Confidence through a systematic approach to accountancy

Advertisements use a multitude of key buzz words to attract customers one of the main purposes of which is to give the potential client confidence in the service or product they intend to purchase.

How do we as accountants in reality instil such confidence as distinct from just putting it down in an advertisement because it’s good for marketing?

Accountants are there to prepare your tax returns and tell you whether you made a profit or a loss and therefore advice if your business is financially viable or not and what changes you need to make it profitable. Also on a psychological level he/she is there to give you a certain peace of mind that you are compliant with your taxation responsibilities and numerous other statutory requirements such as to the Central Statistics Office and the Companies Registration Office.

In order to provide my clients with this level of confidence I find the underlying principal is the systematic approach we take in the practice to each client’s files. I know every client on a personal level and analysis what they need done and how to achieve it. After this every figure we prepare is fully backed up with detailed analysis prepared on a systematic basis. By doing this I can be confident in the figures we produce and so is the client. Our sets of accounts can be analysed the way you peel an onion. The outer layer is the overall figure but you can peel away to reveal the figures and breakdowns behind each number.

Over the last year I have had five revenue audits and in each one the auditors went away without a single euro more than the figures I had submitted to them. This is because each figure is simply explained and then behind each one there is a detailed analysis so that when the Revenue Officers come down I can prove my figures are correct and have a strong basis for countering any arguments they may come up with.

You should expect this from any professional you deal with and although it seems obvious it isn’t always in fact what people get.

(C) Frank McGivney BA(1st class) ACMA CGMA, 0469293891

The Shadow Economy

The Shadow Economy

The shadow economy costs every tax payer money through higher taxation. If everyone declared the income they made then the tax take would increase significantly and the tax burden on an individual basis would fall so we would all pay less.But of greater concern is the effect people,operating with out paying taxes, have on legtimate business. If you are a carpenter qouting for a job and you competion is some guy who pays no tax and no insurance then you just... simply cannot compete. The home renovation scheme has helped alleviate this to some extent in the building industry but it still is a prevalent hinderance to fair trade through out all sectors of the economy.
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1. What is the shadow economy?
In general, shadow economy activity is activity in respect of which businesses (including professions) and individuals engage in inappropriate practices with the aim of not complying with their legal obligations relating to matters such as taxes & duties, PRSI, licenses and employment. Shadow economy activity includes -
not declaring, or under-declaring, a source of income (for example, not declaring or under-declaring 'cash jobs') so as to avoid tax and other liabilities;
employers paying employees in cash under an 'off the books' arrangement so as to evade tax and PRSI liabilities;
'working and signing' - working or running a business whilst at the same time claiming falsely job-seekers benefit from the Department of Social Protection;
non-operation of the VAT system;
tobacco smuggling including the sale of illegal tobacco products;
oil laundering including the sale of washed diesel.
Most of the shadow economy activity takes place within that which is referred to as the ‘cash economy’ (i.e. the payment for goods and services by way of cash).
2. What are the main effects of shadow economy activity?
Shadow economy activity –
reduces tax, duty and other revenues owing to the State;
creates an un-level business playing field that has a negative impact on legitimate businesses as regards competitiveness, sustainability and long term job creation.
3. Reporting shadow economy activity
You can report (or report via your representative body) to Revenue details of shadow economy activity by using our Online Reporting Form. Alternatively, a report may be made by way of a telephone call to your local Revenue office.
Frank McGivney & Co. Ltd Tel 0469293891 email fmcgivney@live.com

Communication

Communication

 

“Wisdom cannot be imparted. Wisdom that a wise man attempts to impart always sounds like foolishness to someone else ... Knowledge can be communicated, but not wisdom. One can find it, live it, do wonders through it, but one cannot communicate and teach it.”
― Hermann Hesse, Siddhartha

There is nothing more important in business than effective communication. You may have the most brilliant product in the world but if you can’t make somebody want to buy it then it is as worthless as a bucket of sand to a camel.

Forms of communication

(1)    Words, sentences, stories, descriptions

(2)    Pictures

(3)    Video

(4)    Sounds, music, songs

(5)    Facial expressions a smile, a grin, a growl a grimace

(6)    Body language, facing away, facing towards, crossed arms, pointing

Fundamentals of communication

(1)    Smile, all the rest is for nought if you can’t get someone to trust you and the way to a person’s heartfelt trust is a smile. Not a grin, not a fake laugh just a simple polite smile. If you are telling something sad or bad then a comforting smile. If you are selling your product then an enthusiastic smile.

(2)    Make the individual or group believe they are the only ones who matter to you in the world by giving them your full attention. Listen to their words, replicate their facial expressions, show a full committed interest in them and hold their gaze. Make them feel there is no one else in the world but you and them, this will make them not only hear but absorb what you are saying.

