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Roberts Nathan News
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Roberts Nathan News
- The income tax standard rate band has been increased by €1,500. The entry point to the 40% income tax rate now increases to €36,800 for single individuals and €45,800 for married couples (with one earner).
- The PAYE credit, personal tax credit and earned income credit will all increase by €50 to €1,700 from the tax year 2022 onwards.
- The ceiling of the 2% USC rate will be increased from €20,687 to €21,295 to ensure it remains the highest rate of USC paid by full-time minimum wage workers. The threshold for the highest rate of Employer PRSI will also increase by €12 to account for the increase to the minimum wage.
- The income tax deduction in respect of light and heat expenses incurred by employees working from home has been increased from 10% to 30%.
Covid SupportsOne key talking point for tax practitioners in advance of the budget was around the current position, which does not entitle a proprietary director a tax credit for PAYE withheld on their employment income where the company paying their wage is availing of debt warehousing. However, it was announced that debt warehousing is now being extended to income tax liabilities for those proprietary directors caught in this position to combat such situations. It was welcome news that there would be no cliff edge to the Employee Wage Subsidy Scheme (“EWSS”). The EWSS is to be extended to 30 April 2022 but will be changed gradually between now and then to phase it out. There will be no change to the scheme for October and November. For December, January and February, there will be two rates of €151.50 and €203, while for March and April 2022, there will be a flat rate subsidy of €100. From 1 January 2022, no new applicants can apply for the scheme. The hospitality and tourism sector will welcome the announcement that the 9% VAT has been extended to 31 August 2022 for their industry.
PropertyMuch of the noise from opposition benches arose during the announcement of measures on property and housing. There was no inclusion of any form of a vacant home tax which had been raised in some pre-budget discussions and commentary. Instead, a new Zoned Land Tax will be introduced, which will be calculated as 3% of the market value of certain land suitable for residential units. This tax will have a two-to-three-year lead-in time and will replace the vacant site levy once brought into force. The Help-to-Buy scheme has been extended to 31 December 2022 but will be reviewed during the year while relief for some specific pre-letting expenses incurred by landlords to be continued for a further three years to the end of 2024.
Indirect Taxes and Green MeasuresDespite the pressures of climate change and having the Green Party as a coalition member, Budget 2022 was not as green-focused as some commentators may have predicted. Some of the measures for a Greener economy are set out below:
- Carbon tax was increased by €7.50/tonne of CO2 from midnight for auto fuels and from 1 May 22 for other fuels.
- It was announced that the VRT rates will be increased from 1 January 2022, with a new rate table being brought into force.
- Tax relief was offered for income generated from selling self-generated electricity back to the grid.
- VRT relief on battery electric vehicles to be extended to the end of 2023.
- The Accelerated Capital Allowance Scheme for Energy Efficient Equipment has been extended for another three years to 31 December 2026. However, equipment operated by fossil fuels is no longer applicable for the scheme. Hydrogen-powered vehicles have now been included in the list of equipment that qualifies for the ACA scheme.
- Smokers see an extra 50cent on a packet of 20 cigarettes.
SummaryAs has become normal practice, much of the headline items had already been leaked in advance of the budget announcement. Despite the commitment to continue the EWSS until Spring, there may rightly be some disappointment among both entrepreneurs and SMEs that there is not a greater focus on assisting them with any further tax incentives. However, given the backdrop of Covid and Brexit, it is a difficult period to control the finances, as some of the figures highlighted in our introduction suggest. We would hope the Covid supports and measures introduced can allow businesses to emerge from this difficult period, and perhaps future budgets can provide some much-needed tax incentives to our domestic SMEs and entrepreneurs. If you require expert assistance on this matter, please contact our Tax Partner, Brendan Murphy on email@example.com or feel free to call on +353 (0) 87 9752896.
Artists Exemption (Income Tax and VAT Implications)
- Arts Council Bursaries when paid directly to individuals by the Arts Council.
- Residencies when paid directly to the individual by the Arts Council for the purposes of producing a qualifying work. (Income from residencies which relate to teaching art or facilitating other individuals to create works of art or similar type practices do not qualify for exemption.)
- Cnuas payments under the Aosdana Scheme.
