€250 tax free for employees and directors

Small Benefit Exclusion- how to give your employees or yourself if you are a director a bonus to the value of €250 tax free

An employer can give an employee a once off voucher to the value of €250 each year without it been taxed or subject to benefit in kind regulations. This also applies to directors. The voucher has to be bought by the employer and given to the employee. The employee can’t buy the voucher themselves and then just get the cash to reimburse them or the employer can’t just simply give the employee the cash, it has to be a voucher.

It only applies to  one voucher per year. So if you give a voucher for €100 during the year and another one for €150 later in the year then only the first one is not taxable and the second €150 will be taxable. In other words in order to avail of the full €250 it has to be given in one go with one voucher.

This is a very tax efficient way to pay employees and also for directors to extract money from the company. It can be availed of once every year to the value of €250.

Motor Expenses and Subsistence for contractors (Computer consultants, engineers, etc)

Motor Expenses and Subsistence for contractors (Computer consultants, engineers, etc)

The Revenue have a special project running at the moment which is looking at the tax compliance of contractors who use company structures to provide their labour only services to mainly one customer. Examples of this may be computer consultants or engineers who provide services to bigger firms. rather than been hired as employees they are hired as subcontractors and put in place a company to provide the services. This is a perfectly legtimate structure to have in place. However the Revenue has decided that they are not willing to allow motor expenses from the home to the place of work as been deductible for tax purposes and also alot of subcontractors would have claimed subsistence and the revenue is also not allowing this (dependent on the individual case). This is based on the basic maxim that all costs must be wholly and exclusively for the business in order to be claimable for tax purposes.
They are been reasonable with people who come forward to amend previous returns and pay any outstanding tax. If you are in this situation you can ring me on 0469293891 to discuss what you need to do.

 

Revenue’s Contractors Project

Background

Revenue’s National Contractors Project is aimed at addressing very specific problems that emerged through audit activity. A succession of tax audits had revealed that individuals were providing their services to clients ("end-users") via intermediaries - often, but not exclusively, personal service companies. The intermediary treats the individual as an employee and operates PAYE on the remuneration which it pays to the individual. An assumption underlying these arrangements is that the individual is not an employee of the end-user. While this may be true in the generality of cases, the facts will determine whether or not there is an implied contract of employment between the individual and the end-user.
The tax audits have revealed that in some instances the use of intermediaries has resulted in evasion, which arose when intermediaries paid tax-free "expenses" in circumstances where the expenditure had not actually been incurred. In other circumstances, the expenses had no relation to the business. It was clear that some contractors were using the device of an intermediary company (which they usually owned or controlled) to contend that they are compliant PAYE taxpayers, while actually extracting a large part of the company’s contract income from the company free of tax in circumstances where such income should have been taxed. In some of the worst cases encountered, up to 70% of income was extracted in this manner.
While the project was intended to be narrowly focused, there are many different circumstances arising, which give rise to requests for clarification. The purpose of this article is to address the treatment of expenses and the procedures which Revenue is adopting for this project.

Revenue’s Approach

Revenue’s Contractors Project is designed to deal quickly and cleanly with the particular problem. Contractors whose accounts show unusually high proportions of expenses are being identified for compliance intervention.
To facilitate disclosure, we adopted the practice of providing assistance to those who were experiencing difficulty, and where a genuine effort is being made, we accept amendment of disclosures following discussion. At the same time, tax agents have been invited through their professional organisations to encourage their clients to consider whether they should make an unprompted qualifying disclosure.
We are also ready to discuss methods of paying the disclosed amounts where there is an inability to pay in one sum. Within the disclosure itself, we undertook to accept disclosures that dealt with the four specified years provided the resulting level of expenses was within industry norms, and provided we had no specific knowledge that the declaration was likely to be false. This is a considerable concession, because Revenue routinely checks disclosures in some detail. Finally, for the purposes of this project we advised that Revenue would not seek to "re-gross" expenses in calculating the tax underpayment. We have adopted this approach on the understanding that the parties concerned will comply strictly with the law in future. In the event of a future re-audit discovering this not to be the case, then Revenue will not feel bound by the approach adopted to date in relation to re-grossing, and future tax underpayments, and associated interest and penalties will be pursued.

Treatment of expenses of travel and subsistence where the services of an individual are provided through an intermediary to an end-user

