TAX FILING DIARY MARCH 2012

TAX FILING DIARY MARCH 2012

14th  (23rd by ROS)

P30 – Feb 12     (Employers)

F30 – Feb 12  (Professional Services Withholding Tax)

DWT – Feb 12 (Dividend Withholding Tax – Companies)

 

19th  (23rd by ROS)

VAT 3 – Jan-Feb 12

Annual VAT3 & RTD Year Ended 29/2/12

 

21st (23rd by ROS)

Annual CT1 & Payment –Year Ended 30/6/11 – Corporation Tax

Form 46G –  Year Ended 30/6/11 – Corporation Tax

Preliminary Tax – Yr Ends 30/6/12 – Corporation Tax

Preliminary Tax First Instalment (large Companies) –Yr Ends 30/9/12Corporation Tax

 

Eric Power FCCA, Eric Power Accountants.  Email ericpower.fcca@gmail.com

Disclaimer: This is a calender of the main tax compliance deadlines but is not intended to be an exhaustive list.  While every effort is made to insure the accuracy of the information, we do not accept any responsibility for loss or damage suffered by any person acting, or refraining from acting as a result of this material.

R&D Tax Credit Changes – Finance Bill 2012

1. ‘Key Employee’ Reward Mechanism 
This is a new reward mechanism for key employees who have been involved in the R&D activities of a company which will allow them to effectively receive part of their remuneration tax free.
Principle features of this mechanism are as follows:

• The employee must not be, or have been, a director of the company or be connected to a director of the company
• The employee must not have, or have had, a material interest in the company or be connected to a person who has a material interest
• The employee must perform 75% of their activities “in the conception or creation of new knowledge, products, processes, methods and systems”
• 75% of the emoluments of the employee must qualify for the R&D Tax Credit
• The amount of credit that can be surrendered to key employees is capped at the amount of corporation tax due by the company before taking the R&D Tax Credit into account i.e. the company must be taxpaying
• It is up to the company to decide which employees can avail of this relief and the amount of credit which can be allocated to each employee. The effective rate of tax payable by the employee for a tax year cannot be reduced below 23%. The employee must make a claim to Revenue for a refund of tax paid. Unutilised tax credits which the employee has been allocated can be carried forward by the employee indefinitely until they are used (or until the employee leaves the company)
• To the extent that some or all of the R&D Tax Credit is denied (i.e. following a Revenue audit) the employee may be obliged to repay some/all of the credit claimed against their income tax liability.

By virtue of the fact that a company has to be taxpaying to avail of the reward mechanism, and that the key employees cannot be directors or have a material interest in the company this measure is likely to have greater relevance for multinationals as opposed to SMEs.

2. Introduction of a Volume-Based Regime
The Finance Bill has introduced a volume-based regime i.e. an R&D tax credit for every euro incurred, up to the first €100k of qualifying spend incurred by a company. Companies claiming the R&D Tax Credit will therefore have up to an additional €25,000 per annum of tax credit (effectively cash) available to reinvest. This will be particularly valuable to SMEs.

3. Changes to the Existing Subcontracting Rules
The existing subcontracting rules have been changed whereby a company can now claim an R&D tax credit for outsourced spend based on the greater of the current percentage based limits (outsourced R&D expenditure paid to unconnected third parties/third level institutions restricted to 10%/5% of the company’s in-house spend) or €100K. However, the total amount claimed cannot exceed the qualifying
expenditure incurred by a company itself in the period.
SMEs tend to outsource a greater proportion of their activities as they would not have all of the necessary in-house capabilities required for their R&D activities.
This increase in the outsourced cap will therefore increase the R&D tax credit which can be claimed by SMEs which is likely to be subsequently reinvested in the business.
The legislation has been further amended to require the company to notify the third party provider in writing that it cannot also claim the R&D Tax Credit.
As currently drafted this provision has particularly negative consequences for the third party provider, which is concerning, and will no doubt impact on commercial arrangements between the company and the third party provider.

4. Management and Control of R&D Activities
Expenditure incurred in the managing or control of R&D activities will not qualify for the R&D tax credit unless such activities are carried on by the company itself.

