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  Business Advice

Are you a UK Based Director of an Irish Registered Company?

The (European Union) EU and the United Kingdom (UK) finally reached agreement on a Free Trade and Cooperation Agreement (TCA), avoiding a hard Brexit.  However, this does not change the fact that the UK has left the EU and therefore is no longer part of the EU single market and customs union and is now regarded as a third country.  This creates a very real issue for a number of companies and their Directors in the UK and Ireland.

In this article, Roberts Nathan Partner Aidan Scollard reviews the potential significant changes for UK resident Directors of Irish registered companies as the UK now becomes a third country.  Although there are more than 60,000 Irish Directorships of UK registered companies there are also a significant number of UK based directors of Irish companies for which Brexit now creates significant changes.

EEA Resident Director Requirement

Companies Registration Office have previously alerted service providers to the fact that under Irish company law an Irish registered company must have at least one European Economic Area (EEA) resident Director on the board on an ongoing basis or a bond in place to cover filing liabilities.

Many Directors based in the UK who are either of Irish decent or UK based companies who have established Irish entities as part of their Brexit planning will need to consider this likely change.

Where an existing Irish company has fulfilled this Director requirement by appointing a UK resident director they should now consider replacing that director or adding an additional director who is an EEA-resident.

It should be noted that this requirement is based on residency, not nationality. Thus for example, a company director of Irish nationality who lives in the UK and has done so for a number of years is unlikely to satisfy the EEA requirement in the future which is a question a number of our clients have been considering.

S137 Bond

It is possible for a company to put in place a Section 137 Revenue Bond which is an insurance policy that CRO approve in replacement of having an EEA resident individual on the board. This insurance policy covers against fines or penalties incurred to the value of €25,000 for non-compliance and covers the company for a period of two years at which point the company will either need to renew the bond or appoint a director who meets the requirement.

The bonds are relatively easy to put in place but will have a premium cost to maintain for the two year period and we have put these in place for a number of clients recently.

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 Revenue Commissioners for a Statement under Section 140 of the Companies Act 2014 which, if granted, will relieve the company from the requirement to hold a Bond or to have an EEA-resident director.

This Statement is granted based on the company having a ‘real and continuous link to the State of Ireland’. The successful company will need to satisfy one or more of the following two conditions:

  1. The affairs of the company are managed by one or more persons from a place of business established in the State and that person or those persons is or are authorised by the company to act on its behalf.
  2. The company carries on a trade in the State.

Furthermore, a company may be granted this Statement based on either of the following two conditions:

  1. The company is a subsidiary or a holding company of a company or other body corporate that satisfies either or both of the conditions specified in 1 and 2.
  2. The company is a subsidiary of a company, another subsidiary of which satisfies either or both of the conditions specified in 1 and 2.

This Statement is granted based on retrospective activity and will generally not be granted to a company that intends to have a real and continuous link to the state.

Once the Statement is made by Revenue to the successful company, the Company Secretary can apply to the Registrar of Companies for a certificate that exempts the company from the Section 137 bond requirement or the need to have an EEA-resident director appointed to the board.

Application for this exemption to Companies registration office must be accompanied by this statement from the Revenue Commissioners made within two months of the date of the application of the Revenue Commissioners statement.

This is the common basis that we see UK parent company clients using for their Irish operating subsidiaries and we have helped a number of clients in this area where they can clearly prove that there is a real and continuous activity here in the Irish state.

Final Word

Company Directors need to consider the implications since the UK has left the EU and consider their options. As with any legal or accounting issue early advice is important.

Contact us if you wish to discuss the impacts of any of these changes to your company structures here in Ireland and any structure planning requirements or to obtain a bond.

January 21, 2021
  Brexit

Brexit deal done; What next?

