB, you must submit your claim on your Corporation Tax return via the Revenue Online Service (ROS). As with R&D tax credits, before submitting a claim it is important to check that you meet the requirements and have all the necessary supporting documentation.

Conclusion

Companies sometimes mistakenly believe that they are not engaged in research and development because they do no operate in industries such as pharma or technology. However, in many instances, companies in other sectors such as manufacturing, energy, financial services, agribusiness, food and drink, are eligible for R&D tax credits and/or the Knowledge Development Box. While navigating the conditions attached to submitting a claim can appear daunting, these are valuable incentives both for indigenous Irish SMEs and for multinationals and are therefore well worth considering.

Talk to us

Edward Murphy
Partner and Head of Tax Services
edward.murphy@crowleysdfk.ie

President Trump signed into law H.R. 1, originally known as the “Tax Cuts and Jobs Act”, on 22 December 2017, resulting in the most significant tax reform in the US for more than 30 years.

The key business measures in the tax reform package are:

  • The corporate income tax rate is reduced to 21% from 35% with effect from 1 January 2018.
  • There is a move to a full dividend exemption regime for dividends from non-US companies, requiring a 10% holding.
  • As part of the transition to a participation exemption regime, a one-time mandatory tax will be imposed on foreign earnings retained outside the US. This “deemed repatriation” tax applies in respect of any company in the world (including Ireland), if it is controlled by either a U.S. company or by U.S. citizens. This includes either:

(a) any company where the shares are owned (directly, indirectly or constructively) 50.01%+ by US shareholders, or

(b) where 10% of the shares are owned by a US corporate shareholder.

  • The deemed repatriation tax rates for the transition to a territorial tax system are 15.5% for earnings held in cash or liquid assets and 8% for the remainder.
  • There will be a minimum tax on profits arising to foreign subsidiaries of US multinationals from the exploitation of intangible assets, known as “global intangible low-taxed income” (GILTI).
  • A “base erosion anti-abuse tax” (BEAT) will be adopted. The BEAT will generally impose a minimum tax on certain deductible payments made to a foreign affiliate, including payments such as royalties and management fees but excluding cost of goods sold.
  • Interest deductions for tax years beginning after 31 December 2017 are restricted to 30% of EBITDA (earnings before interest, tax, depreciation and amortisation). For tax years beginning after 31 December 2021, the limitation will be 30% of a measure similar to EBIT (no add-back for depreciation and amortisation).
  • Other provisions target cross-border transactions, including revised treatment of hybrids and a new special tax incentive for certain foreign-derived intangible income.

Any business with U.S. connections should consider what exposure to U.S. tax (if any) may exist in light of the above changes.

Should you require any further details on the above, please contact a member of our Tax Department.

What is PAYE Modernisation?

With effect from 1 January 2019, employers will be required to notify Revenue with details of the amount of the emoluments and the tax due for each employee on/ before the payment date on a real time basis. This means that each time an employee receives a payment or benefit from their employer, the PAYE due and remitted to Revenue must be 100% accurate.

This real time reporting (RTR) process abolishes the requirement to file P30’s, P35’s, P45’s, P46’s and employers will no longer have to produce P60’s at the end of each tax year.

A Revenue Payroll Notification (RPN) will replace the current Tax Deduction Card (P2C) and from the 1 January 2019 all employers will be required to:

  • Obtain the most up to date RPN before making any payments to employees
  • Report employee payments (amount of pay, payment date, amount of PAYE, USC and PRSI deductions) to Revenue in real-time, and
  • Reconcile Revenue’s response to the payroll submission

At the end of each month, employers will receive a statement from Revenue with payroll submission totals. Employers must either:

  • Accept the statement as their monthly return, or
  • Correct payroll data if the statement is incorrect

The statement issued by Revenue will be deemed to be the return if no amendments or corrections are made before the return due date i.e. 14 days after the end of the month (23 days for ROS users who file and pay online).

The legislation governing the new regime, provides that a failure by an employer to correctly operate PAYE on a payment/ benefit to an employee, may result in the employer being liable for the payment of income tax on a grossed up basis. In addition, the existing €4,000 penalty for non-operation of PAYE may be enforced more readily.

Employers should take the time now to review their employee data, payroll processes, policies and systems to ensure that they are ready to comply with their RTR requirements on 1 January 2019.

Should you require any further details on the above, please contact a member of our Tax Department.

What is a salary sacrifice arrangement?  

The term salary sacrifice is generally understood to mean an arrangement between the employer and employee under which the employee forgoes the right to receive any part of his or her remuneration due under the term of  his/her contract of employment and in return their employer provides a benefit of a corresponding amount to the employee.

Where an employee forgoes salary payable under an existing contract of employment in exchange for a benefit, the employee remains taxable on the “gross” income payable. The salary sacrificed will be an application of income earned by the employee, not an expense incurred by the employer.

Exceptions

However, there are Revenue approved salary sacrifice arrangements which are exempt from the tax treatment outlined above. These include the following scenarios where the employee’s gross salary is reduced in return for:

  • bus, rail or ferry travel passes through a travel pass scheme
  • exempt shares appropriated to employees under approved profit sharing schemes, provided certain conditions are met
  • the provision of bicycles and safety equipment through the cycle to work scheme

Contact our Tax Department if you have any questions about salary sacrifice arrangements or other employee benefit queries.