The publicity attracted by the National Contractors Project has caused some questions to be raised about the application of tax rules, and has led to requests for general rulings from Revenue about hypothetical cases in a wide variety of situations.
The basic legal provisions are in the Taxes Consolidation Act, which provides in Section 81 that a business may not deduct expenses that are not "wholly and exclusively" incurred for business purposes. Section 117 provides that sums paid as expenses are assessable as emoluments of the office or employment, while Section 114 provides for a deduction in respect of expenses which an employee or office-holder is necessarily obliged to incur in travelling in the performance of the duties of the office or employment or other expenses wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment.
The Act does not make specific provision for the payment of tax-free expenses. However, to avoid the operation of PAYE on expenses which would then lead to repayment claims on foot of deductions due under Section 114, Revenue has long accepted that expenses which meet certain conditions may be reimbursed tax free in certain circumstances. Revenue has given detailed guidance on the circumstances in which tax-free reimbursement of expenses may be made in its Statement of Practice SP/IT/2/2007 (PDF, 157KB), in information leaflets IT51 and IT54, and in this year’s Tax Briefing 3 of 2013, all available at: www.revenue.ie.
The guidance given in Tax Briefing 3 of 2013, entitled "Reimbursement of Travel and Subsistence Expenses by Intermediaries", clarifies the Revenue position on the circumstances in which expenses of travel and subsistence may be reimbursed free of tax where the services of an individual are provided through an intermediary to an end-user, generally at the premises of the end-user. Services provided through an intermediary include services provided through a personal service company, a managed service company or an agency.
The key characteristic of the arrangements which are the subject of Tax Briefing 3 of 2013 is that the end-user is acquiring the services of a specific individual who will work under the general direction and control of the end-user. In some instances, the contract between the end-user and the intermediary will be explicit in identifying the individual whose services are being acquired by the end-user. In others, it will be apparent from the nature of the services, the manner in which they are provided and the conduct of the parties, that what is being provided is the services of a specific individual.
The main point which Tax Briefing 3 of 2013 sought to clarify is that, in applying previous Revenue guidance to the arrangements referred to in the Tax Briefing, home cannot be treated as a "normal place of work". Revenue does not accept that the fact that administrative work is carried out at home, or that home is the registered office of the intermediary alters this position. It follows that the cost of travel to and from home may not be reimbursed free of tax. As Tax Briefing 3 of 2013 points out, in most instances, the end-user premises is the normal place of work and expenses of travel and subsistence may be reimbursed free of tax in respect of necessary business absences from this normal place of work.
In referring to the "normal place of work", Tax Briefing 3 of 2013 was picking up the terminology of previous Revenue guidance. At the same time, it is important to bear in mind that "normal place of work" is not mentioned at all in statute. The true test of whether the cost of travel is allowable for Schedule E purposes is whether the journey was necessarily incurred in the performance of the duties of the office or employment. This is a test which has repeatedly been recognised in various judicial pronouncements as narrow and hard to meet.
Some of the scenarios in the examples in Tax Briefing 3 of 2013 would be rather unusual in the context of an intermediary which provides the services of an individual to an end-user. Nevertheless, they are intended to bring out the circumstances in which Revenue will accept that the cost of travel and subsistence may be paid tax free to an individual whose services are being provided via an intermediary.
Applying the foregoing test to the scenarios in Tax Briefing 3 of 2013, Revenue’s view is that a journey from the person’s home to a job is not a journey necessarily undertaken in the performance of the duties of the employment. The person is simply travelling from home. The length and cost of the journey is not imposed by the office or employment but is dictated by the choice of place of residence of the individual concerned. Similarly, an individual whose services are provided via an intermediary and who incurs expenses in living away from home cannot claim the cost of living away from home.
The fact that an intermediary may provide the individual’s service under a series of short-term contracts does not alter the position. Each location at which the individual provides services becomes a "normal place of work" while the services are being provided to that end-user. The expenses of travelling from home to each of these locations or the expenses of living at those locations cannot be reimbursed tax-free.

Treatment of Expenses of Travel and Subsistence in other Cases

The situations dealt with in Tax Briefing 3 of 2013 are to be distinguished from situations where a company provides goods or services, other than the services of a specific individual, to its customers or clients. There is no change in Revenue’s interpretation or application of the law in relation to such cases. Previous Revenue published practice as set out in Revenue leaflets IT51 and IT54 and Statement of Practice SP IT/02/2007 continues to apply.

Family Members as Employees

The question of whether any individual is an employee of an intermediary company can only be determined in the light of the particular facts. This applies equally to the engagement of family members of directors. Revenue has found that, in some of the cases examined in the course of the project, alleged employments of family members were not bona-fide. Revenue will continue to examine such arrangements to determine whether they have been put in place on an arm’s length basis. This means that the family member must be performing services or duties in the business and rates of pay must be similar to the rates paid to other employees doing the same type of work. If the pay is for technical work, the employee (payee) should have the skills, qualifications and experience necessary to carry out that work and to justify the rate of pay.

