Guidelines for Cash Businesses Using Tills

Revenue have issued a new information leaflet for cash businesses using tills. Some key points are

• transactions must clearly show dates cost and VAT
• till rolls or electronic backup must be retained for 6 years
• it must be possible to produce backup information for Revenue auditors

Revenue Warning on Bogus Phone Calls

A caller (reported to have a non-Irish accent) pretending to be a Revenue official has been contacting businesses seeking PPSN numbers or addresses of named taxpayers. Revenue note that they would not make this type of telephone call.If you have doubts about a caller claiming to be from Revenue you should contact your local Revenue Office.

Transfer of assets to spouses to protect against lenders

Many business people under pressure from lenders have tried to protect their assets by transferring them to their spouse. At least two banks have stated that they will pursue legal action to overturn these transactions.

On-line tax registration

It is now possible to register online for the following taxes

• Income tax
• Employers PAYE/PRSI
• E-levy

This is available on the  My Services page on ROS page in ROS. http://www.revenue.ie/en/online/ros/index.html

 Upcoming seminar

Watch out for details of our upcoming seminar on business tax issues.

Income Tax

High Earners Restriction on Specified Reliefs

This restriction targets high earners making use of certain tax reliefs, mainly property related.

The threshold for this restriction is reduced to €125,000.

The threshold for adjusted income is reduced to €400,000. It was €500,000

 This aims at increasing the taxtake on high earners to an average 30%.

Levy on Non-resident Irish Domiciled Individuals

An annual levy of €200,000 will apply t0 individuals who have

an Irish Income Tax liability under €200,000

worldwide income over €1m

Irish property valued over €5m. Borrowings do not reduce the property value

Example

Property Valued €6m

Mortgage €5m

Value for Levy €6m

Health Expenses

The requirement for a hospital to be on a specified list has been removed. Now the taxpayer only has to prove that the treatment was necessary.

Certain treatments will be ineligible

• cosmetic surgery unless for sound medical reasons
• treatments deemed to be against public policy

Pensions

There are no changes to the tax treatments of contributions and payments. However, one tax planning opportunity has been removed.

Previously, money held in a PRSA did not incur the deemed 3% distribution imposed on an ARF. Now, after the date when an annuity could have been bought, funds left in the PRSA will incur the deemed distribution.

Example

Fund in PRSA €500,000

Date transferable to annuity 1/1/2011

Deemed distribution to PRSA holder 2011 €15,000

Taxed at marginal rate

Remittance Basis

There are three significant changes to the remittance basis of taxation. This is where the taxpayer’s foreign income is taxed only when remitted to Ireland.

The changes are

Irish citizen’s not ordinarily resident

This would apply where an Irish citizen moved abroad for three years and the returned. They would not be ordinarily resident. They will no longer qualify for the remittance basis.

Proof of domicile

Revenue will now seek proof of non-domiciliary status. It will be critical to maintain a link with the original country of domicile  e.g. by keeping a grave plot, club memebership.

Seconded employees

When an employee was seconded to Ireland they will now get the remittance if

• They have been transferred from an European Economic Area  or Double Tax Agreement country. Previously the EEA was excluded
• They work here for one year. Previously it needed three years.

Rental Income

Capital allowances  for the year must be used before losses forward

Service Charges

The tax credit for service chrges is abolished.

Capital Taxes

Capital Acquisitions Tax

there is a new pay and file system for CAT

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

It has imposed an 80% rate of Capital Gains Tax on certain land disposals. This has caused some confusion as many taxpayers think that it relates to all land disosals are caught.

The disposals caught by the tax are

• Where the land has been rezoned.
• Getting planning permission is not rezoning.
• The designation of the land must change from

                            non-development to development 

                            from on type of development to another e.g from commercial to residential

Finance Act 2010 introduced a provision that planning perissions involving a material contravention of the Local Development Plan are also caught by the tax

This very brief outline shows how complex this issue is. You should always seek professional taxadvice.

Valuation. Valuing businesses is complex and needs expert advice. It may mean using benchmarks from comparable busiensses in the same sector.

Timing

This is important both to

• get a good price
• maximise tax reliefs e.g. retirement relief

Company sales involve other decisions

• Sell shares or sell assets?
• What to do with company property?

Shares vs Assets

Selling shares is simpler for the seller. It may also enable CGT deferral via share for share sales.

Purchasers prefer to buy assets as there is less risk of hidden liabilities e.g. revenue audits. To get a sharesale you will have to give tax indeminities.

Property

Even at today’s lower values company premises may have a high value. They may not interest the purchaser, for example in a management buyout. They also have a stamp duty cost to the buyer.

It may be worth restructuring to remove them from the sale.

The many issues in a company sale mean you should consult professional tax advice

Planning and advice are critical to these decisions. A good tax adviser will play a major part. Some issues to consider are

Current low capital values.

 Making a gift is a disposal for Capital Gains Tax. Low asset values minimise this. therfore, now may be a good time to consider passing on assets.

Use of reliefs

Taxpyers should organise theirtransactions to use reliefs such as

• Retirement relief for Capital Gains Tax. This need not mean actual retirement
• Business and Agricultural Property Relief 
• Principal Private Residence

Possible use of trusts

These can be used for example to

• care for incapacitated relatives
• pass assets to children while ensuring responsible use
• manage CAT thresholds and liabilities

Family partnerships

These are structures to enable involving your children in business without ceding control. They get around some of the complexities of trusts

1. avoid PRSI
2. facilitalte tax evasion

They aim to prove that many are actually employees. This could leave “employers” with PAYE and PRSI liabilities.

Areas of risk  particular scrutiny are

management employees

1. locums e.g. doctors
2. labour only contractors
3. contract interim managers

Consult your tax adviser if in doubt about any of these issues

1. undeclared rental income
2. possible undeclared income used to buy the property
3. possible invalid claim of stamp duty exemptions

If a taxpayer falls foul of any of these it can lead to significant interest and penalties. Stamp duty problems could cause bills of tens of thousands alone. Revenue get information on rentals and are able to link up with stamp duty payments and exemptions.

Landlords who feel they may have a problem should contact their tax adviser to help resolve it.

.

The foreign country’s regulations will govern what is reclaimable.

The agent may have to supply scanned images of the invoices.

Now, where the customer can supply a valid EU VAT number the service provider can charge VAT at 0%.

Your invoice must state that VAT is being accounted for by the customer on the “reverse charge” basis.

The customer then accounts for VAT as follows

Charge VAT at own rate e.g. UK VAT as if on a sale

Reclaim VAT in the % dduction they are allowed