February tax news: audit of accountancy practices

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Audit of accountancy practices
We understand that Revenue have commenced a pilot project auditing accountancy practices in the Cork area, whether the project will be extended to other regions is likely to be determined by the tax take from the sample practices. In our experience the following are areas that attract Revenue attention:
• Correct accounting for VAT particularly with regard to recovery;
• Correct accounting for PAYE with a particular focus on expense claims;
• Verification of turnover;
• Incorporation of practices together with goodwill valuations and legal documentation of transfers (or not as the case may be);
• Retirement relief claims with regard to incorporation.
Transferring your business to a company
Revenue’s long standing concession concerning capital gains tax (CGT) relief and the transfer of bona fide trade creditors as part of the transfer of a business to a company is clarified with respect to debts such as business loans. The concession applies to genuine trade creditors who supply goods or services to a business and not business debts such as bank loans or tax liabilities taken over by the company.
Generally relief is provided under section 600 TCA 1997 where a business, together with the whole of its assets, or the whole of its assets other than cash, is transferred to a company as a going concern wholly or partly in exchange for shares.
PAYE for non-resident employees
An Irish resident employer will not be obliged to apply for a PAYE Exclusion Order in respect of remuneration paid to a non-resident employee in certain circumstances per Revenue eBrief No. 03/15. The eBrief states that where the employee:
• is not resident in the State for tax purposes,
• has been recruited abroad,
• carries out all the duties of employment abroad,
• is not a director of the employer, and
• is outside the charge to tax in the State,
the employer is not required to apply for an Exclusion Order under section 984 TCA 1997 and accordingly does not need to operate Irish PAYE.
New Penalties for principal contractors
Principal contractors who fail to operate relevant contracts tax (RCT) on payments to subcontractors within RCT will be liable for a penalty proportionate to the amount of the tax that should have been deducted.
The penalty for each instance of non-operation of RCT after 1 January 2015 will be based on the status of the subcontractor:
• Where the subcontractor is liable to the zero rate of RCT, the principal will be liable to a civil penalty of 3% of the relevant payment.
• Where the 20% RCT rate applies, the principal will be liable to a civil penalty of 10% of the relevant payment.
• If a RCT deduction rate of 35% applies, the principal will be liable to a civil penalty of 20% of the relevant payment.
• Where the subcontractor to whom the payment was made is not known to Revenue the principal will be liable to a civil penalty of 35% of the relevant payment.
Tax treatment of payments for support, maintenance or education
Revenue have issued an eBrief setting out their position on the Finance Act 2014 amendments to the capital acquisitions tax (CAT) treatment of payments to children for the provision of support, maintenance or education from their parents.
The CAT legislation is amended to confine the CAT exemption to payments received by a:
• a minor child of the disponer or of the civil partner of the disponer or,
• a child of the disponer, or of the civil partner of the disponer, who is more than 18 years of age but not more than 25 years of age who is receiving full-time education or instruction at any university, college, school or other educational establishment, or
• a child of the disponer or of the civil partner of the disponer who, regardless of age, is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself.
Information on agricultural relief
Revenue published an updated version of their guidance on agricultural relief for capital acquisitions tax which includes the changes introduced by Finance Act 2014. The main changes concern the “farmer test” , the treatment of farm leases and the clawback provisions.
Guidance also published from Revenue on the income tax exemption for certain income arising from leasing of farm land is updated to include the changes introduced by Finance Act 2014. With effect from 1 January 2015 the age restriction or the requirement to be permanently incapacitated are removed.
The conditions for the relief, how the relief operates and the changes effective from 1 January 2015 are detailed in the guidance note. It is also noted that a company may be an eligible lessee provided it is not connected with or controlled by the qualifying lessor(s).
Tax treatment of animal leasing
Revenue eBrief No. 17/15 clarifies how animal leasing should be treated for income tax and VAT purposes. A dairy farmer with surplus cattle may lease them to another dairy farmer who wishes to increase production without the need to invest in ownership of extra animals. Where the lessor continues to carry on the business of farming, Revenue will accept that the income from leasing of cattle will be considered to be income from farming and will be taxed accordingly. The income tax treatment is detailed in the eBrief.
Animal leasing is liable to VAT at the standard rate, currently 23%.Two scenarios may arise in relation to VAT and leased animals and details of these are set out in the eBrief.
Updated guidelines on research and development tax regime
Updated guidelines published by Revenue take into account changes to the Research and Development Tax regime made by recent Finance Acts. Also included are examples illustrating calculation of the relief and new content which is intended to clarify aspects of the regime.
Disclosure window for tax avoidance transactions
Details on the “qualifying avoidance disclosure” provided for in Finance Act 2014 are available in Revenue Brief No. 16/15. The legislation allows a taxpayer, who entered into a tax avoidance transaction on or before 23 October 2014, to settle with Revenue by paying the tax due and a reduced amount of interest. To avail of this opportunity, a taxpayer must make a “qualifying avoidance disclosure” on or before 30 June 2015.
Guidelines on mandatory disclosure regime
Amended Guidance Notes on the new mandatory disclosure regime are available on the Revenue website. The amended guidance notes reflect the changes introduced by Finance Act 2014 which are effective for any transaction which is commenced after 23 October 2014.
Personal Tax Forms for 2014
The paper version of the Form 11 for 2014 is now available on the Revenue website. The 2014 Form 11 is also available on Revenue Online Service.
The Form Med 1 for 2014 can be used to claim tax relief for certain health expenses incurred during 2014.
The above Revenue documents are available on the Revenue website.

