Archive for the ‘Uncategorized’ Category

Reducing gift/inheritance taxes

Thursday, August 9th, 2012

Increased exposure

In recent years your possible exposure to gift and inheritance taxes has increased because

  • Thresholds have fallen drastically. The Class A threshold is now only €250,000. This brings many more beneficiaries into the tax net.
  • The rate has increased from 20% to 30%

Also, many estates may not have cash to settle a liability.

Can you reduce the problem?

You can to reduce tax costs and manage the cash problem. For example you can

  • Use available reliefs
  • Spread gifts/inheritances
  • Insure against CAT payment

Available reliefs

The main CAT reliefs are

  • Agricultural Property
  • Business Property Relief
  • Principal Private Residence
  • Small Gift Exemption

There are detailed conditions for these reliefs. I will give you some tips on less obvious ways to use them.

Agricultural Relief

This gives 90% reduction on the value of agricultural property where the beneficiary has 80% of their assets as agricultural property. Property worth €1m will be treated as €100,000 for tax. Two possibilities are

  • The relief also applies if a gift of cash is applied within two years to buy agricultural property and the beneficiary passes the asset test. This could be used to gift to someone who wants to enter farming. They can manage their asset portfolio to pass the 80% test
  • Cash could be put in trust for someoneuntil they qualify under the 80% test for the relief

Business Property Relief

This applies the same 90% reduction as Agricultural Relief

If a relative’s business needed cash you could give it in return for a 30% shareholding.  This is enough to qualify for Business Relief. You can then pass the 30% holding on say by will and it will qualify for the relief.

Principal Private Residence

If you wish to gift or bequeath a house to a child you should let them live in it as their residence for three years beforehand. It will then be exempt fron Gift/Inheritance Tax

Small Gift Exemption

A person can get gifts up to 3,000 per annum from any number of people in any year without a tax liability. parents, grandparents, other relatives and even strangers can give this benefit tax-free.

Spread benefits

The tax threshold depend on your relationship to the person passing the benefit. Therefore, you can split up the benefit to use the threshold. For example

Bequeath €500,000 to son. Your son is married with there children has three children. His threshold is €250,000. Tax is €75,000.

You could instead pass the asset as follows to use other thresholds

To your daughter in law €16,604

To each grandchild €33,208

You remove €116,228 from the tax net. This saves €34,868

Insure against gift/inheritance tax costs

You can take out an insurance policy to cover the tax costs. The proceeds are tax free if they are used to pay the tax

You should consult your insurance advisor for independent advice in this area

For advice on gift/inheritance taxes e-mail us at info@conlonosullivan.ie

Compulsory Purchase Orders

Thursday, February 2nd, 2012

Our New Office

Thursday, October 13th, 2011

We have just moved to a new office in
Pavilion House
31 Fitzwilliam Square
Dublin 2

Phone; 01 7759421

French property owners face new tax

Thursday, May 26th, 2011

In our reading of tax news items we note a proposed new French tax on non-resident property owners. This will be 20% of the property value used to calculate the taxe fonciare, the equivalent of rates.

Discrimination against non-residents would appear to be against EU legislation. owners should consult their French advisers.

Nama Business Plans

Wednesday, February 3rd, 2010

The National Asset Management agency has been set up to manage non-performing property loans. As part of the process builderts and developers whose assets are being taken on by NAMA must now prepare detailed business plans .

Key elements of these plans include

  • Details of land holdings
  • Projected incomes
  • Projected completion costs
  • Remediation costs
  • Cash flow projections

The underlying assumptions must be realistic. Plans will be given detailed scrutiny.

Professional help will be vital for a high standard of planning

Business Plans and how to use them

Monday, January 4th, 2010

What is a Business Plan?

Most people see a business plan as a set of numbers mainly designed to get finance. It will normally comprise

  • Outline text
  • Projected financials i.e. P + L, Balance Sheet and Cash Flow

The plan will be done at start-up. It will be dusted down when new finance is needed

What’s wrong here?

There are several things wrong with this approach. These are

  • It avoids asking the key business questions like
    • who are our customers, how do we get and keep them
    • who are the competition
    • what are our strengths, weaknesses, opportunities and threats
    • We never measure performance against the plan. That’s like setting off for Bedlfast and arriving in Cork..
    • We may not understand how the numbers hang together e.g. how payment options affect cashflow

How should we use plans?

  • Look at the key business stategy first. What are you offering? What is the market
  • Based on your strengths and weaknesses develip yourtactics, pricing, advertising etc
  • Put put numbers on your projected results
  • Debate the plan with partners, advisors, family etc. This helps you identify weaknesses and argue your case convincingly
  • When in business continuously monitor performance against the plan

How we can help

We can help you in several ways

We have broad commercial experience in project appraisal  We can help you in the strategic and financial planning phase.

We support you in presenting to your case to lenders and grant agencies.  We are approved Enterprise Ireland advisors.

Measuring performance against plans can be difficult for small businesses. We vcan provide accounting services to givy you ongoing information on how you are doing.

Share Options

Monday, January 4th, 2010

Do you get Share Options or Awards?

Many company employees, particularly in multinationals, get benefits in the form of shares. Depending on the type of benefit there are a number of tax treatments. They all have one thing in common. The PAYE system does not cater for these benefits.  The recipient employee, will at some point have to submit a personal tax return. This is often overlooked and employees may have several missed returns. What starts out as a benefit may end up as a source of worry and stress.

Types of Benefits

The main benefits are

  • Share options. These give the employee the right to buy shares at a discounted price.  The employee gets the option at a “grant date”. The eventual purchase of the shares is called the “exercise date”
  • Savings schemes to purchase shares. Here, the employee saves from his/her net pay into a special scheme. The scheme buys shares on the employees behalf
  • Stock awards as bonuses. These shares are free to the employee. They my sometimes vest, i.e. become owned by the employee at a later date e.g. an award in 2009 may only vest in 2010.
  • Dividends on shares held

Approved and Unapproved Share Schemes

The tax treatment of options and savings schemes differs between approved and unapproved schemes. Revenue Approved Schemes must meet stringent conditions.  Many multinational schemes were not amended to meet these requirements and so are unapproved. There are lists of approved schemes on the Revenue website

Tax treatment

Share options

Approved Scheme

No tax arises at either grant or exercise date. When the shares are sold, the employee pays Capital Gains Tax.

Unapproved Scheme

The employee is liable to Income tax at their higher rate on the discount between market price and the option price at exercise. If the option has a life over 7 years tax is payable when the option is granted.

The employee must also submit form RTSO1 to Revenue within 14 days of exercising the option.

Savings Schemes

Approved Schemes

No tax arises when the shares are acquired. Capital Gains Tax is due when the shares are sold. The deductible cost is the price paid for the shares

Unapproved Schemes

The employee is liable to Income tax at their higher rate on the discount between market price and the scheme purchase price.

Stock Awards

These are taxable as a Benefit in Kind. The benefit is the difference between market price and any cash paid at the award date.

Dividends

Receipt of dividends mean the employee must file a tax return. Irish dividends suffer witholding tax at 20%.

Foreign dividends are taxed on the amount received. They are taxed at the lower of the Irish and foreign effective tax rates.

How we can help you

We can help you to file your returns for Income and Capital Gains Taxes.

If you have neglected to file returns we will deal with Revenue on your behalf. There may also be some offsetting credits you have left unclaimed. In any case, we will help remove the worry and unease of the outstanding issues.

The above is a general outline. It is not a substitute for professional tax advice