(3)    Language Use the level of language suitable to your audience. If talking to a room of scientists then go ahead and enjoy yourself and talk technical about quarks and atoms, protons and vectors. If you are talking to anyone else then explain things in words which don’t need a degree in micro biology to understand.  

(4)    Assume people know absolutely nothing about your product. You should know everything about it (and if you don’t then be ashamed and go learn it all) but sometimes a high level of knowledge leads to people talking above people’s heads. Explain the simple things and then move on to the complex this allows everyone to follow what you are saying.  

(5)    Use images and sounds not just words. A picture can convey a million words, a song can elicit an emotional response, both images and sounds can cause memories to be formed by association

(6)     Talk clearly and loud enough to be heard and understood

(7)    Embrace your audience with your body language, face them, be open with your arms and hands.

(8)    Enjoy the experience of communicating with others. Humans can sense emotions, if you are happy and sincere they will read this in you.

(9)    Listen to them communicating to you. Remember what your mother told you about having two ears and one mouth. Communication goes two ways, look at their body language, notice their facial expressions, listen to their words, appraise their knowledge, determine what level of technical jargon they understand, notice are the looking at you.  

This is just a very basic article. I hope it helps with your communication skills.

© Frank McGivney 16.06.16

Frank McGIvney & Co, Chartered Management Accountants fmcgivney@live.com 0469293891

Motivation post: No Retreat baby No Surrender

 Motivation Blog Post: Tenacity

I have always been a determined kind of a person. I set up my own business from scratch and have driven forward with what I felt was a significant level of drive and ambition, until I met one of my current business partners, Martin Finucane and realised I was only trotting behind his tenacity. His determination to sell our new product the Able Table is beyond phenomenal and is the major reason for the success of our business venture.

Its something people are lacking often in their work ethos or business plan. They have a great idea, they have the right attitude to risk but they fail because they wont keep pushing against the wall of consumer resistance and self doubt.

The lesson we all need to learn is not to give up, to keep pushing, until the resistance and obstacles crumble in response to the pressure we are exerting.

Negative responses, negative people and negative thoughts all need to be banished when you are self employed.

Positivity not only should but absolutely must be the corner stone of your philosophy and modis operandi.

Don't accept no for an answer, keep going until a sale is made, until the deal is struck or the suppliers price is reduced.

Its not just in sales but everywhere in an organisation. Purchasing, human relations, product design and in every aspect of a business there is only one road to success and that's with a positive determined attitude of no retreat and certainly no surrender.


(c) Frank McGivney 03 June 2016

Frank McGivney & Co Ltd, Chartered Management Accountants, Kells, Co. Meath, Ireland
Telephone 0469293891

Able Table

  Able Table: An Experience

The sounds of the exhibition faded as I watched him slowly approach the Able Table stand. I had observed him over the past two days, his face lacked a smile and his body seemed to hold a tension within itself, displaying a certain awkwardness to the world in which he meandered. At exhibitions some people tend to slide up kind of cautiously to stands, not sure if they want to attract the attention of an overeager sales assistant before they establish for themselves some level of interest in the product or service on display.  Others don’t hesitate, ready to do battle of the buying or ripping apart variety. He rolled up to us with a determined look in his face, a no nonsense gait born of a presumably difficult life climbing to the higher echelons of managerial position. He avoided our feeble attempts at eye contact. His focus was on the Able Table alone. The low mumble from the motor of his wheelchair stopped. His head facing down, he positioned himself in the correct slot. His arms rested on the table, he looked up and a tear trailed down my face as his demeanour softened, his body relaxed and the most wonderful smile uncovered itself from his stoic lips.

“This is the table I have been looking for all my life” were his words as he took out his laptop and started the process of accessing the Able Table for its potential as his future work environment. I met Martin’s eye and our anticipating lungs recommenced drawing in air.

The adventure had started nearly a year before the Mobility Exhibition in the RDS. Martin Finucane had been at home one day recovering from a serious back injury of his own when his wife, Esther, strolled in and told him to go out the back and build her a table to help in work. Esther works as a care assistant in residential facility in Navan helping people in wheelchairs. Martin who had just come out of a stint in a wheelchair himself said “Of course honey” and that was the spark which ignited a revolution in the care of disabled persons. The next day he started the whole process of designing a table which could facilitate in a social inclusive manner the care of a number of people in wheelchairs at the same time. Eventually after much toil and effort he came up with a design which both him-self and Esther were happy with and so was born the Able Table.