Penalties

As outlined in the Code of Practice for Revenue Audit, auditors will exercise care in considering whether penalties arise in any particular case, and in considering the appropriate category of tax default. Because of our experience with early cases encountered, Revenue’s view is that the type of activity being targeted in this project is in the deliberate behaviour category. Of course, the circumstances of each case will inform the level of penalties being proposed. The deliberate behaviour category is fully appropriate where the claimed expenses are not incurred, or not incurred in connection with the business. A lower penalty is appropriate where it is clear that the practice at issue resulted from a reasonable interpretation of the law or practice which turned out to be incorrect.
Where a taxpayer does not agree to the level of penalties being proposed, Revenue may seek to have the penalty determined by a relevant Court [Paragraph 4.5.3 of the Code of Practice contains more details]. Where the default is in the deliberate behaviour category, and if a "Notification of a Revenue Audit" has not issued, the penalty level proposed is 10%. A taxpayer who has received a "Notification of a Revenue Audit" still has an opportunity to make a prompted qualifying disclosure, and the penalty payable will be 50%, where the default is in the deliberate behaviour category. Where any default is shown to be due to careless behaviour or innocent error, much lesser penalties, if any, will apply. Finally, those who have a liability to additional tax, due to deliberate behaviour, and make no effort to make a disclosure (or make a false disclosure) are liable to penalties ranging from 75% to 100%, and to audit of several years if evidence of possible tax fraud is discovered. In particularly serious situations, consideration will be given to investigating with a view to prosecution.

Protocols in relation to the making of Disclosures

All matters in relation to qualifying disclosures are dealt with in accordance with legislation and the Code of Practice for Revenue Audit.

Who is being Audited?

In general the focus of the audit will be on the intermediary company and the individual. It may be necessary in some cases to extend the scope of the intervention to other directors to verify particular aspects of the matters under review. All taxpayers who are to be audited will receive a "Notification of a Revenue Audit".

How many years are being Audited?

In order to deal quickly with the problems identified Revenue decided not to launch an open-ended audit programme, but instead to focus on just four years – 2008 to 2011 - and to encourage tax agents to advise their contractor clients to review those years and make disclosures where appropriate.

Previously Audited

The fact that a case was previously audited [Comprehensive or PAYE (Employers)] and the matter of the tax-free reimbursement of expenses was not raised does not preclude Revenue from raising the matter in the course of an audit under the Contractors Project. The fact that deliberate default was not discovered on an earlier audit does not mean that Revenue has approved or excused the default. Where the treatment of expenses was specifically raised during an earlier audit, Revenue will consider accepting any subsequent adjustment as a Technical Adjustment, without penalty. For a technical adjustment not to attract a penalty, the auditor must be satisfied that due care has been taken by the taxpayer and that the treatment concerned was based on a mistaken interpretation of the law or practice, and did not involve deliberate behaviour. However, an exception to this treatment might be where the level of expenses which should have been taxed increased substantially in years subsequent to the audit.

Inability to Pay

Claims to Inability to Pay are dealt with in accordance with Paragraph 4.9 of the Code of Practice.

No Liability

Many individuals are satisfied that they have no need to make a disclosure because their affairs are in order. While we do our best not to trouble such people, some may receive audit notices, normally where the expenses appear high for the business in question. In that case, it will save a great deal of trouble if the contractor writes to Revenue stating why he/she believes there is no outstanding liability, and briefly explaining why the nature of the actual business generates unusually high expenses.

Review/Complaint

For those who feel they have been unfairly treated, the procedures for seeking a review are set out on Revenue’s website: www.revenue.ie

Progress to Date

Well over a thousand audit letters have been issued by Revenue, and the response has generally been engagement by the contractor to discuss the making of a disclosure (Revenue officials offer advice if required), or to explain why they have no need to do so. There is also a steady flow of disclosures from those who have not yet been selected for intervention. The small group who have decided not to engage have entered the audit process.
Revenue has met with companies, tax agents and representatives of both contractors and recruitment agencies to discuss the project, and to allay some ungrounded fears about Revenue’s intentions. Revenue has not changed its interpretation of tax law. It is focussed on dealing with tax evasion which, if left unchecked, will result in unfairness to other compliant taxpayers and a loss to the Exchequer.
The national project has identified a very wide range of structures and practices being used by contractors, and it has become clear that this project (or a successor) may need to continue for some time, to deal with issues specific to subsets of the contracting sector, and with connected issues.

Taxation of Artists

Irish Taxation of Artists

© Frank McGivney 22 November 2013

Ireland was once regarded as the land of saints and scholars, this also encompassed artists of all types. We have always had a rich history of artistic endeavour among our people. In Kells for instance we have one of the finest examples of Irish creativity, with the world famous, Book of Kells (located in Trinity College). This heritage has enriched the lives of our nation over the course of history and has helped to define our national identity. Irish people in all areas of the arts are recognized world wide as the best in their fields.

In 1969 the then finance minister Charles J Haughey introduced. in the Finance Bill, the artist’s exemption. This provided for qualifying artists to be exempt from income tax. This was a unique relief that applies to visual artists, composers of music and writers. It was seen as an extremely progressive measure especially in the context of that time in history.

The artist’s exemption has to be seen in the context of the type of work that is involved. Most artists in Ireland earn very little from their artistic works. In fact they would be below the poverty line and therefore most have to supplement their income with “normal” nine to five jobs in order to pursue their dreams of creating masterpieces. Works of art are created individually not like most other items, which are created in multiples. Therefore the amount of time that it can take to produce a book or paint a landscape is a lot longer than it would be to produce a set of iron gates or a mobile phone. The artist may in fact have to produce several versions of any one individual item in order to reach the level of perfection that he/she seeks. As a result the eventual income from the sale of  art may have no real bearing to the actual length of time it took to create the piece, also income can be very erratic as the time between works of art been sold is dependent on the creative process not on simple production runs and normal economics. This means realistically that if a nation wants to encourage an artistic heritage for future generations to appreciate then it has to give some help to artists.