Aidan Scollard, Partner at Roberts Nathan, provides his view on what Irish businesses dealing in cross-border trade with the UK need to consider following the recent Brexit agreement between the European Union and United Kingdom of the Free Trade and Cooperation Agreement.   The Deal The (European Union) EU and the United Kingdom (UK) finally reached agreement on a Free Trade and Cooperation Agreement (TCA), avoiding a hard Brexit and the risks of duties and tariffs under WTO rules. However, this does not change the fact that the UK has left the EU and therefore is no longer part of the EU single market and customs union and is now regarded as a third country. This status has significant consequences for businesses in different areas such as cross border trade, the imposition of VAT on transactions and the free movement of people. At 1,246 pages and affecting over $900 billion worth of goods and services, the TCA is the most ambitious and far-reaching trade agreement ever concluded by the EU. Irish businesses will need to fully comprehend the effect of the TCA on cross-border trade between the EU and UK. A new Partnership Council, co-chaired by the European Commission and the UK government, will oversee the agreement’s implementation and management. A large number of committees and working groups will be established to oversee the details of new arrangements at a more-granular level, including resolving any technical issues arising from the agreement or ensuring proper functioning of new rules. The new UK-EU relationship is fluid, and these bodies will be making judgments and issuing guidance that will have the potential to change market access and frameworks. In short, things are likely to change and there will be an extended period of adjustment. Highlights Further review of particular aspects of the TCA will be required in the coming months, but in the meantime we set out some highlights of the main initial impacts of the TCA:  TARIFF AND QUOTA FREE TRADE OF GOODS
  • The TCA establishes zero tariffs or quotas on trade between the UK and the EU, where goods comply with rules of origin requirements.
  • Notwithstanding the tariff and quota free trade enshrined in the TCA, certain technical barriers to trade continue to apply and address issues related to technical regulation, conformity assessment, standardisation, accreditation, market surveillance and marketing and labelling.
  • While Brexit ends the EU ease and simplicity of moving goods freely, the TCA adds administrative burdens and no duty or tariff taxes.
TRADE IN SERVICES
  • The TCA includes well-established provisions on cross-border trade in services that will secure continued market access across a broad range of sectors, including professional and business services, financial services and transport services, and will support new and continued foreign direct investment.
  • In relation to financial services, although the TCA provides for “continued market access” the details have been left for later. The EU and the UK are yet to discuss “specific equivalence determinations” which will eventually be codified in a Memorandum of Understanding.
  • The UK and the EU have agreed a framework for the recognition of professional qualifications which is based on the EU’s recent free trade agreements.
  • The effect of Brexit and the TCA on cross-border trade in services differs from sector-to-sector. For example, UK resident financial services firms previously possessed “passporting rights” which allowed them to sell financial services into the EU. The TCA has not granted equivalent rights meaning that on 1 January 2021 UK resident financial firms will (as expected) lose their right to sell financial services in the EU.
SUBSIDIES AND STATE AID
  • One of the key issues of concern of the EU was ensuring that the UK could not grant subsidies (tax or otherwise) to UK businesses which would effectively allow them to undercut similar businesses in the EU.
  • The EU and UK are free to determine their own rules relating to the granting of subsidies but are bound by broad principles which must inform the contents of the rules which must ensure that the granting of a subsidy does not have detrimental effects on the trade between the EU and UK.
  • The EU and UK shall each establish independent bodies which will design and oversee these rules and which are subject to the review of their respective domestic courts.
  • The EU and UK have agreed on a reciprocal dispute resolution mechanism (an accelerated arbitration procedure) where a party is of the opinion that a subsidy is causing, or is at risk of causing, significant harm to its industries.
  • Whilst part of the EU, the UK was bound by EU laws related to state aid and government subsidies and was subject to oversight by the European Court of Justice (EUCJ), a sore point for the UK public. Brexit effectively removes the applicability of these laws and jurisdiction of the EUCJ.
  • There is also a ‘most-favoured nation’ clause, which ensures that, if either the UK or the EU gives more-favourable terms to another country in future, those terms will automatically extend to the UK/EU deal.
  • However, these provisions are subject to a long list of exceptions, which vary from one member state to another.
PEOPLE AND MOBILITY
  • Residence rights in existing cases in the UK and EU will continue to be respected as long as the residence situation remains unchanged. New residency applications after the transition period will likely be subject to the same procedures as for third countries.
  • Existing (frontier) workers will have the right not to be discriminated against on grounds of nationality as regards employment, remuneration and other conditions of work and employment. In addition, they will have the right to take up and pursue activities and assistance by employment offices in the same way as offered to own nationals as well as rights to tax, social advantages, housing benefits and access to education for their children.
  • Prior to Brexit, UK citizens (like all other EU citizens) were granted unrestricted rights to live and work in the EU, and vice versa. Post Brexit, closer consideration will be required for non-EU workers and transfers, however the UK / Ireland Common Travel Area provisions allow for continuation of citizens of each of those countries to live, work and retire to each other’s jurisdiction.
Conclusion While many potential immediate difficulties have been avoided the devil will be in the detail. The implementation of the trade and cooperation agreement (TCA) in the coming months will require ongoing review by Irish companies trading with the UK (and vice versa) as practical issues arise on the movement of goods and supplies of services.  Particular changes around taxation and accounting treatments will likely arise as the UK changes its relationship to having a third country status with the EU. We will provide ongoing updates and can assist your business as circumstances change. If you require any assistance on these matters please contact your usual contact Partner in Roberts Nathan.   Document References:
EU-UK_Trade_and_Cooperation_Agreement_24.12.2020 (1) Brexit agreement summary
January 8, 2021
  Audit

