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News Taxation

  Taxation

Preliminary Tax – What is it?

Preliminary Tax is an estimate of the tax that you expect to pay for the year. Our clients have asked us the following questions on several occasions. What exactly is this payment for? What happens if I don’t pay? And when is Preliminary Tax due to be paid?We have outlined below some details which we hope answers these questions.What exactly is this payment for?All taxpayers, whether a self-assessment individual or a company, are liable to pay it and it is paid in advance of the relevant tax year.Preliminary Tax is calculated on either:
  1. 100% of your previous year’s liability, OR
  2. 90% of your current year liability, OR
  3. 105% of your pre-preceding year’s liability.
As estimating the current year’s liability can be both time-consuming and costly the majority of clients opt to pay 100% of the previous year’s liability.What happens if I just don’t pay?If you fail to return and pay your Preliminary Tax by the due date then you are liable to a series of penalties, interest and surcharges. The interest alone is charged at a daily rate of 0.0219%, and in addition to this a surcharge of 5% – 10% of the liability may be applied.When is Preliminary Tax due to be paid?Preliminary Tax is due to be paid as follows:
  • Individuals
For example, self-assessment taxpayers are required to file and pay their Income Tax and Preliminary Income Tax liabilities as follows:
Income Tax Year ending 31st December 2018File and Pay your Income Tax by 31st October 2019
Preliminary Tax for 2019File and Pay Preliminary tax by 31st October 2019
The above deadline may be extended if you opt to file and pay using Revenue’s Online System (ROS). In 2019 the extended deadline is 12th November 2019.
  • Companies
The Preliminary Tax return and payment, for companies, is due 11 months after your accounting year end. For example, if the accounting year end is 31st December 2018:
Accounting Year-end31st December 2018
Corporation Tax Deadline23rd September 2019
Preliminary Tax Deadline23rd November 2019
Don’t Forget!!Even if you did not have a tax liability you will still be required to file a Nil Preliminary Tax Declaration on ROS.If you are unsure about your tax obligations, or require assistance calculating your liability, please do not hesitate to
Contact us
November 4, 2019
  Business

Some Highlights of Budget 2020

Minister for Finance Paschal Donohoe delivered his Budget 2020 speech on Tuesday which included a €2.9bn budget day package. Also confirmed is a €1.2bn Brexit-proof fund.Whether you are for or against it, carbon tax will be the most controversial element of the package and a talking point for many. Below we have outlined the main tax highlights of Budget 2020.Personal Taxes
  • Income tax rates and bands and the USC rates and bands remain unchanged. The Minister for Finance did not want to commit to personal tax cuts in the lead up to a no-deal Brexit.
  • The Home carer credit has increased to €1,600 and the Earned income credit has increased to €1,500.
  • The Group A threshold for CAT has increased from €320,000 to €335,000. The increased threshold applies to gifts or inheritances received on or after 9 October 2019.
Payroll Taxes
  • There was no mention of employer’s PRSI however Budget 2019 announced this would increase from 10.95% to 11.05% from 1 January 2020. Employer’s PRSI has steadily increased over the last few years and represents a significant cost to businesses.
  • SARP relief and the Foreign Earnings Deduction have been extended to 31 December 2022.
  • In 2018, the Government implemented a 0% BIK rate for electric vehicles subject to a value limit of €50,000 in comparison to a rate of 30% of the car’s original market value for non-electric vehicles. This initiative has been extended to 2022.
Business TaxesThe R&D tax credit regime has been amended so that it is more accessible to micro and small companies in Ireland. These amendments include the following:
  • An increase in the credit from 25% to 30%.
  • The ability to claim the credit on qualifying expenditure before the company commences trading. It should be noted that any credit claimed in this period can only be offset against VAT and payroll liabilities.
  • An increase in the outsourcing limit applicable to third level institutes from 5% to 15%.
  • Farm restructuring relief, a capital gains tax relief due to expire at the end of this year, has been extended to 31 December 2022.
  • Several amendments will be made to the KEEP scheme to incentivise take-up in the scheme. This includes a change in the definition of a qualifying company so that the scheme applies to group structures and a change in the definition of a qualifying individual so that it applies to part-time and flexible employees.
  • EII relief, an income tax relief for individuals who invest funds in certain companies, will also undergo changes which apply from yesterday. The amendments will allow individuals to claim full relief in the year of investment and the annual investment limit will increase from €150,000 to €250,000.
  • The Minister for Finance announced there will be a significant overhaul to the DWT regime. From 1 January 2021, real-time date collected under the new PAYE Modernisation regime will be used to create a personalised rate of DWT on distributions received by individuals. In the meantime, an increase in the DWT rate from 20% to 25% will apply from 1 January 2020.
(more…)
October 9, 2019
  Taxation

Is there still value in UK car imports post-Brexit?