Changes to the Capital Gains Tax regime

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Mark Doyle outlines the key changes to the Irish tax treatment of capital gains including reliefs available to farmers and recently published Revenue eBriefs on capital gains tax.
Read the article in full here

Finance Bill 2014

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Finance Bill 2014 was published on 23 October 2014; the Bill includes many tax measures not previously announced and also confirms the announcements made by the Minister of Finance in his Budget speech. In this article, featured in Accountancy Plus December issue, Mark Doyle examines, at a high level, the main tax changes that will impact taxpayers.
Read the article in full here. 

November tax news : pay & file deadline

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Pay & File Deadline & Revenue Audits
Revenue has confirmed that they will endeavor not to schedule comprehensive audits or final meetings over the next few days as we lead up to the ROS filing deadline of 13th November.  According to Chartered Accountants Ireland, Revenue have stated that, “it is recognised that Tax Practitioners, especially those in small/medium practices, are predominantly occupied with the Income Tax return filing deadline during the month of October and the first half of November each year”.
Revenue’s Pay & File Tips
Revenue have published an eBrief setting out some reminders for the current Pay & File income tax season.   Some of the tips outlined are;

  • Taxpayers and agents registering for Revenue Online Service (ROS) are advised to allow at least 10 working days to complete the registration process.
  • Tax agents are also advised that they must be linked to their clients before submitting the income tax return; and it may take up to 2-3 working days for the agent/client link to be recorded on the eRegistration system.
  • There is an option to complete a pre-populated 2013 Form 11 return for both ROS on-line and offline.
  • 2013 PAYE pay and tax deducted details and Department of Social Protection (DSP) payments are provided when a pre-populated Form 11 is selected.
  • If a Form 11 return generates a refund and the taxpayer wishes to offset this refund against their Preliminary Tax or Capital Gains Tax obligations, a Statement of Net Liabilities must be completed.
  • A transaction charge of 1.1% of the value of the payment applies to credit card payments via ROS.

Income Tax Self-Assessment
Revenue’s guidance on the new full self-assessment which applies for 2013 Income Tax Return may also be of use when filing returns over the coming days.  You are reminded that the new self-assessment panel in ROS requires you or the client to make a self-assessment by either choosing to accept Revenue’s calculation or disregard it and enter your own figures.
Amending Tax Returns
Guidance on the procedures for amending a tax return which has already been filed was published by Revenue.   The guidance also covers claims for repayment of tax arising out of an error or mistake in a tax return and the time limits for self-correction without penalty.
High Income Earners Restriction
Guidance on the application of the High Income Earners restriction, with worked examples, is available in Revenue’s Operational Manual.  This guidance, and a technical note on the Revenue website on the application and calculation of the restriction, may be of assistance as you prepare 2013 income tax returns.  The Revenue’s analysis of the High Income Individuals’ Restriction in 2012 may be of interest to you.  The analysis, which is published on the Department of Finance website, shows that 1,040 individuals were subject to the restriction in 2012 yielding €63.2 million in additional income tax.
iXBRL Financial Statements
Phase 2 of mandatory iXBRL filing commenced last month for taxpayers filing corporation tax returns on or after 1 October 2014 in respect of accounting periods ending on or after 31 December 2013.  Corporate taxpayers who satisfy three specific criteria are excluded from phase 2 of mandatory iXBRL filing.  The criteria are:

  • Balance Sheet total does not exceed €4.4 m, and
  • Company turnover does not exceed €8.8 m per annum, and
  • The average number of employees does not exceed 50.

Each of the three criteria must be met otherwise the company is required to file the financial statements in iXBRL format in Phase 2.
Revenue has published eBrief No. 85/14 which deals with the iXBRL filing requirements of Holding Companies and also phase 2 of mandatory iXBRL filings.
Finance Bill 2014
Finance Bill 2014, published on Thursday 23rd October, sets out the fine print of Budget 2015, also contains details of tax measures not announced by the Minister during his Budget speech on 14th October.  The Bill is expected to pass through the Dáil this month and be enacted as Finance Act 2014 early December.  Mark features an article on Finance Bill 2014 in the CPA Ireland journal this month.  This article will also be published on our website in due course.  If you would like a copy of this article please contact us.  In the meantime you can download the Finance Bill from the Oireachtas website.