- Payments from the sale of qualifying works abroad, which fall within the guidelines.
- Advance royalties.
Audit Changes For Your Irish Subsidiary
The changeA growing number of UK groups are approaching us around their group and local Audit requirements for their Irish subsidiary companies. In part this has happened due to recent changes (July this year) where the Institute of Chartered Accountant England and Wales (ICAEW) have decided to revoke their status as a Recognised Accounting body (RAB) in Ireland. This means that for UK member Audit firms of ICAEW they will no longer be registered by them to sign off audits on the Irish companies within their client groups.
Subsidiary AuditWe work with several Irish and UK based subsidiary companies of large international groups to provide group and local audit services. Many of these are household names with subsidiaries that can avail of audits from firms outside of the parent group audit firm and have expert auditor service requirements. Where the local subsidiary is not a significant component within the overall group then Parent / Group Auditors will often be satisfied to have the subsidiary audited by a firm which is not necessarily part of their network, and this is where we come in. We have been engaged recently on a number of these audits where local management have chosen to avail of audit services from firms other than Big4/5 as previously mandated by their group. We can act as Auditor to companies with group reporting and audit assurance requirements to the group level based on our large firm backgrounds and experience. We have been involved in multi-national audits to include reporting to the group finance function and group external Auditors. We speak their ‘language’ and can communicate effectively and efficiently and ensure that all reporting deadlines and obligations are met.
Audit Requirements Ireland - Do I need an audit?The common initial question we are asked is whether the Irish company can avail of audit exemption due to its size. This is referred to as the Small company Audit exemption: Small Company Audit Exemption What must a company do to qualify for the small company exemption? In order for a company to qualify for the small company audit exemption the company must satisfy TWO or more of the following conditions in the current financial year and in the preceding financial year (unless it is its first financial year):
- Balance sheet total does not exceed €6m
- Turnover does not exceed €12m
- Number of employees does not exceed 50
- The balance sheet total of holding company and subsidiaries taken as a whole does not exceed €6m net (or €7.2m gross)
- The amount of turnover of the holding company and subsidiaries taken as a whole does not exceed €12m net (or €14.4m gross)
- The average number of persons employed by the holding company and its subsidiaries does not exceed 50.
Filings and EfficienciesWith our services;
- You have a professional and dedicated Audit team with local knowledge and international experience from a contactable team.
- We can ensure that the local statutory audit and financial statements of the subsidiaries are completed.
- We can also have the local statutory Audit completed efficiently at the same time as group financial reporting and group audit reporting thus saving time and avoiding the need for a return visit or information requests from Auditors later in the year when you are in your normal monthly reporting cycles.
ContactAs we approach the accounting year end for many companies now could be a good time to have a review of your Audit and Advisory needs and whether our specialist subsidiary audit services could work for your company. For a confidential initial brief meeting or discussion, please contact: Aidan Scollard FCA Partner and Registered Auditor Roberts Nathan Email firstname.lastname@example.org Office + 353 1 876 4550 Mobile +353 86 25 23 026
The Process To Think Through When Selling Your Business
PreparationPreparation is key to achieving the best value. The preparatory phase is when you should engage with your adviser and thoroughly review the business and its value drivers. Ask, 'why would someone want to buy my business" and then focus on this. Prospective purchasers will demand transparency, so dealing with potential red flags and 'deal breakers' in advance of the buyer due diligence process will help protect value. Telling your businesses story is essential and understanding how to present its financial information, both historical and forecast, is a crucial element of the process. What is the succession plan? With many owner-managed businesses, the owner is the business. A potential buyer will attribute little value to a company where its driving force (the owner) will be exiting or retiring in a short period after the sale. Early tax planning protects value. The shareholders should consider the tax implications in advance of the process as time is of the essence where restructuring is required to effect a tax plan. Early key questions to be answered;
- Is there an opportunity for family members (children and siblings) to be involved in utilising tax reliefs such as business asset relief for capital acquisitions tax purposes?
- Is there an option to claim retirement relief or entrepreneur relief for capital gains tax purposes?
- Is there an option to review the group structure as a holding company can be beneficial when selling all or part of a business?