We have recently been asked to assist with VRT queries from a number of clients who have been considering importing cars from the UK, we have outlined below some information which may be of assistance to you if you are also considering this.Post-Brexit, if you import a vehicle from the United Kingdom (UK), this may be treated as an import from a non-European Union (EU) country.At importation you may have to:
  • Complete a customs electronic declaration

and

  • Pay Customs duty and Value-Added Tax.
Used vehiclesIn the event of a no-deal Brexit, the procedures for vehicle registration will remain unchanged for a period of 30 days. This is to facilitate the registration of vehicles imported pre-Brexit but whose registration appointments are scheduled for post-Brexit.After this period you will have to present a customs import declaration to register your vehicle.New vehiclesIf you are importing a new vehicle into the State it must always be accompanied by the following:
  • A valid Certificate of Conformity (CoC) that confirms European Union type-approval. Please note that the type approval number on the CoC must correspond to an EU Member State.
or
  • An Individual Approval Certificate issued by the National Standards Authority of Ireland (NSAI).
There will be implications for new vehicles, which have been type approved by the UK Vehicle Certification Agency post-Brexit. Guidance documents on the treatment of UK type approvals post-Brexit have been issued by the NSAI and Road Safety Authority.If you have questions regarding importing cars from the UK please
contact us for assistance.
October 3, 2019
  Taxation

Potential VAT and Customs Duty implications of trade with the UK post-Brexit

If you trade with the United Kingdom post-Brexit, the relevant rules of trade will likely change. It is important to consider and plan for the VAT and Customs implications on your business arising from the various methods by which the UK can leave the EU.Customs dutiesIt is likely that customs duties will become a reality for those trading and importing from the United Kingdom.The UK intends to negotiate a free trade agreement with the EU, but this is unlikely in the two-year negotiation period after Article 50 was triggered and would hopefully be underway in the transition period after the UK leaves the EU and which is currently likely to be 31 October 2019.Certain imports into Ireland will be particularly affected, such as the agricultural and food sectors, where duties tend to be much higher e.g. Cheddar cheese 55%.Beef 40%.Planning consideration would need to be given to available customs reliefs, to cut such costs.VAT and Customs implicationsThere will likely be significant VAT considerations which must not be overlooked in the event that the UK become a third country for trading purposes to the EU 27 block.The implementation of VAT at point of entry for goods from the UK means that Irish businesses will have to bear the cash flow cost of VAT on goods coming into Ireland. While import VAT is recoverable, there could be a significant cash flow burden as these amounts will need to be funded to have goods released into circulation.Contracts should be reviewed to assess their impact from a customs perspective, and to determine which party to the contract is responsible for fulfilling customs obligations. This would include the payment of applicable customs duty and import VAT.Do you foresee your business or supply chain interacting with the UK post Brexit?If yes, please contact us to discuss Tax planning.
September 27, 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 worksKEEP 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 CriteriaThe 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
  News

Changes to Revenue Demand Letters

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!
March 21, 2019
  News

Bittersweet: What will a sugar tax mean for fans of fizzies?

In response to overwhelming evidence that sugars, not fats, are the greatest dietary threat to public health, governments in the developed world are beginning to implement measures aimed at countering the obesity, diabetes, heart disease, stroke, metabolic and hormonal disorders, dental destruction and even the adverse psychological and neurological effects of our sugarmania.

The Irish soft drinks industry has pushed back hard against plans to have a new sugar tax up and running by April of next year. They predict it will cut their income to the tune of €60 million annually, and that if the public’s habits do not change (we Irish are among the world’s greatest lovers of soft drinks), it will add about €60 a year to a household’s annual spend.