August Tax News: directors' travel expenses

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Non-executive directors’ travel expenses attending board meetings
The cost of travel by a non-executive director from home to board meetings will not qualify for a deduction under the Taxes Consolidation Act 1997 (section 114) according to Revenue. However, Revenue note in their operational manual that there are may be circumstances in which a non-executive director’s expenses of travel in respect of attendance at board meetings would qualify for a tax deduction under the provision of section 114.
The Revenue operational manual at Part 5 (05-02-19) sets out the statutory provisions with regard to the claiming of travel and subsistence expenses by directors, including non-executive directors, and the right of such director to make a claim for a tax deduction in respect of those expenses.  Revenue also set out their position on the application of these statutory provisions dealing with travel and subsistence expenses of non-executive directors in their operational manual.  The manual is published on the Revenue website.
Guidelines on Involvement with VAT Fraud
Revenue recently published guidelines on the consequences for taxpayers of becoming involved in a set of transactions connected with VAT fraud.  In the guidelines Revenue warn that taxpayers could lose entitlement to a VAT input credit or may be liable for Irish VAT on previously zero-rated intra-community supplies where the related transactions are connected with fraud.  Revenue also advise that due diligence should be undertaken when entering into a business transaction and set out some steps that should be taken before entering into a transaction and risk indicators that should be considered.  The guidelines are published in Chapter 16 of the VAT Manual.
Self-Assessment System
A list of Frequently Asked Questions has been published by Revenue on the new self-assessment system.  Under the self-assessment system taxpayers or their agents must make their own assessment to income tax, corporation tax, or capital gains tax as appropriate. In previous years Revenue would assess the taxpayer on the basis of the information entered in the return of income. For the 2013 Form 11 tax returns the new self-assessment system applies. A key feature of the new system is the required completion of a self-assessment panel on ROS.   According to a recent report by Chartered Accountants Ireland errors with the completion of this panel as a result of third party software have now been resolved by Revenue.
Updated Revenue Complaint and Review Procedures
Revenue’s Complaints and Review Procedures were updated recently to clarify when the procedures can be availed of by taxpayers.  The Complaints and Review Procedures are published in Leaflet CS4 and can be used by customers for a wide range of issues “regarding Revenue’s handling of their tax and duty affairs”.   The procedures now include a specific provision for the exclusion of a review request in cases where a notification of a Revenue Investigation has issued. However, it appears that a review can be submitted after the investigation is complete if it is still appropriate.  The updated Leaflet CS4 is available on the Revenue website under About Us- Customer Service – How to Complain to Revenue
Contacting Revenue
Revenue has published updated guidelines for taxpayers and practitioners on how to contact them with a query.  The guidelines, published in Revenue eBrief No. 63/14 set out the procedures to be followed when making contact with Revenue and the use of secure email.   The guidelines highlight that submissions to Revenue must be made via secure email and that a specific format must be followed.   Also Revenue Legislation Service will no longer deal with routine and ad-hoc queries from practitioners and taxpayers. Except for the matters referred to paragraph 5 of the Guidelines, such queries are to be directed to the appropriate Revenue District for answer.
Payments on Redundancy or Retirement
Revenue has also updated their guidance leaflet – IT21 on the tax treatment of lump sum payments on a redundancy or a retirement.  Such lump sum payments may be exempt from tax or may qualify for some relief from tax.   Details of the exemption and reliefs available are covered in the updated guidance which is published on the Revenue website under Taxes & Duties – Income Tax – Leaflets.
Pensions – Personal Fund Threshold and Standard Fund Threshold
A new electronic system to facilitate notification of a Personal Fund Threshold (PFT) for pension purposes is now available.  The new system can be accessed via ROS or PAYE Anytime.  Revenue eBrief No. 50/14 sets out details on this new electronic system, who should make a PFT notification and the relevant time limits.  Revenue has also published updated guidance on the Standard Fund Threshold (SFT) regime and the PFT.  In brief, the SFT regime imposes a limit on the total capital value of pension benefits that an individual can draw in their lifetime from tax-relieved pension arrangements. Were the limit is exceeded there are tax consequence.  If the capital value of an individual’s pension rights on 1 January 2014 exceeds the SFT limit of €2m, the individual can protect that higher capital value from any risk of incurring chargeable excess tax in the future by notifying Revenue and obtaining a PFT certificate from Revenue for that amount.
The above mentioned Revenue documents are available from the Revenue website www.revenue.ie
 

