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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.  

Selling a business is time consuming, emotive and can be costly if not executed correctly.  As our economy continues to prosper there is increased interest in small and medium enterprises across all sectors. This coupled with the availability of funding makes it a great time to consider an exit strategy Once you have decided to sell the hard work begins!  In this article we explore a range of considerations when selling a business.

Preparation  

Preparation is key to achieving the best value. The preparatory phase is when you should engage with your advisor and carry out a thorough review of the business and it’s 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 business’s story is important and understanding how to present it’s financial information, both historic 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 business where it’s driving force (the owner) will be exiting or retiring in a short period after sale.   Tax planning in advance of sale will protect value. You should firstly consider the shareholder structure. Is there an opportunity to get family members (children and siblings) involved? Is there an option to claim retirement relief or entrepreneur relief or through a holding company group structure to claim participation relief on exit?

Identify prospective purchasers 

Understanding and researching the potential buyers for your business is a very important part of the process. Every business owner will be able to name a number of potential buyers, be that a management team or a key competitor. However there might be other potential buyers who may not appear on a list, who may have other strategic reasons for buying and may pay a premium for the business, i.e. new market entry, to acquire IP or to gain access to resources (e.g. people).   Keeping the process confidential during these early stages is important as it may ‘spook’ potential customers or suppliers and may unsettle key employees. Having an advisor on board will help maintain confidentiality.  

Negotiating the deal   

Once potential purchasers are identified they may enter a period of limited due diligence. A lot of valuable insight can be gained during this period for the seller in terms of how the due diligence is conducted the type of queries and questions raised. Having this insight early will help in the price negotiation phase.    You should never name your price, solicit offers for potential acquirers setting strict deadlines for offers. It is important that the seller maintains control of the process at this stage.  A second round of offers maybe 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 the ability to execute the deal and sources of funding should also be considered.     

Closing the deal  

Negotiating 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 handover of relationships and integration?  The sale process is a time consuming and 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 business over many decades. At Roberts Nathan we have a wealth of experience advising owner mangers through the transaction process both on the sales side and buy side. Please contact us if you would like to understand more. 

A statutory instrument establishing the much anticipated Central Registrar of Beneficial Ownership of Companies (RBO) was signed into law by the Minister for Finance, Paschal Donohoe on the 22^nd March 2019. Timelines are now set and companies can expect to be contacted by the office of the RBO with regard to their filing obligations over the coming weeks. When will the RBO accept online filings? In accordance with the SI, the RBO will begin to accept on-line filings from 22^nd June 2019, after which there will be five months for companies and Industrial and Provident Societies to file their RBO data without being in breach of their statutory duty to file. The office of the Registrar of Beneficial Ownership (RBO) will contact each company and Industrial and Provident Society about their filing obligations in the coming weeks. The RBO website will be launched on 29^th April which will provide further information. Key Dates

• 29^th April 2019 – The RBO will launch an official website to provide further guidance.
• 22^nd June 2019 - The RBO will start accepting online submissions via live portal.
• 22^nd November 2019 – This will be the last date for companies formed prior to June 2019 to submit their details.

Companies incorporated after 22^nd November 2019 will have five months to submit their details without being in default. If you would like assistance in submitting your details to the RBO, please don’t hesitate to get in touch and we’ll be glad to provide you with further guidance.   

The Companies (Amendment) Bill 2019 was published in January 2019 and proposes to change the Annual Return Deadlines for Irish Resident Companies. These new filing dates will directly impact every Irish company and is likely to become law in just a few months. Current ‘Two-Step’ Process Currently, there is a ‘two-step’ process for the companies to meet their reporting obligations. The annual return must be electronically filed to the CRO within 28 days of the Annual Return Date. Once this step has been completed, the company is allocated a further 28 days to submit their Financial Statements. Proposed New ‘One-Step’ Process: It is proposed to change the annual return filing deadlines to a “one-step, 56 day process”. While the new ‘one-step’ process does not provide companies with any additional time, it does allow for companies to avail of a continuous 56 day period to:

• Electronically file the annual return,
• Upload Financial Statements, and
• Deliver any signature pages to the CRO.