RN Podcast: 2020 – The Year that was, and 2021 potential for business growth

As we close out on 2020, we have produced a podcast where we take a look at the year that was, and provide our view on what businesses might expect in 2021. Aidan ScollardBrendan Kean and Derek Dervan, partners with Roberts Nathan discuss three main areas likely to impact Irish businesses as well as some tips when planning for 2021:
1. The implications of the Covid vaccine on Irish businesses. Cashflow and succession planning have become very important for business owners, however some good has come from Covid in terms of the opportunities it has created for doing business in a new way. It may also bring about potential M&A and real estate activity, and possible increased consumer spending in the year ahead.
2. Brexit and planning around UK businesses setting up operations in Ireland.
3. Budget 2021 Capital Acquisition and Gains taxes, Entrepreneurial Relief, Pensions and Retirement Relief.
Roberts Nathan podcast discussing 2020 the year that was, and why 2021 has potential for business growth for Irish SME businesses
We hope you enjoy listening to our podcast and if you have any questions regarding any of the points raised please let us know.
 
December 17, 2020
  News

How to Calculate Annual Leave Entitlement

Annual leave can be a tricky area for employers to navigate, particularly with regard to employee contracts or those leaving the business. In this article we answer some of the most frequently asked questions, helping to provide employers and managers with a better understanding of the calculations behind annual leave entitlement. Firstly, let’s cover the basics The legislation provides a basic annual leave entitlement of 4 weeks. If the normal working week is 5 days, the employee entitlement is 20 days. However, if the normal working week is 6 days, the annual leave entitlement is 24 days. There are 3 different methods for calculating the duration of the annual leave entitlement.
  1. Based on the employee’s working hours in one year. An employee who has worked at least 1,365 hours in the leave year is entitled to the maximum of 4 working weeks’ annual leave.
  2. By allowing 1/3 of a working week for each calendar month in which the employee has worked at least 117 hours.
  3. 8% of the hours worked in the leave year, subject to a maximum of 4 weeks.
How do you calculate holiday pay? Firstly, if the employee is paid by salary or by time rate, the amount due for one week of annual leave will be the amount paid to him/her for a normal working week prior to the commencement of holidays. In cases whereby the amounts are variable for a normal working week (i.e. commission), the average of the last 13 weeks immediately prior to taking the leave should be used to calculate the amount. This payment includes any regular allowance and bonus but does not include overtime. What are the holiday pay entitlements when my employee leaves? When your workers leave a job they must receive pay for any statutory leave they are entitled to in the current leave year but have not taken. You can calculate this using our convenient Annual Leave Days Calculator below. [CP_CALCULATED_FIELDS id="1"] You will need to consider the total annual leave in days, the total amount worked in months and the amount of leave taken in days. The calculator will display the number of days due to the employee upon leaving the business.   Can annual leave be carried forward to the following leave year? The employer must ensure that employees take their annual leave entitlement within the leave year or, in exceptional circumstances, within six months of the following year with the employee’s agreement. It is the responsibility of the employer to ensure that employees take their full statutory leave allocation within the appropriate period. Can an employer pay in lieu of annual leave? The Act does not allow an employer to pay an employee in lieu of annual leave. The Act only provides for payment in lieu of annual leave where the employment relationship is terminated. Please get in touch if you have any further questions with regard to annual leave entitlement and we’ll be glad to assist you. Our dedicated Payroll team provide a number of clients with Payroll services using a wide variety of methods.We have the systems in place to facilitate your business with a reliable service at a competitive rate.  Please contact us via the live chat icon to discuss outsourcing your businesses Payroll.  
July 23, 2019
  Business in Ireland

What is KEEP and when is it most effective?