Identify Prospective PurchasersUnderstanding and researching the potential buyers for your business is an essential part of the process. Every business owner can name several potential buyers, be that a management team or a key competitor. However, other potential buyers may not appear on a list, may have different strategic reasons for buying and may pay a premium for the business, i.e. new market entrant, acquiring IP, or gaining access to resources (e.g. people). Keeping the process confidential during these early stages is vital as it may 'spook' potential customers or suppliers or unsettle critical employees. Having an adviser on board will help maintain confidentiality.
Negotiating The DealOnce potential purchasers are identified, they may enter a period of limited due diligence. Much valuable insight can be gained during this period for the vendor, regarding how the due diligence has conducted the type of queries and questions raised. Having this insight early on will help in the price negotiation phase. It's not advised to name your price, solicit offers for potential acquirers setting strict deadlines for offers. The seller must maintain control of the process at this stage. A second round of offers may be required until a preferred bidder is selected, after which they may enter a period of exclusivity to carry out a more detailed assessment of the company. This selection criteria should not be based on price alone, and factors such as, ability to execute the deal and sources of funding should also be considered.
Closing The DealNegotiating the transaction documents is the final part of the process and also very important for both buyer and seller protection. Considerations will need to be given to the deal structure. Will part of the consideration be based on an 'earn out' from future profits? Will the owner-manager be required to remain with the business for a period post-sale to help with the handover of relationships and integration? The sale process is a time consuming and very involved process for the business owner, and often management teams are distracted by the process taking their' eye off the ball' to the detriment of the business. Getting your advisers involved early in the process will help avoid many of the common pitfalls and ultimately protect the value that in many cases has been built up in the business over many decades. At Roberts Nathan, we have worked on many buy-side, sell-side and management buy-outs in the recent past, and we have a wealth of experience advising owner-managers through the transaction process. Please get in touch with us if you would like to understand more, my details are in the link below: https://www.robertsnathan.com/member/derek-dervan/
Business Succession Planning
Interaction of CGT and CATThere is a requirement in both retirement relief and business asset relief for the assets to be held by the successor for 6 years, otherwise these reliefs may be subject to a clawback. It is also important to note that where both CGT and CAT apply on a transfer, a tax credit may be available for the CGT suffered against the CAT due. This is referred to as same event credit and is only available where the assets are held for two years by the successor from the date of gift. Stamp Duty A recipient of a gift may suffer stamp duty at market value of the assets. Stamp duty on business assets is generally applied at 7.5% whereas shares in a trading company would be subject to stamp duty at 1%. Conclusion Where there is a plan to allow a new generation take over a business it is important to consider the tax implications in advance. Retirement relief and business asset relief may result in value passing without a significant tax leakage. Now may be an opportune time to consider such a transfer. Many businesses which have had limited trade in the past 18 months may have a lower market valuation and it is always a fear that there may be changes to capital taxes in future budgets as the government try to ensure a strong exchequer take given the cost of covid reliefs. In Roberts Nathan we have experienced teams in both tax advisory and corporate finance advisory to help you with such business decisions. Please use the link to contact Brendan Murphy for any questions on any part of the above: https://www.robertsnathan.com/member/brendan-murphy/
Returning or Relocating to Ireland (Tax Implications)
- Split Year
- Special Assignee Relief Programme (SARP)
- Payroll Obligations
Recent Changes in Director Residency Requirements for Irish Companies (BITA Article June 2021)
- Appoint an EEA resident to your Irish company board
- Put a bond in place - an insurance policy that CRO approves in replacement of having an EEA resident individual on the board
- The Exception to the Rule – ‘Real and Continuous link’ - It is possible for the Directors of an Irish Company who have no EEA-resident Directors to apply to the Irish Revenue Commissioners for a Statement under Section 140 of the Companies Act 2014
- Period 1 - COVID-19 restricted trading phase
- Period 2 – Zero interest period
- Period 3 – Reduced interest period
- Period 1 - COVID-19 restricted trading phase
- Period 2 - Zero interest period
- Period 3 - Reduced interest period
Six Months Since Brexit – Is the Dust Finally Settling?
Updates to EWSS scheme
- Actual monthly turnover details for January to December 2019,
- Actual monthly turnover details for Jan to June 2021 and
- Monthly projections for July to December 2021.