However, the scientific evidence is clear: sugar is very, very bad for us. Most of us in the developed world go through about 70kg of it a year...a far cry from the recommended maximum of about 13kg a year. We as a nation urgently need to cut out most of our sugar intake, and a sugar tax is the first step.

Doctors, scientists and politicians see Ireland on track to become Europe’s fattest, least-healthy nation within a decade if current trends do not reverse. Anti-tax advocacy groups - most notably the Irish Beverage Council and the Food and Drink Industry of Ireland – say similar taxes already in place around the world have shown no discernible public-health benefits. So, who’s hitting the sweet spot and who’s just feeling sour?

At a glance: Will the sugar tax be a bitter pill to swallow?

  • When will the Sugar Tax come into operation?

April 2018

  • Does this mean my favourite fizzy drink is going to shoot up in price?!

“Shoot up” might be a bit strong, though you’ll definitely notice a difference. Even if you really, really love fizzy drinks, the price increase won’t break the bank. For the rest of us, the evidence suggests that we’ll spend smartly, cutting back by just enough to see health benefits and spend the savings elsewhere.

  • What will this mean for my corner shop?

If evidence from comparable markets is to be believed, it means your corner shop will sell a little less in the way of fizzy drinks, and a little more in the way of bottled water, teas and infusions, nut-based drinks and milk. This isn’t going to drive anyone out of business.

  • What will this mean for my restaurant?

It means that you’ll sell fewer cans or bottles of fizzy drinks, but as they’re not a backbone of your business you needn’t worry too much. As your customers choose to drink less sugar, you’ll be able to judge how much you’re likely to sell and adjust your inventory accordingly. Your spend in the initial phase may well increase slightly, but fizzy drinks last a long time: your stock will regularise. You won’t find yourself suddenly stuck with sweet stuff you can’t shift.

  • What will this mean for the food and drinks industry?

They’ll have to move with the times, but for every cent lost to declining sugar sales, they’re likely to pick it up elsewhere. Cutting back on sugar may well end up saving them money in the long run too: we’re surprisingly adaptive in our tastes and industry experience shows that consumers are unlikely to pine for sugar, or even notice a slight lack of sweetness, if products see their sugar content lowered gradually.

  • What will this mean for the economy overall?

Less money spent on tackling the profound health effects of a high-sugar diet will mean more money available for spending elsewhere, meaning a gradual but identifiable boost for research, equipment, personnel, infrastructure and more. Fewer sugar-related illnesses (e.g. less diabetes, fewer heart attacks and strokes and improved psychological health) will mean a busier, more productive population, making more and spending more.

  • What will this mean for me as a consumer?

Unless you absolutely must drink several litres of fizzy drinks every week, then honestly not that much. Yes, there is evidence that sugar is addictive, but it’s not so habit forming that your life will be ruined without it and you’ll probably consume less without even realising it. You’ll initially spend a little more on fizzy drinks, and then you’ll begin to phase them out in favour of cheaper, healthier alternatives. Eventually, your risk of sugar-related illness and mortality will reduce. You’ll save money on medical expenses and dental expenses, and spend elsewhere.

Images: Shutterstock

May 5, 2017
  News

Why do I have to Pay Preliminary Tax?

Do you ever feel like you’re constantly paying tax? You’ve just paid for last year and now Revenue is asking for a payment for next year! Of course, remaining tax compliant is of utmost importance so you pay the liability – but every year you ask yourself…

What exactly is this payment for? What happens if I don’t pay? And when does it need to be paid by?

This is known as Preliminary Tax, and all taxpayers, whether a self-assessment individual or a company, are liable to pay it. Preliminary Tax is calculated on either:

  1. 100% of your previous year’s liability, or
  1. 90% of your current year liability, or
  1. 105% of your pre-preceding year’s liability.

As estimating the current year’s liability can be both time-consuming and costly the majority of clients opt to pay 100% of the previous year’s liability.

 

What happens if I just don’t pay?

If you fail to return and pay your Preliminary Tax then you are liable to a series of penalties, interest and surcharges. The interest alone is charged at a daily rate of 0.0219%, and in addition to this a surcharge of 5% - 10% may be applied.

 

When Preliminary Tax due to be paid?