Acquiring and retaining key members of staff is arguably the greatest challenge facing Irish based employers currently. Incentivising employees, whilst securing adequate levels of protection for both the business and it’s key stakeholders is a balancing act that most growing businesses face. Employee incentive plans can be structured using various methods including share-based remuneration. Tax treatment is often one of the most important considerations and a key factor to the implementation of a successful programme. The Key Employee Engagement Programme (KEEP) offers a solution to employers who wish to award employees with the opportunity to earn an incentive bonus without them necessarily becoming long-term shareholders in the company. How the programme works KEEP applies to qualifying share options granted between 1st January 2018 and 31st December 2023. The programme entitles employers to award a bonus incentive, contingent on appreciation of the company’s share price value that is not subject to Income Tax, PRSI or USC. Instead the employee is subject to capital gains tax (CGT) (currently 33% as opposed to a potential for 52% under Income tax treatments) on the ultimate disposal of the shares. The shares must be fully risk-bearing, unquoted, ordinary shares that carry no preferential rights to dividend or value.  The employee is granted an option to acquire the shares at market value and if, by the time the employee exercises the option, the shares have increased in value, they are not subject to Income tax on the increase at that time. The option cannot be held for longer than 10 years and cannot be exercised within the first 12 months of the grant. The option must not exceed 50% of the employee’s salary or €100,000 per annum. Furthermore, the total options granted to an individual employee over a three-year period must not exceed €250,000. Qualifying Criteria The qualifying employee or director must be required to work more than 30 hours per week in a position that is capable of lasting for more than 12 months. In addition the employee or director cannot own more than 15% of the ordinary share capital of the company. The qualifying companies must be classified as micro, small or medium sized enterprise. While there are also some additional restrictions on certain industries and company structures. When is KEEP most effective? There is no doubt that providing employees with an option to benefit from future share price appreciation is an innovative approach which further incentivises the employees to perform. However, as with any share-based remuneration scheme, much of the success will be determined by the method used to implement the scheme and by having clear objectives in place for implementing the scheme. We can assist you with the necessary professional guidance to ensure your KEEP programme implementation is effective and successful. The most effective use of KEEP is when the objective of the employer is to extend the benefits of share-based remuneration to a wider group of employees without them necessarily becoming long-term shareholders in the company.  Once the employees exercise the option there is no requirement for them to retain the shares for a minimum period of time. In practice, employees tend to quickly sell the shares to realise their value meaning employers can continue to extend the option to a wider group of employees without greatly expanding the shareholder base. If you are thinking of developing an employee incentive scheme using KEEP or other schemes, please contact us for assistance.  
June 25, 2019
  Business in Ireland

