Crowleys DFK Support Cork SMEs’ Global Success

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Edward Murphy, Head of Tax, was featured in Cork Chamber’s 200th anniversary magazine. He discusses Cork, the local Cork SME sector and it’s success on the domestic and global stage.

You can read the full interview below.

Q:   What’s it like to do business in Ireland’s fastest growing city region?

A:   It’s hard not to be excited by the hive of activity in Cork in recent years – from the myriad of new developments, a growing workforce and a thriving third-level education sector to the region’s continued success in attracting high-value overseas investment. However, it’s the global success of our indigenous Cork SME sector that is, perhaps the most exciting.

Q:   Why have indigenous Cork SMEs been so successful locally and globally?

A:   While Cork has a well-earned reputation in attracting and retaining foreign direct investment, the support it offers homegrown entrepreneurs and SMEs is second to none. Innovation and the ambition to think globally is nurtured through an excellent support ecosystem of start-up incubators, accelerator programmes and research, development and innovation hubs; backed by local business organisations, third-level institutions, and public and private investors.

Q:   What are the key challenges facing SMEs looking to expand overseas?

A:   The continued uncertainty surrounding Brexit is currently the biggest challenge facing SMEs that trade with the UK. However, a constant challenge relevant to all markets is access to local, trusted and reliable professional connections and advice overseas. This is a key step in any global expansion strategy and is often a major stumbling block for many businesses. Understanding how to do business in a new jurisdiction can be time consuming and expensive when you don’t have a local relationship or know where to go to get the proper advice.

Q:   Can you describe how Crowleys DFK can help SMEs with their international growth strategies?

A:   At Crowleys DFK, we understand the challenges faced by our SME and owner-managed business clients. We are proud of the reputation and long-term relationships we have built with them over the years. They represent a diverse range of today’s most innovative and high-performing industries and sectors, including information and communications technology, life sciences, manufacturing and consumer products.

We have been a member of DFK International since 1993. This worldwide association of independent accounting, tax and business advisory firms has over 220 member firms covering 92 countries. We have a long history of working with other DFK Firms. It’s through these strong relationships that we can deliver a complete international service to clients.

Whether it’s getting advice on taking on two employees in Germany, accessing capital markets in London or New York or helping technology companies expand into San Francisco, we connect our clients with trusted professionals throughout the world. In many cases our clients prefer to deal with us and in these instances, we instruct the other DFK firms. This means clients can concentrate on their business and don’t need to spend time developing new relationships abroad.

We have all the right connections to help businesses achieve their ambitions – locally and globally.

Contact us today for expert advice on growing your SME.

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Help to Buy Incentive

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The Help to Buy (HTB) incentive is a scheme to help first time property buyers. It helps with the deposit needed to buy or build a new house or apartment. In order to claim the HTB scheme, you must:

  • Be a first-time buyer
  • Take out a mortgage that is at least 70% of the purchase value of the property
  • Be tax compliant
  • Live in the property for a minimum of 5 years after purchase

To qualify, you must have not bought or built a house or apartment previously on your own or jointly with any other person. You will still qualify for HTB if you have previously inherited or have been gifted a property.

The HTB scheme is back dated to include homes bought from 19 July 2016 and will be available to 31 December 2019. If the property was purchased between 19 July 2016 and 31 December 2016, the price of the property must be €600,000 or less. If the property is bought between 1 January 2017 and 31 December 2019, the property must cost €500,000 or less.

The amount you can claim is the lessor of the following:

  • €20,000
  • 5% of the purchase price of the new home.
  • The amount of Income Tax and Deposit Interest Retention Tax (DIRT) you have paid in the previous 4 tax years.

Regardless of the amount of people who enter into the contract to buy or build the property, the cap of €20,000 applies. Universal Service Charge (USC) and Pay related Social Insurance (PRSI) are not considered when calculating the amount you are entitled to claim.

If you purchased or built the property between 19 July 2016 and 31 December 2016, the refund will be issued directly to you. If you buy a new build between 1 January 2017 and 31 December 2019, the refund will be issued to your contractor. The contractor must be approved by Revenue. If you self-build, the refund is paid to a bank account held with your mortgage provider.

Revenue may clawback the refund if:

  • You do not live in the property for 5 years
  • You do not complete the process to buy the house
  • You were not entitled to the refund
  • The property is not completed

Once the property is built or bought, you have the sole responsibility of complying with the conditions for the HTB refund.

If you require any assistance with HTB or  further details on the above, please contact us.

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Dwelling House Exemption – Capital Acquisitions Tax

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A recent High Court decision has a significant bearing on the application of dwelling house exemption to beneficiaries who inherit a mixed asset estate, comprising of a number of residential properties.