Over the centuries different inventions and creations have had the potential to change the lives of the whole of the population of the earth and some have in the most fundamental of ways changed the lives of specific sectors of the human clan. The Able Table is one such invention, it revolutionises the care and well-being of people who suffer with disabilities. It allows for hand over hand care for up to four people all at once. This may not mean a whole lot to able bodied persons outside of a care or hospital environment but if you have spent years and perhaps decades been cared for on a one to one basis with no social interaction, well then the opportunity to finally have a meal around a table with others is a fundamental life enhancing revolution in the quality of your daily life.

The Able Table also improves the lives of the carers and nurses who have dedicated their lives to the care and well-being of others. They are the ones who cry when they see Mary’s head rise from her chest for the first time as her arms rest on the table. They are the ones who return the smile of Tom who after years of gloom finally laughs at the stories been told from the other end of the table by Pat, a man who up until the Able Table has held his stories inside of himself. These amazing carers are also the ones who can now join in the conversation around the table and whose work load is eased because of the ease and convenience of the table’s unique and patented design.

People in wheelchairs can never usually fully sit into a table, the depth of their chair imposes a void between themselves and the point of contact with the table-top and hence distances them from other people. Martin decided this was not acceptable, that everyone deserves the right to be included in society at the most basic of levels. Prior to our table dinner time was a lonely half hour for people in care homes, as they ate or were feed on a one to one basis on individual trays. But the Able table is now here to create a complete paradigm shift in the way people perceive those in wheel chairs. No more are they outside of the social circle, they are now in the heart of it.

The effect the table had on the man at the start of this article is replicated on a daily basis with people in care facilities where Martin and his Step Daughter Cariosa bring the most wonderful gift anyone can give another, the gift of companionship, breaking the cycle of isolation and bringing them more fully into the human family.

We are appearing on the Dragons Den on Sunday the fifth of June. The June bank holiday when hopefully the sun shines and the dragons will see what I saw the day Martin came into me with his business idea. As an accountant I hear people’s stories on a daily basis but with Martin Finucane I saw not only a product, wonderful enough to potentially change people’s lives for the better, but more importantly I saw in Martin himself a man with something special inside of himself, something which cries out to be encouraged to blossom into the reality of a mission to improve the world for those with disabilities.

@DragonsDenRTE @siliconbarry @GavinDuffy @EamonnEquinn #TopTV @Alisoncowzer

 @Eleanor_McEvoy @able_table
https://www.facebook.com/theabletable/?fref=ts
www.abletable,ie

  © Frank McGivney, Financial Controller Able Table Ltd.    29.05.16

Growing older to reduce taxation

Your Age and Irish Taxation

Some people are old at forty and some eighty year olds are as young as the grandchildren they babysit.

We all grow old it is the basis of life in the universe. From the time of the Big Bang forward the universe has been steadily aging, cooling, and converting its energy from ordered into unordered forms in order to eventually over billions of years to come to an end. If that didn’t depress you then the good news is that in Ireland your age can offer some tax benefits

(1)    Pension Contributions: the amount of money which qualifies for tax relief that you can invest in a pension as a percentage of your income increases as you get older:

Age	Amount which qualifies for tax relief
Under 30 years	15% of net relevant earnings
30 to 39 years	20%
40 to 49 years	25%
50 to 54 years:	30%
55 to 59 years	35%
60 and over	40%

This is subject to a limit of €115,000 of income which can be taken into account and the fund can only be €2 Million before any amount drawn from it is taxed at the high rate of tax (2016 Levels)

(2)    If you are over 65 then then the first €18000 of annual income is exempt from income tax and €36000 for a married couple (increased by 575 for first and second dependent child and 830 for each subsequent child) Perhaps when you are 65 it would be a good time for them to be leaving home but if they do stay then at least your tax is lower.

(3)    If you are over 65You get an extra tax credit called the Age allowance which is worth €245 if you are single or widowed and €490 if married or in a civil partnership.

(4)    Retirement Relief is available on the sale of your business once you reach 55 and over

(5)    You are exempt from DIRT if you are over 65 and your income is below the exemption limits above. (If you are over 65 and have been charged DIRT then get on to us and we can help you reclaim it.)

(6)    Young trained farmers, there are a number of tax breaks and stamp duty concessions available for young trained farmers. These are farmers who are under 35 and who have completed certain farm related qualifications.

Like everything in the tax code your treatment depends of very specific details. Taxation is based on detailed laws and regulations and not on fairness (even though it is meant to attempt to attain fairness which is hard to see in the current system with a 12.5% tax rates for the biggest of companies). It’s important not to miss out on any tax breaks you might have coming to you due to your age.

© Frank McGivney, Frank McGivney & Co. Chartered Management Accountants, 0469293891 27/04/2016

How to Save €5360 in income tax

How to Save €5360 in income tax

Reducing your tax liability using Standard Rate Cut off Point

Figures used are the 2016 ones.