The scheme has been modified over the years, currently it only applies to the first Euro40,000 of profit from creative works of art. If your income is substantial then you have to take account of the fact that any reliefs you claim will be also restricted by the high earnings restrictions.

The €40,000 limit was introduced in the tax year 2011.
Guidelines have been drawn up by the Arts Council and Minister for Arts Sport and Tourism, with the consent of the Minister for Finance, for determining for the purposes of Section 195 whether a work is an original and creative work and whether it has, or is generally recognized has having cultural or artistic merit. The Revenue Commissioners may consult with a person or body of persons, such as The Arts Council, which may be of assistance to them in reaching decisions in relation to Artists Exemption.
The scheme provides that the Revenue Commissioners can make determinations in respect of artistic works in the following categories only:

1. a book or other writing
2. a play
3. a musical composition
4. a painting or other like picture
5. a sculpture

You have to be resident or ordinarily resident and domiciled in Ireland in order to avail of the relief. For foreign artists who intent to become ordinarily resident in Ireland in order to avail of the relief, they can fill out an application form to get advance approval from the Revenue.

You have to apply for the relief in the year that you earn the income, this is vital, if you apply after the year end then you won’t be approved for the previous year. If you are paid an advance royalty then you still have to meet these criteria and get your application into the revenue in that year.

Claims for Artists Exemption should be made on Claim form Artist 2 (PDF, 356KB). A determination granted on the basis of this claim form will cover the particular work or works submitted with the claim as well as all future qualifying works in the same category, provided they fall within the guidelines.
Depending on the category in which artist’s exemption is being claimed the following items should be submitted in support of a claim

1. a book or other writing - 3 published copies of the book
2. a play - a copy of the script along with a signed production contract
3. a musical composition - CDs or cassettes on which claimant must be accredited
4. a painting or other like picture - 8-10 good quality photographs of work together with evidence of sale i.e invoices and a brief CV of artistic career to date
5. a sculpture - as at (d) above.

The exemption only applies from income from the creative aspect of the work. Any other income is taxable. So for instance the income from the sale of your musical cd may be exempt but the income from concerts would be taxable.

Other taxes:

The exemption only applies to income tax. Your income is still liable for PRSI and Universal Service Charge. Also if your supply of goods exceeds 75000 or your supply services exceeds Euro37500 in a continuous 12 month period then you also will have to register for VAT. The vat on the sales of Paintings, sculptures, etc is 23% and the vat on work performed on land or building in Ireland is 13.5%.

Determinations of approval for Scheme:

2. Section 195, Taxes Consolidation Act, 1997 provides that a work for the purpose of the Section is an original and creative work in one of the following categories:
1. a book or other writing;
2. a play;
3. a musical composition;
4. a painting or other picture;
5. a sculpture.

Revenue may determine such a work to have, or to be generally recognized as having, cultural or artistic merit.

3. In broad terms, therefore, in order to secure exemption under Section 195, a work has to be both original and creative and to have either cultural merit or artistic merit.
4. In order to be granted a determination under Section 195, it is not necessary for a work to have both cultural and artistic merit - the presence of either quality is sufficient.
5. In applying these guidelines, Revenue may, as provided for in Section 195, consult with such person or body of persons as may, in their opinion provide authoritative assistance to them in establishing whether a work is a qualifying work for the purposes of Section 195

Cultural or artistic merit

6. A work has cultural merit if its contemplation enhances the quality of individual or social life by virtue of that work's intellectual, spiritual or aesthetic form and content.
7. A work has artistic merit when its combined form and content enhances or intensifies the aesthetic apprehension of those who experience or contemplate it.

Original and Creative

8. For the purpose of a determination under Section 195, Taxes Consolidation Act, 1997 the term "original and creative" encompasses any unique work which is brought into existence for the first time as an independent entity by the exercise of its creator's imagination.
9. A non-fiction work in category (a), a book or other writing, will be considered original and creative only if,
1. It comes within one of the categories cited in Appendix A, and
2. The essence of the work is the presentation of the author's own ideas or insights in relation to the subject matter, and the ideas or insights are of such significance that the work would be regarded as a pioneering work casting new light on its subject matter or changing the generally accepted understanding of the subject matter.
10. Exclusions from the compass of "original and creative"
    The following types of work in the categories set out in Section 195, Taxes Consolidation Act, 1997 will NOT be regarded as coming within the compass of "original and creative".
1. A Book or other writing, notwithstanding paragraph 9, above
1. A book or other writing published primarily for, or which is or will be used primarily by, students pursuing a course of study or persons engaged in any trade, profession, vocation or branch of learning as an aid to professional or other practice in connection with the trade, profession, vocation or branch of learning.
2. An article or series of articles published in a newspaper, magazine, book or elsewhere - except a book consisting of a series of articles by the same author connected by a common theme and therefore capable of existing independently in its own right.
2. A Play
   Types or kinds of plays written for advertising purposes which do not exist independently in their own right by reason of quality or duration.
3. A Musical Composition
   Types or kinds of musical compositions written for advertising purposes which do not exist independently in their own right by reason of quality or duration. Arrangements, adaptations and versions of musical compositions by a person other than a bona fida composer who is also actively engaged in musical composition.
4. A Painting or like picture
   Types or kinds of photographs or drawings (other than a set or sets of photographs or drawings that are collectively created for an artistic purpose) which are mainly of record, or which serve a utilitarian function, or which would not exist independently in their own right by reason of quality or by reference to their potentiality for inclusion as part of an art exhibition.
5. A Sculpture
   Types or kinds of objects which are primarily functional in nature, objects produced by processes other than by hand, objects produced by hand by persons other than those actively engaged as bona fide artists in the field of visual arts.