When will the New Deadlines come into effect? It is proposed that the new system will be implemented in early 2020. This will result in a new filing software system replacing/updating the CORE platform. The CRO has also indicated that the new system will allow for digital signatures, this will speed up many of the CRO processes. How will this impact your company? The new ‘one-step’ process will allow companies a straight 56 day period to complete their filing obligations. It also means that the current 28 day deadlines will be removed, and therefore companies are less likely to incur late filing penalties. The new ‘one-step’ process aims to simplify the annual filing obligations for companies and to encourage compliance. If you are concerned about your company’s CRO obligations, please do not hesitate to contact one of our Audit & Compliance experts, they will be happy to help!  

The Revenue Commissioners are updating their systems to make the collection of unpaid taxes more efficient and effective and taxpayers can expect to see significant changes in how they communicate with the Revenue Commissioners, in this regard, going forward.

What is the Current Procedure?

While the Revenue Commissioners have not yet confirmed when the new procedures will be introduced, it is anticipated that the first of these changes will be implemented by the end of March 2019 and will impact the how taxpayers engage with them upon receipt of a Demand Letters. Currently, when a taxpayer has overdue liabilities they receive a demand letter detailing the amounts outstanding for each tax-head. The letters are issued by individual case workers and their contact information is available on the letter. Generally, the taxpayer will contact the caseworker and either pay the outstanding liabilities or enter into an instalment arrangement. In cases where the taxpayer does not engage with the Revenue Commissioners they are issued with a series of further demand notices, and it can take several months before a case is progressed to enforcement.

What’s Changing?

From the end of March 2019 the Revenue Commissioners are changing their procedures for the collection of outstanding taxes. Taxpayers will now receive a 7-day notice demand letter, if the taxpayer has not engaged with Revenue within the 7 days the case will automatically be marked for enforcement. In addition to this demand letters will no longer be issued by a caseworker instead they will be automatically generated. The letters will contain a general helpline for taxpayers to contact.

How will this Impact Me and My Business?

Essentially this change means that taxpayers, whether individuals, businesses or companies, will need to engage with the Revenue Commissioners if they receive a demand letter. It appears as though Revenue are hoping a new, more streamlined process will increase tax collections while also reducing the amount of time spent on chasing outstanding payments. If you would like further information on the above please do not hesitate to contact a member of our team, they will be happy to help!

PAYE Modernisation was officially implemented from 1^st January 2019 and it is considered to be the most significant change in PAYE reporting since the 1960s. However, as with any significant reporting change, the implementation has been far from seamless. Here we detail the most common problems that payroll departments have been experiencing:

1. Revenue Payroll Notifications (RPN): RPNs have replaced the old P2C as the employee’s tax credit certificate. However, unlike their predecessor if the RPN used is incorrect or ‘old’ Revenue will reject the payroll report.
2. Incorrect Pay Dates: Revenue have recorded a large number of employers submitting payroll reports with the incorrect pay dates. Remember the report must be submitted before the employee is paid!
3. Employment IDs: The new system requires all employees to be issued with a unique employee ID. Where employment IDs are not correctly applied it may lead to two or more RPNs being issued for one individual, resulting in Revenue rejecting payroll reports.
4. Running Payroll in Advance: Running payroll in advance is no longer an option. Payroll must be reported in “real-time” with this new system.
5. Monthly Statements: The P30 has now been replaced by Monthly Statements which are statutory returns and are generated on the 5^th of each month for the previous month. If you do not accept/amend the monthly statement by the 14^th of the month, Revenue will deem you to have accepted the statement.

Overall the new reporting obligations on employers is tedious and time consuming, but now more than ever an employer’s compliance with payroll tax deductions is critical as non-compliance can lead to significant penalties, interest and fines. We offer a tailored payroll service to new and existing clients which is designed to overcome the common issues associated with PAYE Modernisation. Our Payroll service unlocks valuable time for our clients which allows them to focus on their business. Please get in touch if you would like to discuss availing of our Payroll service for your business.

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