5. Transfer of a Trade – Carried Forward Credits and Buildings
R&D tax credits carried forward can now be transferred intra-group as part of the transfer of a trade (subject to certain conditions).
R&D tax credits can also continue to be claimed on buildings qualifying for the R&D tax credit following a transfer of that building as part of a trade (again subject to certain conditions).

6. EU Grants
While the legislation previously specified that expenditure met by grant assistance from the State would not qualify for the credit, this has now been extended to include grants or other assistance received from the EU or European Economic Area.

Disclaimer: This blog is not intended to be professional advice but rather a summary of the subject discussed.  While every effort is made to insure the accuracy of the information, we do not accept any responsibility for loss or damage suffered by any person acting, or refraining from acting as a result of this material.  Full professional advice should be sought before action is taken or not taken as the case maybe.

SOLE TRADING Versus LIMITED COMPANY?

The single most asked question we get is – ‘shall we form a company or shall I go it alone’?

The answer will change according to earnings, forecasts, residence of owners and managers, and the type of business. We regularly form companies or businesses for clients depending on what structure is most suitable for them. This depends not only on the issues discussed above but also personal preference and the relative administrative burdens involved.

Sole Trader

Sole trader is the simplest option. To set up as a sole trader, you will need to register as a sole trader with the Revenue Commissioners and submit an
income tax return once a year (deadline 31 October of the following tax year). The books are generally easier to maintain and don’t have to be audited, (except possibly by Revenue of course).

Some sole traders register their business name with the CRO. For example, Engineer Carl Smith might register the name CS Engineering. (This is NOT the same as setting up a company.) The business name certificate should be displayed at the place of business and a copy given to the bank. Note that there is no restriction on registering a duplicate business name. However, a company name must be unique.

Closing down the business is relatively straightforward.

There is no limited liability – the Sole Trader is personally responsible for all of the debts of the business.

Limited Company

A limited company is a legal entity separate to yourself and shareholders liabilities are limited to the amount of share they subscribe. With a limited company if you are setting up in business on your own, you will need to find another person to act as a director although you can own 100% of the shares in the company yourself (single member company). Make sure that you and the other director(s) know what they are getting into as they have legal rights and obligations as the director of a company. See www.odce.ie for full details.

A limited company and its directors are subject to more regulation than a sole trader but the company structure offers advantages in terms of taxation.  A simple example of this is if the business is making more money than the director-owners need then the excess is taxed at 12.5% in a company rather than a potential income tax of 20%/41% plus USC plus PRSI for a sole trader. (Be mindful though that certain professional service companies and investment income can attract additional Corporation tax if profits are not distributed as dividends to its shareholders).

Every year, Financial Statements (accounts) will need to be prepared together with a Corporation Tax return and an Annual Return to the Companies Registration Office. Most small companies don’t need to get their accounts audited. Companies which do require an audit include:

• Companies who filed their annual return to the CRO late in the current or previous year
• Companies with a turnover exceeding €7.3 million, assets greater than €3.65 million and average number of employees of 50 or more
• Companies limited by guarantee (e.g. sports clubs, charities, property management companies etc.)
• Group companies
• Banking / insurance companies
• Unlimited companies

The company structure does require more accounting and tax work but the additional fees involved should be more than covered by the tax savings in running the business through a company.

The company also provides a structure for introducing additional investors, giving shares to key employees or family members and selling shares in the business.

Closing down a company is more difficult and expensive than for a sole trader especially where there are outstanding debts and a liquidator is required.

Disclaimer: This blog is not intended to be professional advice but rather a summary of the subject discussed.  While every effort is made to insure the accuracy of the information, we do not accept any responsibility for loss or damage suffered by any person acting, or refraining from acting as a result of this material.  Full professional advice should be sought before action is taken.

PAYE TAX REFUNDS

Do you pay tax in Ireland through your work, (the PAYE system), in Ireland?

If so you maybe paying too much tax?

About 40% of all workers are without even knowing it!!

You need to act now – We can review up to 4 years for you (Time barred for older returns).                                  

Contact us for a fully confidential consultation on 051 347 363.  

Our Fee is charged at 10% of refund plus handling fee.