Non Fiction works:

Non-fiction categories applicable to be considered as eligible for a determination under Section 195.

1. The following categories of literature (and any combination thereof) coming fully within the terms of reference of the Arts Council encompassing the subjects of fiction writing, drama, music, film, dance, mime or visual arts, and related commentaries by bona fide artists:
• arts criticism
• arts history
• arts subject works
• arts diaries
• autobiography
• belles-letters essays
• biography
• cultural dictionaries
• literary translation
• literary criticism
• literary history
• literary diaries
2. The following categories of works coming fully within the terms of reference of the Heritage Council including works which, in their entirety, comprise one or more of these categories:
• archaeology
• publications associated with items or areas of significant heritage value
3. The following category of works coming fully within the terms of reference of the National Archives Advisory Council:
• Publications which relate to the archives which are more than 30 years old concerning Ireland, and are based largely on research from such archives.
4. Categories of works which in their entirety comprise one or more of the categories cited in paragraph 1 to 3 above

The current list of people who have availed of this relief is available at (from 2002 onwards):

http://www.revenue.ie/en/tax/it/leaflets/artists-exemption-section-195-1997-act.html

If you are embarking on the long and rewarding trail of artistic Endeavour then contact Frank on 0469293891 to put in place the best structures of tax planning to minimize the tax you will pay on your hard earned creations. Remember planning is forward thinking, it is more difficult to minimize tax looking backwards.

© Frank McGivney 22 November 2013

All parts are protected by copyright and can only be reproduced if mention of the author is made on such reproductions.

Frank McGivney BA ACMA CGMA

Frank McGivney & Co. Ltd,

Chartered Management Accountants, 38 Cherryhill court Kells, Co Meath Tel 0469293891 Email fmcgivney@live.com