Taxing Land Profits

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Before we look forward it is useful to look back at how development land was commonly held and treated for tax purposes prior to the economic downturn (1).  In the past there was a difference in the income tax treatment between residential development land and non-residential development land. Residential development land qualified for a special 20% rate of income tax which made it extremely attractive for developers to hold such sites in their personal capacity. This led to a practice whereby housing was sold to the end purchaser on foot of two agreements – one for the sale of the site on which the house stood between the developer and house-buyer and the other between a construction company (controlled by the developer) and the house-buyer. The profits realised on the sale of the site by the developer were only subject to income tax at 20% (2) while the profits realised by the construction company were subject to corporation tax at 12.5%. Overall, the tax position for developers was very attractive. The tax benefits of this structure led to developers taking on large amounts of personal debt to acquire development land and this is perhaps a part contributor to the personal debt problems suffered by many over recent years.
Trading profits realised on the sale of non-residential land were subject to income tax at marginal rates, in this regard land held for non-residential development was generally held and developed through companies to gain access to the 12.5% rate on the sale of fully developed land (3).
The tax position for persons who held land that increased in value was also attractive with a CGT rate of 20% applying to capital profits. Land was often acquired by way of buying the company that held the land. The upper rate of stamp duty was as high as 9% which meant that significant stamp duty savings could be made by acquir ing the company that held the land rather than the land itself as the rate of stamp duty on shares was 1%. Some developers also availed of “resting in contract” structures to avoid stamp duty when acquiring land.
SIGNIFICANT CHANGES
Enactments since the economic downturn have changed the tax position for developers quite dramatically. The main changes are:
➤ The 20% income tax rate for residential land dealers was abolished from 2009 and any such profits are now subject to income tax at marginal rates;
➤ Certain profits attributable to a rezoning of land post the passing of the NAMA Act where the profits are realised in the course of a trade are subject to income tax at 80%. Capital gains attributable to such a rezoning are also subject to tax at 80%;
➤ The rate of stamp duty on land has been reduced to 2% and “resting in contract” structures have largely been legislated against;
➤ Debt written off for individual land dealers/developers will be regarded as a receipt of the trade where that debt was used to purchase or develop land held as trading stock;
➤ For individuals, if a loss arises as a result of interest charges or diminution in trading stock, relief for the loss cannot be claimed unless the interest has been paid and/or the stock sold. (4)
➤ For CGT purposes where land is acquired with borrowed money and that debt is subsequently released the base cost of the land is now reduced by the amount of the debt released or in other circumstances a chargeable gain is deemed to arise.
➤ A CGT exemption was introduced to relieve capital gains arising on property (i.e. land and buildings) acquired before 31 December 2014 where that property is held for at least seven years. If the property is held for longer than seven years a proportionate amount of the gain is relieved – for example, if land is held for nine years, 7/9ths of the gain arising is relieved.
As a consequence of these changes, developers will now need to consider how to hold development land taking into account the potential impact of the 80% tax rate introduced by the NAMA Act on profits and capital gains on land rezoning.
HOLDING DEVELOPMENT LAND
A question that arises is whether land should be held personally or via a company. For individuals carrying on a trade of dealing/developing land without trading losses carried forward it probably no longer makes sense to hold development land personally. This is because any profits realized on the land will be subject to income tax at marginal rates (assuming the land is not subject to the 80% NAMA tax). The 20% income tax rate for dealing in residential land was abolished from 2009 thereby removing the main motivator for the holding of land personally. Individuals with significant carried forward trading losses may seek to continue that trade in their personal capacity in order that any profits arising on future trading activities would be relieved from income tax.
Where losses forward are not available the more tax efficient route for individuals may be to have a company controlled by them acquire the land; if the company fully develops the land, the profits arising thereon should be subject to corporation tax at 12.5%.
Changes in taxing the write-off of bank debt and restricting loss relief where land is written down and interest accrued will potentially impact on certain genuine land dealers/developers. Such changes have made it less attractive to carry on a trade personally as the tax impact of potential failure is greater.
For non-dealers/developers in land (i.e. not carrying on a trade) the CGT relief for property acquired before 31 December 2014 and held for at least seven years represents an interesting opportunity. It should be more tax efficient for such an individual to acquire land personally rather than by way of a company controlled by them.This is because if the land is held by a company in order to extract any profits from that company a charge to income tax or CGT would arise, if the land is held personally gains on of sale can be received by the individual in a potentially tax free manner.
It is important to note that if an individual holds the property, any income from that property (i.e. rental income) will be subject to income tax on their lands.
IMPACT OF NAMA TAX
Some consideration must be given to the potential impact of the 80% rate of income tax (5) and CGT introduced by the NAMA Act 2009 (6).These provisions only impact on land that has been rezoned (7) on or after 30 October 2009 or where the land has been subject to a material contravention of a development plan on or after 4 February 2010 (collectively referred to as “rezoning” hereafter).The 80% tax rate only applies on profits attributable to the rezoning. There will be some difficulty ascertaining the amount of profits chargeable to the 80% income tax rate and the amount subject to tax as normal. It is likely to be the case that a land dealer will have profits from other land dealing activities not attributable to the rezoning, i.e. some profits could be attributable to the grant of planning permission, the construction of a building and marketing of the property, such profits would be taxed as normal. Persons subject to this tax should ensure that their records are sufficient to support the position that they adopt; professional valuations of the land should prove useful in this regard. Alternatively, there may be some merit in having the construction work carried out by a separate company to split the profits clearly.
The 80% CGT rate is more limited in its application than the income tax provisions outlined above. The 80% rate of CGT only applies where there is a disposal of land and that land:
a. has been the subject of rezoning since its acquisition by the person making the disposal;
b. was acquired from a connected person and the acquisition cost for the purposes of the CGT Acts was other than market value, where the rezoning took place during the ownership period of either person; or
c. was the subject of a sequence of transfers between connected persons, if the rezoning took place during the period between the date of disposal and the latest date at which the acquisition cost, at any step in the sequence, was market value.
For the 80% rate of CGT to apply the land must have been rezoned while in the ownership of the person making the disposal and in this way it differs from the income tax position outlined above. While the impact of the 80% rate of CGT may not be significant when land is first rezoned, as time passes and land becomes more valuable the level of profit attributable to the rezoning will grow.
Points b) and c) above are designed to prevent the side-stepping of the 80% tax rate by way of connected party transfers. Certain transfers that limit the application of the tax are still permitted. Where appropriate, companies holding land are again being bought in preference to buying the land as the cost of the land to the company when it was originally acquired could be in excess of the land value today thereby potentially exposing less future profits to the 80% rate of tax.
The 80% rate of income tax or CGT is likely to mean that the value of recently rezoned land is lower than land that was rezoned prior to the passing of the NAMA Act and that persons holding such land will hold off developing or selling it until such time that the law in this area is changed.
CONCLUSION
Lessons should also be taken from the personal debt crisis where those who fared best often benefited from the protection afforded by the corporate veil. When searching for a tax efficient structure, what might suit one taxpayer may not suit another, and all cases must be considered individually.
Notes:
1.This article deals with direct taxes only and is high level in nature in addition VAT is beyond the scope of this article
2. PRSI and the health levy did not apply
3. The 12.5% rate is available on the sale of fully developed land, profits arising on the sale of non-fully developed land would be subject to tax at 25%.
4. Applies only to an individual whose income related to land dealing over a three year period is less than 50% of their total income
5. Rezoning profits realised by a company are subject to income tax rather than corporation tax
6. Certain sales of land are not subject to this tax e.g. land sold on foot of CPO and sales of sites of
0.407 hectares or less not exceeding €250,000 in value
7. See section 644AB TCA 1997 and section 649B TCA 1997 for what amounts to a rezoning of land.
This article first appeared in the August issue of Accountancy Ireland (Chartered Accountants Ireland)