Top 5 Reasons to Establish Your Business in Ireland

Ireland offers a flexible and competitive regime to companies who are looking for a location to structure European operations. Countless international groups use Irish holding companies to hold other subsidiaries and conduct M&A activities. With Brexit now looming, Ireland is set to thrive as the only English speaking full member of the EU. In this article we explore the top 5 reasons to establish your business in Ireland. Skilled Workforce Ireland has one of the most educated workforces in the world with one million people in full-time education. As an English speaking country with direct access to the EU labour force of approximately 250 million people, over half a million Irish residents now speak a foreign language fluently. Ireland is also number one in the world for the availability of senior management talent, many of whom gain employment with the multi-national companies based in Ireland. Tax Benefits There are many tax benefits for companies investing in Ireland, either with fully fledged trading operations or global holding company structures. We outline some of those benefits here. Ireland’s low rate of corporation tax (12.5%) is half the OECD average. Knowledge Development Box (KDB) 6.25% tax rate is available on development activities carried out by an Irish Company. Research and Development (R&D) benefits from 25% tax credit, tax depreciation on acquired or capitalised Intellectual Property (IP) and a competitive holding company regime combine to offer your company an unrivalled location of choice for inward investment. Connectivity Extensive transport links between Ireland to Europe and the rest of the world and US pre-clearance facilities at Dublin Airport and Shannon Airport, the only ones of their kind in Europe, make Ireland one of the most connected countries to establish a business. Quality of Life With 33% of Irish citizens under the age of 25 and almost half under the age of 34, Ireland has the youngest population in Europe. Ireland has unrivalled heritage, culture and impressive natural landscapes, all within close proximity to the busy cities of Dublin, Cork, Galway and Limerick. This is ideal for escaping the city noise after a busy week at the office. Government Programmes Additional to the generous tax benefits on offer, government programmes are available to companies looking to establish a base in Ireland. The Special Assignee Relief Programme (SARP) provides Income tax relief, of up to 30%, to employees who are assigned to work in Ireland from abroad. This programme was designed to help companies provide key employees with incentives to relocate to Ireland. The Key Employee Engagement Programme (KEEP) offers further benefits to employers who wish to award employees the opportunity to earn a bonus based on the share price performance of the company, without them necessarily becoming long-term shareholders in the company. Ireland is home to many of the world’s leading high-performance companies including Amazon, Intel, Pfizer, Citi, Fujitsu, Apple, Dell, Twitter, Facebook and Google. The country is positioning itself to become a world leader in Health Innovation, Cloud Computing, SAAS, Big Data, ICT Skill, Sports Tech, Energy Efficiency and Internet of Things. Over 1,200 overseas companies call Ireland home
  • 1 in the world for investment incentives and inward investment jobs per capita.
  • 1 for flexibility and adaptability of people.
  • 1 for European investment from US.
  • 7 of the top 10 global software companies based in Ireland.
  • 10 of the top 10 pharma companies based in Ireland.
  • 8 of the top 10 industrial automation companies based in Ireland.
  • 14 of the top 15 global aviation lessors have operations in Ireland.
  • 19 of the top 25 financial services companies are in Ireland.
  • 14 of the top 15 medtech companies based in Ireland.
Figures provided by IDA Ireland Our Areas of International Expertise
  • International Company Structuring
  • International Strategic Planning
  • Company Formation & Maintaining
  • Annual Statutory Financial Statements
  • Preparation and Submission of Annual Returns
  • Provision of Corporation Tax Returns
  • Provision of Registered Office
  • Provision of Company Secretary
  • Maintaining EEA Directorships
  • Assistance with opening a company (Euro) bank account
  • Payroll Solutions
  • VAT Compliance
  • Other Business Advice
If you are considering locations for structuring your company’s European operations, Ireland has a lot to offer in this regard. Please
get in touch with one of our International Business experts to discover how we can best assist you in this process.  
June 11, 2019
  Corporate Structure

Have You Reviewed Your Corporate Group Structure Lately?

Corporate group structuring is often an attractive way for organisations to acutely position themselves to drive greater levels of financial growth. For example, the creation of a subsidiary company, which acts as a separate legal entity allows for diversification within the group and can provide a vehicle for holding companies to enter into acquisitions or joint ventures.       Group structuring can also provide tax and debt structuring benefits to the overall corporate group. In particular, utilisation of finance subsidiaries within a corporate structure will help to mitigate the risk of the parent company for subsidiary debts and can also act as a tax shield when subsidiary loans fail. Why Review Your Corporate Structure? A review and overhaul of a group structure can bring many benefits, including cost savings, reduced management time and improved efficiency. This may be undertaken following planned changes such as a refinancing, in connection with tax-driven changes, as part of a corporate governance initiative or following Mergers & Acquisitions. It is essential that directors are aware of the legal and business risks inherent in corporate group structures. Additionally, corporate groups must be structured to reflect the group’s needs and should implement appropriate governance procedures that delineate responsibilities and authority. At Roberts Nathan, we assist clients in reviewing their corporate group structure and highlighting any existing threats or opportunities. Please do not hesitate to contact us to discuss planning for your corporate group structure.
May 28, 2019