Quick Summary of the Budget for 2014

RATES/CREDITS 2014
Personal Tax Credits 2013 € 2014 €
Single persons 1,650 1,650
Married or in civil partnership 3,300 3,300
Additional one-parent family 1,650 0
Single person child carer n/a 1,650
PAYE 1,650 1,650
Age credit – Single 245 245
Age credit – Married/Civil partners 490 490
Home carer 810 810
Dependent relative tax credit 70 70
Rent relief
Under age 55 single persons 200 200
Under age 55 married/civil partners 400 400
Aged 55 or over single persons 400 400
Aged 55 or over married/civil partners 800 800
Incapacitated child 3,300 3,300
Blind persons: Single 1,650 1,650
Married/civil partners (both blind) 3,300 3,300
Widowed additional credit 540 540
Widowed person bereaved in year of assessment 3,300 3,300
Widowed parent: 1st year after year of bereavement 3,600 3,600
2nd year after year of bereavement 3,150 3,150
3rd year after year of bereavement 2,700 2,700
4th year after year of bereavement 2,250 2,250
5th year after year of bereavement 1,800 1,800
Exemption limits – 65 – years and over
Single/widowed/surviving civil partner 18,000 18,000
Married or in civil partnerships 36,000 36,000
Standard rate bands
Single/widowed persons/surviving partner 32,800 32,800
Married couples, one income 41,800 41,800
Married couples, two incomes 65,600 65,600
One parent/widowed parent 36,800 36,800
Tax rates
Standard rate 20% 20%
Top rate 41% 41%
PRSI
Employee ceiling No limit No limit
Employee PRSI exemption No exemption No exemption
Employee PRSI rate 4% 4%
Employer PRSI (higher rate) 10.75% 10.75%
Employer PRSI (lower rate) 4.25% 8.5%
Self-employed ceiling No limit No limit
Self employed – minimum contribution €500 €500
Self-employed PRSI rate 4% 4%
Universal Social Charge (USC)
Exemption limit €10,036 €10,036
€0 - €10,036 2% 2%
€10,037 - €16,016 4% 4%
> €16,016 7% 7%
Self-employed income > €100,000 10% 10%
Aged 70 and over/medical card holders, >€60,000 7% /10% 7%/10%
PERSONAL TAX
INCOME TAX RATES AND BANDS
There have been no changes to the income tax rates and bands.
USC
There have been no changes to the USC rates and bands.
PRSI
No changes to the PRSI rates were announced. However, as a carry forward from Budget 2013, with
effect from 1 January 2014, PAYE employees will be subject to PRSI on their unearned income,
including rental, investment, dividends and bank deposit interest income.
In addition the 4.25% low rate of PRSI for employers is due to revert to 8.5% on 1 January 2014.
MEDICAL INSURANCE RELIEF
Tax relief for medical insurance premiums will be restricted to the first €1,000 per adult insured and
the first €500 per child insured. The tax credit for these premiums will remain at the standard tax rate.
ONE-PARENT FAMILY TAX CREDIT
This credit is to be replaced with a new single person child carer tax credit with effect from 1 January
2014. The new credit will be to the same value (€1,650) but will be available to the principal carer of
the child only.
HOME RENOVATION INCENTIVE (HRI)
Tax relief of 13.5% will be available for qualifying expenditure on home renovation and improvement
work. The relief will be granted by way of a tax credit split over two years following the year in which
the works are carried out. The minimum expenditure must be €5,000 and relief will be provided on all
qualifying expenditure up to a maximum of €30,000. The relief relates to the principal private residence
of an individual only while the relevant contractors must be tax compliant.
START YOUR OWN BUSINESS (SYOB)
An exemption from income tax up to a maximum of €40,000 per annum will be provided for a period
of two years to individuals who set up a qualifying, un-incorporated business, having been unemployed
for a period of at least 15 months prior to establishing the business.
HIGH EARNERS’ RESTRICTION (HER) AMENDMENTS
The initial 30% relief for investments under the Employment and Investment Incentive Scheme (EIIS)
will be removed from the HER calculation for a period of three years.
Capital allowances and losses on plant and machinery used in manufacturing trades, which are claimed
by passive investors, will be included as a specified relief for the purposes of the HER.
FILM RELIEF
The new film relief scheme is being brought forward from 2016 to 2015. This means that the existing
form of tax relief available to individuals investing in the film industry will cease a year earlier than
expected. The definition of ‘eligible individual’ for the purposes of the relief is to be extended to include
non-EU talent, in conjunction with the introduction of a withholding tax. This is subject to EU State
Aid approval and a commencement order.
TAX RELIEF ON LOANS TO ACQUIRE AN INTEREST IN A PARTNERSHIP
This relief will be withdrawn on a phased basis over 4 years. Relief will not be allowed for new loans
taken out from 15 October 2013.
Existing claimants will retain the relief on a reducing rate basis until 1 January 2017.
LUMP SUM PAYMENTS
Top slicing relief will no longer be available in respect of all ex-gratia lump sum payments arising on
or after 1 January 2014. All lump sum payments to individuals who worked in Magdalene Laundries
will be exempt from tax.
LIVING CITY INITIATIVE
This will be extended to include residential properties constructed prior to 1915 and to include Cork,
Galway, Kilkenny and Dublin. This initiative is subject to EU State Aid approval and a commencement
order.
PENSION CONTRIBUTIONS
Income tax relief at the marginal rate will remain for qualifying pension contributions.
DEPOSIT INTEREST RETENTION TAX AND EXIT TAXES ON LIFE ASSURANCE POLICIES AND
INVESTMENT FUNDS
The rate of retention tax that applies to deposit interest, together with the rates of exit tax that apply to
life assurance policies and investment funds, is being increased to 41% (previously 33% or 36%
depending on the frequency of the payment). The increased rate will apply to payments, including
deemed payments, made on or after 1 January 2014.
FARMER TAXATION
The eligibility for young trained farmers relief is being extended by adding three more qualifying
courses to the list of relevant qualifications required for the 100% rate of stock relief and for the stamp
duty relief for the purchase of agricultural properties.
BUSINESS TAX
The Minister’s speech contained 25 pro-business measures, many of which are non-tax related and
some of which are covered elsewhere in this summary. The key corporation tax measures are set out
below.
R&D TAX CREDIT
Last year the Minister announced that a full review of the R&D tax credit regime would be carried out.
On foot of this review a number of changes have now been introduced:
- the first €300,000 of qualifying expenditure will benefit from the 25% R&D tax credit on a volume
basis, with no requirement to refer to the 2003 base year spend. This is an increase of €100,000. For
R&D expenditure in excess of €300,000 the relief continues to be based on incremental costs in
excess of the 2003 spend.
- it is also intended that the base year 2003 will be phased out entirely over time.
- the limit on the amount of expenditure on R&D outsourced to third parties which can qualify for the
R&D tax credit is being increased from 10% to 15%.
- since 2012, a company with an entitlement to the R&D tax credit can surrender a portion of the credit