June 2014 Newsletter

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Member of CCAB-I Taxation Committee South
Mark recently became a member of the CCAB-I Taxation Committee South. The Consultative Committee of Accountancy Bodies – Ireland “CCAB-I” is the representative committee for the main accountancy bodies in Ireland. The Tax Committee South is a CCAB-I committee responsible for advising Chartered Accountants Ireland on taxation issues. The committee interacts primarily with the Revenue Commissioners and the Department of Finance and participates on TALC (Taxation Advisors Liaison Committee).

Consultation on Agri-Taxation
Mark, in his new role as member of the CCAB-I Taxation Committee South, recently met  with officials from the Department of Finance and the Department of Agricultural, to discuss recommendations made under the Agri-Taxation consultation. Incentives to encourage  growth and development of farm businesses and simplified options for taxation of such  businesses were discussed with officials.

Revenue Guidelines on Advance Opinions
The circumstances in which Revenue’s Large Cases Division (LCD) will provide opinions/confirmations in advance of a transaction have been published by Revenue in Tax Briefing Issue 04. Certain procedures are to be followed by taxpayers and agents when requesting an opinion or confirmation from LCD in advance of a transaction/event on or after 9 May 2014.

Electronic Form 12
An electronic version of the 2013 Form 12 tax return is available. This is the first phase of the eForm 12 facility and the most common income types, credits, allowances and reliefs are included. A second phase, which will provide for additional income, credits and reliefs, is expected next month. If you, or your client is already registered for Revenue’s PAYE Anytime service you can access the eForm 12 using the same PIN details. If you are not already registered for PAYE Anytime, you can apply for a Revenue PIN from the Revenue website. Processing time is expected to be 5 working days. The eForm 12 is currently accessible from the Revenue website only. It is expected to be available via PAYE Anytime next month. As a tax agent, you can access the eForm 12 service for your clients via Revenue Online Service “ROS”. However, the ROS option only applies where the client is not already registered for Income Tax.

Local Property Tax Reliefs for Certain Individuals
An eBrief was published by Revenue recently confirming that they will operate on an administrative basis the extension of two Local Property Tax (LPT) reliefs in relation to residential properties that are occupied by certain disabled and/or incapacitated individuals. The extension of the two reliefs is intended to correct anomalies and inequities that had been identified in the operation of the reliefs and, pending the enactment of further legislation. According to eBrief No. 38/14 Revenue will deal with affected cases on an administrative basis in line with guidelines published on its website.