In Ireland you pay tax at the lower rate of income tax (currently 20%) up to point you exceed your standard rate cut off point after this you pay the higher rate.

Examples

(1)    Single Person their first €33800 of income is taxed at 20% and the balance (anything from €33801 and above) is taxed at 40%.

(2)    Single parent the first €37800 is taxed at lower rate then rest at 40%

(3)    Married couple one income the first €42800 is taxed at 20% then balance at higher 40%

(4)    Married Person two incomes the €42800 is increased by a max of the lower income or €24800. So the maximum at lower rate is €65600 (€37800*2)

Implications and Tax planning to maximise the amount of Income taxed at 20%

(1)    If you are a PAYE worker then there isn’t a whole lot you can do in relation to tax cut off points because you generally can’t split your wages between yourself and our spouse.

(2)    If you are a PAYE worker with the joyous position of having your choice of jobs at different wages rates then the ideal situation to minimise tax is to have one income at €42800 or less and the other at whatever adds up to a balance of €65600. So wife on €40000 then husband on €25600. This allows for all your tax to be at 20%.

(3)     If you are self-employed and earn more than €42800 per year then there are two scenarios

a.       Your spouse works. If he/she is on less than €24800 then you should set up a partnership or employ her in your company and bring her/his income up to €24800 and therefore reduce your taxable income by the same amount.

b.      Your spouse doesn’t work and has no other source of income then you should have him/her as a business partner or company employee. Then split the profits so at least one earns €24800 and the other earns the balance (or indeed any split as long as one is above €24800).

(4)    The Maximum benefit from 3b is for someone earning €65600 or more. If the €65600 is all in one spouses hands then the tax is €42800x20%+€24800x40%= €18480 (less their tax credits). If the income is spread then the full €65600 is taxed at 20% so €65600*.2=€13120. This equates to a saving of €5360 (€18480-€13120). There are also saving in Universal Service Charge which I will analysis in a different article. However there is one bite in the tail in that you lose the Home Carers allowance of €1000 (but still well worth it). It also may not be suitable for some people in certain circumstances such as those on social welfare.

The above is for general information purposes. Each individual case is different and you should get advice from your accountant on all tax planning issues.

© Frank McGivney & Co Ltd (046)9293891  Date written: 22.04.16 

Tax Planning Exempt Income

Exempt income

Life is full of decisions one of the ones you can decide to make is whether you try to minimize the amount of tax you pay. This leads to a further decision of whether you do this legally or illegally.

Legally this is called tax avoidance or tax planning depending on the scale of how you organize your affairs. Both are perfectly valid means of minimizing your tax

Illegally this is called tax evasion, the shadow economy or sponging of the rest of society. It has high penalties for detection including hefty fines and prison sentences. Each time you evade tax then you end up driving the amount taken by other people to higher levels as they have to compensate for the amount you are not paying.

One of the ways to avoid income tax is through exemptions.

Within the Irish tax code there are various exemptions to income tax.

(1)   Exemption Limits:

Once you reach the grand age of 65 then any income you earn below €18000 is exempt from income tax. Once you reach 66 then you also avoid PRSI. If you are over 70 then you are charged a reduced rate of Universal Service Charge

 (2) Personal injury settlements (s 189), payments from the Haemophilia HIV Trust (s 190), Hepatitis C compensation (s 191), and payments in respect of thalidomide victims (s 192).

(3) Income of artists, writers and composers, subject to an overall annual limit of €50,000 (s 195).

(4) Interest on savings certificates (s 42) and instalment savings schemes (s 197).

(5) Income of recognised charities (s 207, 208).

(6) Income of amateur sports bodies (s 235).

(7) Rent from letting farm land (s 664). A claimant must be aged 55 or over, or unable through physical or mental incapacity to carry on farming. Exemption is given for the lower of:

(i) the farm rental income surplus, or

(ii) €40,000 where the lease is for more than 14 years, €30,000 where the lease is for 10 to 14 years, €22,500 where the lease is for seven to 10 years, or €18,000 in any other case.

(9) Rent-a-room relief (s 216A). Income from lodgers is exempt provided your gross income from such letting does not exceed €12,000 in the tax year.

(10) Home childcare earnings of up to €15,000 in the tax year (s 216C).

(11) Earnings of special assignees (s 825C). 30% of income above €75,000 in the case of employees assigned from a tax treaty country to work in their employer’s Irish operation.

(12) Start Your Own Business relief (s 472AA). Where a person previously long-term unemployed sets up a business, the first €40,000 of profits in a tax year are exempt. Expires 31.12.2016.

Frank McGivney www.meathaccountants.com 0469293891

€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.