to key employees, effectively in the form of a tax free payment. Subject to certain conditions, the
employees can use the benefit of the tax credit to reduce their own income tax liability. Amendments
are being made to this element of the scheme to remove some barriers to take-up that were identified
in the review process.
FOREIGN DIRECT INVESTMENT
In tandem with Budget 2014, the Minister also published Ireland’s International Tax Strategy statement.
Broadly, this reaffirms Ireland’s commitment to maintaining an open and transparent tax regime. It
also confirms our commitment to retaining the 12.5% corporation tax rate, “the tax rate is settled policy,
we are 100% committed to the 12.5% corporation tax rate, this will not change”.
The International Tax Strategy paper also notes the active role that Ireland is taking in the BEPS project,
which broadly seeks to eliminate global tax mismatches and ensure that the global tax framework is
“fit for purpose”.
This is particularly relevant given the dramatic changes in recent years in how companies do business
across borders.
An interesting change flagged in the Minister’s speech is an amendment to the tax rules for certain
Irish incorporated companies that are not regarded as tax resident anywhere. While the detail will be
included in the Finance Bill, it will no longer be possible for such companies to remain “stateless” in
terms of their tax residence.
BANKING SECTOR
The Minister introduced a levy on banks to operate in the period 2014 to 2016. The levy will be broadly
based on the amount of DIRT tax paid by the banks in 2011 and mirrors what is already in place in
several other EU Member States.
In a relieving amendment, the restriction on the use of tax losses generated by banks that transferred
loans to NAMA has been lifted. Under the old provisions, the banks could only shelter half of their
future taxable profits through the use of historic losses. This restriction has now been removed.
CAPITAL TAXES
CAPITAL GAINS TAX (CGT)
CGT rate remains unchanged at 33%.
CGT ENTREPRENEURIAL RELIEF
A new relief from CGT has been introduced to encourage individuals to reinvest in trading assets. The
relief applies to individuals who have paid CGT on the prior disposal of an asset (since 01 January
2010). The reinvestment must be:
1. in “an asset for use in a new productive trading activity”/“new business”;
2. made between 01 January 2014 and 31 December 2018; and
3. the new asset must be held for 3 years prior to its subsequent disposal.
The CGT payable on the disposal of the new asset will be reduced by the lower of:
- the CGT paid by the individual on a previous disposal of assets since 01 January 2010; and
- 50% of the CGT due on the disposal of the new investment.
The new relief is subject to EU State Aid approval.
7 YEAR CGT HOLIDAY EXTENDED
The relief from CGT in respect of real property bought and held for at least seven years has been
extended. This relief now applies to real property acquired before 31 December 2014.
RETIREMENT RELIEF FOR FARMLAND UNDER LONG LEASES
Retirement relief has been extended to include the disposal of leased farmland (minimum of a 5 year
lease). The disposal must be to a person other than the child of the vendor.
This relief is aimed at encouraging older farmers with no children to lease out their farms to younger
farmers.
CAPITALACQUISITIONS TAX (CAT)
CAT rate remains unchanged at 33%. There is no change to the tax-free thresholds.
STAMP DUTY
The transfer of shares in companies on the Enterprise Securities Market (ESM) of the Irish Stock
Exchange will be exempt from stamp duty. This exemption is subject to commencement order.
Stamp duty rates otherwise remain unchanged.
INDIRECT TAXES
RETENTION OF THE 9% VAT RATE
The temporary 9% VAT rate applying to the tourism and hospitality sectors is due to revert to 13.5%
on 1 January 2014. The Minister has announced that the rate will remain in place for the foreseeable
future.
FARMERS FLAT RATE ADDITION
The flat rate addition, payable to unregistered farmers to compensate them for VAT incurred on costs,
will increase to 5% from 4.8% from 1 January 2014. The VAT rate applicable to the sale of livestock
remains at 4.8%.
CASH RECEIPTS BASIS
Traders whose turnover is below the current threshold of €1.25m are entitled to account to Revenue
for VAT on sales when they get paid, rather than when they issue sales invoices. This threshold will be
increased to €2m with effect from 1 May 2014 and will extend the availability of this important cash
flow saving measure to a larger number of traders.
EXCISE CHANGES
From midnight on Budget night, the excise applicable to a packet of 20 cigarettes will increase by 10
cents (with pro rata increases for other tobacco products), a pint of beer or cider or a standard measure
of spirits will increase by 10 cents while a bottle of wine will increase by 50 cents (all increases are
VAT inclusive). There is no change in the excise applicable to petrol, diesel or home heating oil.
VAT ANTI-FRAUD MEASURES
To assist Revenue in combating the shadow economy, legislative changes will be introduced in three
areas:
- disallowance of input VAT – businesses which have not paid (in full or in part) for supplies within
six months will be required to repay the VAT claimed on those supplies (a similar provision already
applies in the UK).
- quick reaction mechanism – allows Revenue to introduce an emergency and temporary reverse charge
mechanism to certain goods and services to deal with sudden large scale VAT fraud.
- record keeping – powers to allow Revenue issue notices to traders to procure specific information
where Revenue believe that the specified records might assist in identifying VAT fraud.
AIR TRAVEL TAX
This will be reduced to zero with effect from 1 April 2014 with the objective that airlines increase
routes and flight numbers as a result of the initiative.
PENSIONS
TAX RELIEF
Relief for pension contributions continues at the marginal rate of tax.
PENSION LEVY
The 0.6% Pension levy introduced to fund the Jobs Initiative in 2011 will be abolished from 31st of
December 2014. An additional levy on pension funds of 0.15% will, however, be introduced for 2014
and 2015. Therefore the total pension levy in 2014 will be 0.75% reducing to 0.15% in 2015.
CHANGE TO THE MAXIMUM ALLOWABLE PENSION FUND.
The limit on the total capital value of pension benefits that an individual can draw in their lifetime,
where those benefits are drawn after 7th of December 2005, has been reduced from €2.3 million to €2
million. This limit is known as the Standard Fund Threshold (SFT). Individuals with pension benefits
in excess of €2 million on 1st of January 2014 will be able to protect the capital value of those rights
by claiming a Personal Fund Threshold (PFT) subject to a maximum of €2.3 million, being the old
SFT. Those who already have a PFT will retain it and do not need to take any action.
In valuing Defined Benefit rights the current capitalisation factor of 20 will apply for benefits accrued
to 1 January 2014. It is proposed that benefits accrued after this date will be capitalised using a new
age related factor. For example at age 50 or less the capitalisation factor will be 37 while at 65 it will
be 26.
This leaflet is only a summary of the Budget Speech and is not intended to be a comprehensive guide. 15/10/13.