Debt Release – Land Dealers and Developers
Instructions and examples illustrating the operation of legislation for the release of debts in certain trades (section 87B of the Taxes Consolidation Act 1997) has been published by Revenue. The legislation provides that the release of a debt, in certain circumstances, to be treated as a receipt of income and, consequently, chargeable to tax. The instruction, which is included in Part 4 of the Revenue Tax & Duty Manual, also sets out the time at which the debt release is deemed to have taken place, including the circumstances of bankruptcy and personal insolvency.

Capital Gains Tax Exemption for Single Payment Entitlements
Revenue published an update to their Tax & Duty Manual which reflects the announcement from the Minister for Finance that a capital gains tax exemption will apply for the owners of Single Payment Entitlements. The exemption applies where all of those entitlements were leased out in 2013 and where the owners disposed of those entitlements to the lessee before 15 May 2014. This means that individuals to whom the exemption applies will not be required to pay capital gains tax on any qualifying disposals that would ordinarily be payable by 15 December 2014. The legal provisions to give effect to the CGT exemption are expected to be included by the Minister in Finance Bill 2014 later this year.

Companies who have raised BES/EII/SCS Investments
An updated list of companies that have made a declaration to Revenue that they have raised Business Expansion Scheme (BES), Employment and Investment Incentive (EII), Seed Capital Scheme (SCS) investments on or after 1st January 2007 is now available on the Revenue website.

The above mentioned Revenue documents and guidance can be accessed from the Revenue website.
If you wish to subscribe to our newsletter please contact us. 

April 2014 Newsletter

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Revenue 2013 Annual Report
Revenue published their 2013 Annual Report last week. Some of the key points in the Report are:

  • For 2013 €242 million in LPT was collected, and €76 million in respect of 2014.
  • The compliance rate for 2013 is 94% while compliance for 2014 is at 90%.
  • Revenue also collected €2.7 million in Household Charge arrears from 1 July 2013 and up to the end of 2013.
  • There were 626,561 interventions (including audits) yielding €548.3 million, an increase of 11.4% on 2012.
  • 8,037 audits were completed yielding €311.9 million.
  • Revenue paid particular attention to business sectors where cash transactions are the norm.
  • 14 avoidance cases, 13 of which were under the general anti avoidance provisions of section 811 of the Taxes Consolidation Act 1997, were settled with a yield of €2.6 million and a restriction of losses of €1.1million.
  • Over 16,000 taxpayers or businesses covering almost €124 million of tax debt were given phased payment arrangements .
  • Revenue’s handling of customer complaints, within their standard of 20 days, dropped 7% to 84%.
  • Their standards for dealing with calls to their 1890 telephone service also dropped in 2013.
  • The use of Revenue’s electronic services; ROS and PAYE Anytime increased, 39% and 112% respectively.
  • The number of electronic tax returns via Revenue Online Service (ROS) in 2013 increased by 39% to 6.7 million.
  • PAYE Anytime registrations increased by 13.3% with approx. 857,000 individuals registered for the online service.
  • A total of 1,520,667 payments (up 15% on 2012) were made via ROS with a value of €38.1 billion (up 6% on 2012).

The Revenue Annual Report 2013 can be read in full on the Revenue website.
Revenue Contractors Project
Revenue issued a letter to Chartered Accountants Ireland on the conduct of the Revenue Contractors Project. According to the Institute’s report, Revenue acknowledges the delays in concluding cases, which may be partly explained by the fact that Revenue departed from the normal procedures in the Audit Code of Practice in the conduct of this project.
In the letter, Revenue detail their plan to deal with open cases under this project and state that they will raise assessments and interest and penalties will apply as appropriate. A copy of the letter is published on the Chartered Accountants Ireland website.
Home Renovations Incentive Online Facility
The new electronic system to administer the Home Renovation Incentive (HRI) is now available. Contractors can access the facility through their ROS account or through the Revenue website. Homeowners can access the facility through the Revenue website.
In cases where work was carried out and paid for between 25 October 2013 and 9 April 2014 the homeowner should contact the contractor and ensure that details of the work is entered online as otherwise the homeowner will not be able to claim the HRI tax credit. The contractor has until 8 May 2014 to enter the details on the HRI online system. Commenting on the Revenue Annual Report 2013 published this week, the Revenue Chairman noted that work to the value of €4.4 million has been uploaded to the HRI system.
Revenue published on their website an updated guide on the Incentive and updated Frequently Asked Questions on the system.
PAYE Balancing Statements
The Form P21 will no longer issue in paper format to PAYE Agents. It will be available to agents and to PAYE Anytime registered taxpayers via PAYE Anytime only. Paper versions of Form P21 will continue to issue to taxpayers who are not registered for PAYE Anytime.
Repayment Claim for Income Tax Deducted at Source
Form 54 for the year ended 31 December 2013 should be used to claim a repayment of income tax deducted from income at source during 2013 e.g. deposit interest retention tax (DIRT), dividend withholding tax (DWT), etc, where eligible. The form is published on the Revenue website.
In the Press – Changes to Ireland’s Capital Gains Tax Regime
In the March issue of tax.point, the monthly tax journal from Chartered Accountants Ireland, Mark Doyle featured an article on the changes to the Irish Capital Gains Tax regime in 2014 such as the limits on retirement relief, the new entrepreneurs’ relief, and the property tax exemption. You can read the full article on our website. Read more

