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

Proposed Light Version of Examinership in Ireland

Proposed Light Version of Examinership in Ireland

In Ireland the Examinership process is a means by which companies can avail of the protection of the High Court for a period in order to explore options to reorganize and restructure in the hope of securing the future viability of the company. As High Court Justice Clarke noted in the Traffic Group Ltd Case (2008) "It is clear that the principal focus of the legislation is to enable in an appropriate case, an enterprise to continue in existence for the benefit of the economy as a whole and, of equal, or indeed greater, importance to enable as many as possible of the jobs which may be at stake in such enterprise to be maintained for the benefit of the community in which the relevant employment is located. It is important both for the court and, indeed, for examiners, to keep in mind that such is the focus of the legislation".

 It is a process unique to Ireland and it allows firms to avail of the stewardship of an independent examiner (usually an accountant) to negotiate and reorganize itself so that it can continue to operate into the future.

At the moment the process is extremely expensive both in terms of the legal costs because of the fact the High Court is the court involved and also because of the costs of the examiner who because he is appointed by the High Court is also under a duty of care and responsibility that can only lead to high costs. Also the highly complicated and detailed work involved makes it costly.

However there are proposals that the proposed new Companies Act will provide provisions for the process to be availed of by smaller companies. The usual criteria of meeting two of the following will likely apply

(1)   Turnover is less than 8.8million per annum

(2)   A balance sheet value of less than 4.4 Million

(3)   Fewer than 50 Employees

This new process will allow applications for examinership of a certain size to go to the Circuit court. Hopefully this will help to reduce the costs involved and to allow more companies to avail of it.

A lot of companies that fail do so because they can not meet their debts as they fall due at a particular point in time. However this liquidity failure does not mean the business couldn’t be made viable by reducing its cost base and intelligent restructuring of its systems and processes.

Hopefully the Minister can recognize this and implement a scheme that will allow for the successful protection of firms and the employment they provide.

By Frank McGivney BA ACMA CGMA 30 July 2013

Should Bankers salaries be raised to attract new talent

Article From Journal.ie concerning increasing bankers salaries
In my opinion bankers salaries in Ireland should not only be capped but actually slashed. I may be wrong but most of the positions in Irish Banks are actually filled from within the bank itself. So in effect you are not attracting the top candidates. You are in fact just awarding higher salaries to people who would have got the jobs anyway. The entry level for banks in Ireland are at the clerical level and then employees work their way up the career ladder within the bank. So really is the banking sector in Ireland a closed shop. The circle of available employees at higher levels are likely to come from within the bank or at most from another Irish bank. So how can it be said that the higher salaries are attracting a higher caliber of staff when in fact the staff came from the Irish banking system anyway.
It might be argued that the higher salaries retains higher caliber staff but really where would they go to anyway. All that happens in Ireland is that staff would transfer between banks so the talent pool is not expanded. Irish banks would find it difficult to compete with foreign banks anyway for the few really exceptional staff who most likely are so career focused they would be heading abroad anyway.
I would suspect that for the higher management levels that the employees hired by banks are even more restricted to people who came from certain schools and social circles. I believe Shane Ross highlighted this in one of this books on the Irish banking system.
 http://www.thejournal.ie/poll-does-bankers-pay-need-to-be-attractive-to-attract-the-right-people-838147-Mar2013/#comment-1033241