Dennis O Brien High Court decision

One of the few ways to reduce or eliminate your tax liabilities is to be non resident in Ireland at the time that a tax charge crystalises. This is mainly of signfigance for larger tax bills as the costs associated with living or moving abroad may be restricitve unless a lot of money is involved in a tax bill. It also needs astute tax plannng to find a country which will results in a lower tax bill. As highlighted by the following

Denis O’Brien wins High Court case, will not have to pay €57m tax bill
The case focused on whether or not the billionaire businessman lived at a property on Raglan Road in Ballsbridge.
34 minutes ago 2,046 Views 25 Comments
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Image: Niall Carson/PA Archive/Press Association Images

THE HIGH COURT has upheld a ruling by the Revenue Appeals Commissioner that Denis O’Brien is not liable for a €57 million tax bill.

The Inspector of Taxes had argued that the billionaire should pay €56.86 million in Capital Gains Tax on the €284.8 million received when Esat Digifone was sold to British Telecom in 2000.

In her judgement, Justice Mary Laffoy ruled that 6 Raglan Road – which O’Brien bought in 2000 – was not the permanent residence of the businessman during the 2000/2001 tax year.

Under Ireland and Portugal’s Double Taxation Convention, then, O’Brien is not liable for the tax bill.

Justice Laffoy said she was satisfied that the Appeal Commissioner did not adopt a wrong or mistaken view of the law.

She agreed that O’Brien lived in Portugal at the time of the sale. Revenue had argued the point but the Court found the premises were “unavailable for residential use” during June 2000 and February 2002 because of commissioned works.

Advie on Insurance, Pensions and Investments

The insurance, investment and pension side of our business is been handled on a consultacy basis by Derek Maguire of Financial Architects Ltd. He has provided my clients with the absolute best of advice on the full gambit of  financial product on a professional basis. Derek and his wife are two of the top financial consultants in the country. I have attached below a recent report that Derek provided for me relating to the performance of a clients investmkent portfolio which when analysised led to Derek bee able to switch the client out of a poor performing investment into one offering much higher returns.
I have always been an advocate of matching clients to investments which reflect their attitude to both risk and return. I have adviced cleints in relation to their businesses in this regard for the last 15 years and Derek does the very same by means of profiling with all of our clients. This ensures your hard earned money is placed where you are comfortable that it will be secure and provide a return that reflects your own personnal attitudes to risk.
If you contact me or Niamh on 0469293891 as a first step and we can set up a meeting to get you the best advice

Below is a copy of the report showing the performance of some higher risk investments for a client who met the criteria of been open to higher levels of risk in anticipation of a higher return on investment (ROI)


 Risk Analysis Report - 17/06/2008 To: 17/06/2013 - Weekly Frequency - Aligned to Start Date
MoneyMate Rating is calculated at 01/04/2013
Name Perf Ann
Perf Fund Rating Max
Drawdown Risk Profile
SL Synergy UK Smaller Companies 67.512% 10.869% Not Rated -47.765% Not Rated
SL Synergy Euro Smaller Companies 59.112% 9.734% -41.448% Very High Risk
SL Synergy North American Equity 45.995% 7.862% -38.846% High Risk
BOI Life - Smart Funds Davy Geared Hi Yield Fd 25.875% 4.710% -47.489% Very High Risk
BOI Life - Smart Funds Innovator S9 -19.848% -4.328% -49.098% High Risk
Presented by: MoneyMate Limited
The figures shown are based on the following:
Local Currency, Offer to Offer, Gross income re-invested on Ex-dividend date
Past performance is not necessarily a guide to future performance
Risk Free Return: 0%
© MoneyMate Limited 2012. All Rights Reserved. MoneyMate ®.