Changes to Ireland's Capital Gains Tax Regime

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Finance (No. 2) Act 2013 (“the Act”) introduced a number of important changes to Ireland’s capital gains tax (“CGT”) regime that practitioners should ensure they are aware of. This article examines the main CGT changes contained in the Act on a high-level basis.
CGT Retirement Relief
Retirement relief from CGT is available to individuals on the disposal of certain business and farm assets where the conditions of the relief are met. The Act amends the relief to provide that retirement relief is available in certain circumstances where farm land is let and is subsequently disposed of to a “child” (note: a child for retirement relief purposes can include a niece or nephew who worked on the farm for the requisite time) or other individual. This means that retirement relief is now available on land which has been let by an individual at any time in the period of 15 years ending with the disposal where:
– immediately before the time the land was first let in that period of 15 years, the land was owned by the individual and used for the purposes of farming carried on by the individual for a period of not less than 10 years ending at that time, and
– the disposal is to a child of the individual, or to an individual, other than a child noted above, provided the land was let to a person for the purposes of farming during that period of 15 years and each letting of the land was for a period of not less than 5 consecutive years.
It is interesting to note that where the disposal is otherwise than to a child of the seller that for retirement relief to apply the disposal must be made to an individual rather than to a company. It is not clear what the rationale behind this distinction is and it seems unusual given that many farmers are carrying out their farming operations via companies.
While not an amendment introduced in the Act it is worth noting the changes to retirement relief that apply from 1 January 2014. Where an individual aged 66 years or above makes a disposal of qualifying assets to a third party on or after 1 January 2014 the ceiling for full relief from CGT is reduced to consideration of €500,000 (ceiling is €750,000 for individuals aged under 66 years). Where an individual aged 66 years or above makes a disposal of qualifying assets to their child on or after 1 January 2014 the ceiling for relief from CGT is €3,000,000 in asset value (for individuals aged under 66 years there is no upper limit on the relief available).
Remittance Basis of Assessment
A non-domiciled individual is subject to Irish CGT on gains realised on non-Irish situs assets on a remittance basis, so until the proceeds of the sale are remitted into the State no liability to Irish CGT arises. This led to a situation where non-domiciled individuals were left holding significant sums in offshore bank accounts without the ability to enjoy the monies in Ireland. To combat any tax planning by non-domiciled individuals to effectively remit the proceeds without crystallizing a charge to Irish CGT, new legislation was introduced in the first Act of 2013 (Finance Act 2013). These provisions treated an individual as having remitted a gain (thereby crystallising a charge to CGT) where a “chargeable gain” was transferred to that individual’s spouse and the spouse remitted the funds to Ireland. The Act amends this provision to make it clear that a non-domiciled individual will be chargeable to tax on any gain if the “proceeds” of disposal of a non-Irish situs asset are transferred to a spouse and the spouse remits the funds into the State. As a result of this provision CGT charge could be unintentionally triggered in the case of transfers under a divorce settlement to a non-domiciled spouse who subsequently brings the funds to Ireland. It is understood that Revenue are reviewing this position and guidance may issue in due course.

Debt Write-off
The Act introduced new CGT provisions to determine the base cost of an asset acquired with borrowed monies where all or a portion of the borrowings are subsequently written-off. The purpose of the change is to match the base cost of an asset for CGT purposes with its actual economic cost in circumstances where the economic cost is reduced due to debt being written-off. This change is to take account of the increasingly common occurrence where insolvent persons as part of a bank debt restructuring dispose of assets (usually at a large loss) and the bank subsequently write-off all or a part of the debt.
The base cost of an asset for CGT purposes is reduced where the asset was acquired using borrowings and an amount of the borrowing was subsequently written-off. The provisions apply whether the write-off occurs before, on or after the asset disposal. The Act also provides that if debt is written-off in a later year than the year in which the asset is disposed of, the amount of the debt written-off in that year is deemed to be a chargeable gain arising in that year (the loss that actually arose on the earlier disposal of the asset can be carried forward to shelter the gain arising in a subsequent year). The new provisions do not apply to forgiveness of debt between CGT group companies or to assets which are relieved from CGT (e.g. an individual’s principal private residence).