Preliminary Tax is due to be paid as follows:

1. Individuals

Self-assessment taxpayers are required to file and pay their Income Tax and Preliminary Income Tax liabilities as follows:

Income Tax Year ending 31st December 2016File and Pay your Income Tax by 31st October 2017
Preliminary Tax for 2017File and Pay Preliminary tax by 31st October 2017

Of course the above deadline may be extended to 10th November 2017 if you opt to file and pay using Revenue’s Online System (ROS).

2. Companies

The Preliminary Tax return and payment, for companies, is due 11 months after your accounting year end. For example, if the accounting year end is 31st December 2016:

Accounting Year-end31st December 2016
Corporation Tax DeadlineSeptember 2017
Preliminary Tax DeadlineNovember 2017
 

Don’t Forget!!

Even if you did not have a tax liability you may still be required to file a Nil Preliminary Tax Declaration on ROS.

If you are unsure about your tax obligations, or require assistance calculating your liability, please do not hesitate to contact a member of our team, they’ll be happy to help!

 Images:
Shutterstock 

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April 24, 2017
  News

Relevant Contracts Tax (RCT)

RCT is a withholding tax mechanism which applies to certain payments mainly within construction, forestry and meat processing operations.

 

What is RCT?

RCT applies to payments made by a principal contractor to a subcontractor under a relevant contract (this is a contract to carry out, or supply labour for the performance of relevant operations in the construction, forestry or meat processing industry). RCT applies to both resident and non-resident contractors operating within the state.

All RCT compliance is now conducted online using the Revenue’s Online Service (ROS).

 

RCT deduction rates

The RCT system has three deduction rates:

  1. Zero’ rate for Subcontractors who are fully compliant
  2. 20% Standard rate for all registered subcontractors with a good compliance record.
  3. 35% rate, will apply to all other subcontractors, mainly who are either not registered with Revenue for RCT or those who are registered, but may have tax compliance issues.
 

Who should operate RCT?

Principal Contractors

RCT should be operated by businesses defined as principal contractors. A principal contractor may include property developers, building companies and all associated building trades, as well as individuals who are connected with these businesses.

All government bodies, local authorities, public utilities, boards and bodies established under statute (including school BOM’s) are deemed to be principal contractors under current legislation.

Non-Resident Contractors

RCT relevant operations are carried out in Ireland, RCT applies to the contract regardless of the residence of the subcontractor. Non-resident Principals who subcontract work are obliged to operate RCT. Also non-resident subcontractors who carry out “relevant operations” in the construction, meat or forestry sectors in Ireland may be subject to this withholding tax.

 

eRCT Compliance Procedures

Contract notification

The first step in the eRCT system is to input a “contract notification”. A Principal must notify Revenue online each and every time a new relevant contract is entered into with a contractor.

Payment notification

Prior to making each payment a principal must obtain a deduction authorisation by inputting a Payment Notification on the eRCT system. A principal should indicate the full amount of the payment due to be made to the contractor.

Deduction authorisation

When a payment notification has been made a deduction authorisation will issue automatically to the Principals ROS inbox. The deduction authorisation will show the applicable RCT deduction rate and the amount of RCT to be deducted.

Where a principal makes a payment without first obtaining a deduction authorisation the principal is liable to RCT at 35% regardless of the deduction status of the subcontractor to whom the payments have been made. In addition to the RCT amount, a penalty up to €5,000, may also be payable in certain circumstances. Revenue will verify the correct tax deduction rate applicable to the subcontractor and an adjustment to the liability for the period may be required. A subcontractor will receive an immediate credit on their tax record for the tax amount which may be set against other taxes due.

No interim RCT refunds under new system

Subcontractors are no longer able to apply for interim refunds of RCT deducted during the tax year. Instead, any tax deducted is credited against other tax liabilities the subcontractor may have. Any excess may only be refunded after the income/corporate tax return for the chargeable period has been filed and paid.

At Roberts Nathan, we can advise on whether RCT applies to you along with advising and assisting both Principals and subcontractors with all aspects of RCT including compliance and processes required. We can also assist with completing the RCT registration and obtaining the best RCT deduction rate. To get in contact with a member of our team, click here.

 

Images: Shutterstock

January 19, 2017