If any of the below applies to you then you maybe entitled to a refund:-

1.  Change in circumstances (e.g.  One spouse goes on short-time or loses Job)?

2.  Had Medical or Non-Routine Dental expenses?

3.  Medical Insurance paid by your employer as a Benefit?

4.  Entitled to child related credits (e.g. Home carers or single parent credit)?

5.  Paying Rent for you family home?

6.  Had expenses in your employment NOT refunded by your employer?

7.  Paid Bin Charges?

8.  Paid Trade Union subscription?

9.  Employing a home carer for an Incapaciated Person?

What Documents are required?

You will need your P60s and Income Levy certificates, all medical expense receipts, Bin charges receipts etc.

We are a registered Tax Agent with the Irish Revenue Commissioners 

TAX FILING DIARY FEBRUARY 2012

TAX FILING DIARY FEBRUARY 2012

14th Feb (23rd Feb by ROS)

P30 – Jan 12     (Employers)

F30 – Jan 12  (Professional Services Withholding Tax)

DWT – Jan 12 (Dividend Withholding Tax – Companies)

15th Feb (23rd Feb by ROS)

Annual P35 – 2011  (Employers)

Annual F35 – 2011  (Professional Services Withholding Tax)

Annual RCT35 2011 (Relevant Contractors Tax – Principal Contractors)

19th Feb (23rd Feb by ROS)

Annual VAT3 & RTD Year Ended 31/1/12

21st Feb (23rd Feb by ROS)

Annual CT1 & Payment –Year Ended 31/5/11 – Corporation Tax

Form 46G –  Year Ended 31/5/11 – Corporation Tax

Preliminary Tax – Yr Ends 31/3/12 – Corporation Tax

Preliminary Tax First Instalment (large Companies) –Yr Ends 31/8/12Corporation Tax

Eric Power FCCA, Eric Power Accountants.  Email ericpower.fcca@gmail.com

Disclaimer: This is a calender of the main tax compliance deadlines but is not intended to be an exhaustive list.  While every effort is made to insure the accuracy of the information, we do not accept any responsibility for loss or damage suffered by any person acting, or refraining from acting as a result of this material.

Practical Tips for Getting Through a Tax Audit

Generally 21 days notice is given to both client and accountant of the Revenue’s intention to carry out a tax audit.  This letter will set out the areas and time periods to be audited.  It will also contain the proposed commencement date of the audit.  We would recommend engaging your accountant immediately on receiving such a letter!

Pre-Audit

The first and most important matter to be discussed with your accountant is whether you need to make a prompted qualifying disclosure in advance of the commencement date of the audit.  In other words, come clean as regards to known underpayments of tax before the audit starts.  This will result in far lessor penalties being imposed than if the Revenue were to find the underpayments from their own investigations.  The prompted disclosure must be presented to the Revenue before the audit commences and in writing and must include:-

i)     Background Information giving rise to the prompted disclosure.

ii)    A signed declaration confirming that the disclosure is correct & complete.

iii)  A payment of the underpaid tax and interest accrued thereon.

Audit Commencement

The Revenue audit will generally be carried out at your registered business premises.  You should attend, along with your accountant, the commencement meeting. At this meeting you should  agree an outline work plan with the Revenue auditor(s).  This plan should include such things as length of time the auditor(s) intend to spend at your premises, the records they wish to review and the particular areas they want to concentrate on.  Establish lines of communication with the auditors. The auditors should communicate to an appointed person for answering queries and not directly with staff members.

Finalisation of Audit

On completion of their review the Revenue auditors will call a closing meeting. Again this should be attended by you and your accountant.  If the Revenue auditor(s) are satisfied that no issues arose from their investigation the audit will be declared closed.  If however, there are issues and in their view an underpayment of tax arose the question of penalties will be discussed.  If a prompted disclosure was made prior to the start of the audit and the Revenue auditor(s) are satisfied that there are no other issues much lower penalties can be agreed.

Penalties for a prompted disclosure range from 10% to 50% depending on the perceived severity of the offence by the Revenue auditor(s) ranging from carelessness to deliberate fraud.  In some rare cases the penalties could be classes as 0% if the auditors can be persuaded that the underpayment of tax came from an innocent error.