CGT Property Relief
The CGT relief for land or buildings purchased and held for a period of 7 years has been extended to include land or buildings purchased up to 31 December 2014. A gain on property purchased before 31 December 2014 should be fully or partially relieved from CGT when it is ultimately disposed of (the level of relief depends on how long the asset is held). This is a very attractive relief given the predicted increase in property prices over the next number of years.
Entrepreneur’s Relief
The Act introduces a relief from CGT referred to as Entrepreneur’s Relief. This new relief will apply to individuals who reinvest the proceeds of asset disposals into new business activities. The relief requires EU approval before it becomes effective. The conditions for relief are quite detailed and restrictive in nature, such as, the new business assets acquired must be held for at least three years for relief to apply.
The relief provided is that CGT on any gain on a disposal of the new asset is reduced by the lower of:
50% (i.e. based on a current CGT rate of 33% the gain would be taxed at 16.5%), or
the CGT paid on the old asset in proportion to the amount of the disposal proceeds (after payment of CGT) that were reinvested.
There are a number of conditions to be satisfied in order for relief to be due:
• the relief applies to individuals only
• the individual must have paid CGT on the disposal of any asset after 1 January 2010
• some or all of the consideration for the disposal that gave rise to the charge to CGT must be invested in acquiring “chargeable business assets” from 1 January 2014 to 31 December 2018.
Chargeable business assets are assets
(e.g. goodwill) costing at least €10,000 which are either:
• used wholly for the purposes of a new business carried on by the individual, or
• ordinary shares issued from 1 January 2014 in a qualifying company controlled by the individual, where the company is carrying on a business and the individual is a full-time working director of that company.
A new business means a relevant trading activity carried on by an individual or by a qualifying company that were not previously carried on by that individual or qualifying company or by any person connected with that individual or qualifying company. Relief is not available to certain trades such as investment dealing, certain service companies, land dealing or development, nursing homes etc.
Exit Charge for Companies
In response to recent decisions of the Court of Justice of the European Union in relation to the ‘exit tax’ regimes of other EU States, the Act amends the ‘exit tax’ provisions that in certain circumstances impose a charge to CGT on companies migrating tax residency from Ireland. The amendment provides such migrating companies with options to elect to defer the immediate payment of the CGT arising where a company migrates its tax residency to another EU or EEA Member State after 1 January 2014.
The immediate charge to tax may be deferred and paid in six equal annual instalments or within sixty days of the disposal of migrated assets.

This article first appeared in the March 2014 issue of Chartered Accountants Ireland monthly tax journal tax.point.

February 2014 Newsletter

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ROS Direct Debit Payments & SEPA Arrangements
As a result of the new SEPA arrangements, ROS direct debit payments to Revenue are taking up to 7 working days to clear. Therefore this means that while a ROS direct debit payment may have been made on or before the relevant due date and payment confirmation has been received from Revenue, the payment is not taken from the relevant bank account until a week later. For example VAT payments made for the November/December VAT period on or before 23 January may not be debited from the nominated bank account until this week. Under the SEPA arrangements, subsequent ROS direct debit payments are expected to take up to 4 working days to clear.
Annual P35 Return Deadline
The P35 deadline is fast approaching; the final date for returning the annual P35 return for the year ended 31 December 2013 is 15 February 2014. The P35 return deadline is extended to 23 February where the P35 return and associated payment is made through ROS. Employers subject to mandatory eFiling are obliged to pay and file their P35 return on ROS.
Tax Treatment of Return of Value to Vodafone Shareholders
Revenue have published a guide on the potential tax position on the proposed realisation by Vodafone shareholders (who acquired their shares in exchange for Eircom shares in 2001) of a Return of Value in accordance with the Vodafone Document dated 10 December 2013. The guide covers the capital gains tax and the income tax position and includes examples illustrating the tax treatment.
Certain Green Fees now Exempt from VAT
In Brief No. 09/14 Revenue sets out their position on the VAT treatment of certain green fees following the recent judgment in the Bridport & West Dorset Golf Club Limited case (C-495/12). In this case the European Court of Justice held that green fees charged by members’ clubs are VAT exempt. Green fees charged by non-profit making organisations, such as member owned clubs, to visitors have to date been liable to VAT at the second reduced rate of 9%. Revenue have advised in the eBrief that the clubs concerned may treat non-member green fees, including the green fee element of competition fees, as exempt from VAT with effect from 1 January 2014. There will be no entitlement to a credit for VAT incurred on inputs in relation to such fees and therefore input credits will have to be adjusted accordingly.
Compliance Code for PAYE Taxpayers
Revenue have published a Compliance Code for PAYE Taxpayers which describes Revenue’s PAYE compliance programme and the nature and scope of PAYE compliance interventions. All PAYE compliance interventions undertaken by Revenue since November last year will be made under the terms of this Code.
Guidelines for Artist Exemption & Charitable Donations
New guidelines on the Artist Exemption Scheme were published by Revenue last month. The guidelines have been prepared for the purposes of determining whether a work within a category specified in that section is an original and creative work and whether it has, or is generally recognised as having cultural or artistic merit. Revenue have also published eBrief No. 55/13 which sets out the arrangements for tax relief for donations to eligible charities and other approved bodies. The arrangements, which apply to donations made by individuals on or after 1 January 2013, provide that tax relief is given to the charity on a grossed up basis at the specified rate, currently 31%. eBrief No. 55/13 sets out further details, and how tax relief can be claimed.
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