Unprompted liabilities to taxation found by the Revenue auditor(s) can attract penalties of up to 75%

Statutory interest, at the rate of 0.0219% per day, will apply to any underpayment of tax.  The rate applies from the day the tax should have been paid to the date of payment.

On agreement of tax underpayment, penalties and interest a settlement offer to this amount will be expected by the Revenue along with payment of same.  In cases of cashflow difficulties and installment arrangement can be entered into with the Revenue.

Publication of Settlement

Where a qualifying disclosure has not been made and the settlement is in excess of €33,000 and the penalty content is more that 15% of the tax then the settlement will be published by the Revenue.

Conclusion

It is critiallly important that you get proper professional advice to take you through the Revenue audit process.  The benefit of having the right advice can include lower penalties and no publication particularly if negotiation skills were required to persuade the auditor to reduce the perceived severity of the “offence” and also making a prompted qualifying disclosure that is complete and on time.

Eric Power FCCA, Eric Power Accountants, email: ericpower.fcca@gmail.com

Is the EU on the edge of Extinction?

Europe is in the mist of its biggest financial crises in its history.  All member states have now committed to years of austerity that will suck the life blood out of all member’s economies.  In contrast places like Asia and Australia are leaping forward, allbeit at a slightly slower that expected pace, but still leaving the EU in their wakes.

As any company or business person knows, cash flow is the life blood of any business.  Extrapolate that  to the scale of the EU.  It operates exactly like a business, it has revenues and expenditure.  If expenditure exceeds revenues then you borrow.  The problem – at some point the borrowing has to be paid back!

The EU seems to think that it can get out of this mess by cutting spending and raising taxes to any extent.  This will be the downfall of the EU.  The economy will retract to such a level that revenues of governments will actually fall, not increased, by these policies leading to more austerity and hence continue the downward depression spiral we now find ourselves on.  The EU will implode on itself.

A way out of this mess?  Our politicians definitely have no clue.

Issue Eurobonds for one.  Get monies into the EU economies.  Get people back to work.  This will in turn increase tax revenues and turn the economies around.

Private investors who have lost their money in private banks should not be paid back.  This is the huge anchor that is holding the recovery back.  The big difference between this recession, or dare I say it depression, and the one of the eighties is the huge amounts of debt hanging over people, businesses and governments alike.

Unless the EU gets its act together it could find itself nowhere fast and in the shadow of the new economies of Asia.

Eric Power FCCA, Eric Power Accountants, email ericpower.fcca@gmail.com

P35 Deadline 15th February 2012

P35 Deadline

Employers:- the P35 Deadline is fast approaching. The deadline is February 15th.

File your return and associated payment the easy way through ROS – the extended deadline if you both file and pay through ROS is 23rd February.

If you need assistance call our P35 Helpline on 1890 25 45 65. Lines open until 8pm Monday 7th to Friday 11th February.

Remember avoid penalties, a possible audit or even criminal prosecution by filing on time.

P35 Return Filing – Importance of Recording the Correct PPS Number for Employees

                

When filing the P35 Return for 2011, employers and agents are reminded of the importance of recording the correct PPS number for each employee on the return. This will ensure that an employee’s details are updated correctly to the Revenue and Department of Social Protection (DSP) computer systems with the minimum of delay. The PPS number should match the PPS number on the most recent Tax Credit Certificate issued by Revenue to the employer. 

If, as an employer, you have an employee in respect of whom you have a PPS number but have not received a Tax Credits Certificate from Revenue, this indicates that the person concerned has not been registered with Revenue for this particular employment. Before this person’s pay, tax and PRSI details are filed with Revenue on the P35, you should immediately advise the appropriate Revenue District of the person’s name, address and PPS Number so that we can register the employee as employed with you and issue a Tax Credits Certificate.

When you have a Tax Credits Certificate for that employee, you can then include that person’s pay, tax and PRSI details on the P35 return. If you have filed the P35 return already (without that person’s details), then you need to file a supplementary P35 for that employee.

If you have enquiries on any aspect of the P35 Return filing, please contact the P35 Helpline on 1890 25456