The dwelling house exemption allows someone to inherit a property tax-free provided that they have lived in it for three years before the homeowner’s death and that it was the main home of the person who has died. Critically, if a person owns even a share in another property “at the date of inheritance”, they lose their entitlement to the relief. Revenue has always been of the view that if someone who would otherwise qualify for dwelling house relief inherits not just the main home of the disponer but another property, or a share in another property, they no longer meet the eligibility criteria.

A Court ruling on 25th September 2018 has changed the rules on dwelling house exemption. The High Court ruled in the case of a successor, who inherited both the family home where the successor had lived with the disponer and an interest in four other properties, was entitled to the dwelling house exemption. The judge held that the successor did not have a beneficial interest in either of the dwelling houses at the date of the inheritance, as a successor cannot become beneficially entitled to a house which forms part of the residue of an estate until the assets available for distribution have been ascertained.

The impact of the Court case is that you will no longer be disbarred from dwelling house relief if you inherit property other than the family home in the same will. Revenue has now adopted a revised approach in distinguishing between dwelling houses inherited as a specific legacy and those inherited in the residue of an estate.

Accordingly, a dwelling house forming part of the residue of an estate is not to be taken into account in determining whether a successor has an interest in another dwelling house at the date of an inheritance. Ownership of property received as part of the residue of a will would occur at a later date than “at the date of inheritance”.

Anyone receiving a specific legacy of an interest in a property as well as receiving the family home will continue to be excluded. This is because, as a specific legacy, beneficial ownership of the “other” property would transfer at the same time as the family home.

Revenue acknowledged that if any taxpayers find themselves in a similar set of facts as this case then they may be entitled to a refund of the tax paid, bearing in the mind the four year limit that applies to refunds of tax.

Should you require any further details on the dwelling house exemption, please contact us.

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Revenue Warns Airbnb Hosts over their Tax Compliance

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Revenue have recently written to over 12,000 taxpayers who are in receipt of income from the letting of short-term accommodation through Airbnb. Airbnb have provided Revenue with details of payments made to customers in the years 2014, 2015 and 2016 in respect of the provision of short-term accommodation.

The letters issued by Revenue are reminders to taxpayers to include this income in their tax returns. Revenue have confirmed that they will be carrying out a range of follow up compliance checks to ensure that tax returns are filed on time and completed correctly.

Income received from the letting of short-term accommodation is treated differently for tax purposes to income received from renting a property under a landlord and tenant arrangement. In addition, income from a trade of short-term letting is subject to different tax treatment to income from the provision of accommodation on an occasional basis.

When preparing your income tax return, please be aware of the following points when calculating profits from the occasional letting of short-term accommodation:

  1. A deduction against profits may only be made in respect of incidental costs directly associated with the service provided to guests. Examples of incidental costs include commission paid to online accommodation booking sites, cleaning fees, the cost of providing breakfast to guests as well as a reasonable apportionment of electricity, gas and heating utilised by guests;
  2. A deduction against profits is not allowable for annual costs associated with a property such as insurance, TV licence and general maintenance costs;
  3. Capital allowances on the cost of furniture and fittings for the property are not available against the profits;
  4. No deduction is allowable against profits in respect of expenditure incurred in advance of a property/room being made available for guest accommodation.

For income earned in 2017, the required date to submit your income tax return on Revenue’s Online Service (ROS) is 14 November 2018.

If you have any queries or concerns relating to the letter issued by Revenue, please contact our Tax Department.

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Credit Union Director Duties

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Credit unions have come under increasing scrutiny in recent years with more attention than ever focused on the duties of directors and the board. At a time of rapid change both within the credit union sector, and in the wider economy, keeping up to date is critical, explains Fiona O’Sullivan, Director, Audit & Assurance.

A Central Bank report published earlier this year shows that governance and risk management continue to challenge credit unions. The board of each credit union is responsible for its control, direction and management and must ensure that directors have the skills and expertise to adequately oversee operations — this includes being aware of the rules and regulations governing who can serve on the board, in what capacity, and for how long. Individual directors must be able to devote sufficient time to their roles and responsibilities and must keep up to date with their legal and regulatory obligations.

Improving standards

While governance standards are generally improving, the Central Bank report shows that 60 percent of risks identified in credit unions relate to governance and operational issues. Typically, these include failure to challenge internal audit, failure to adequately monitor the quality of risk management and compliance, and failure to adequately review the performance of individual directors, management and key staff. These problems occur in credit unions of all sizes, not just in smaller entities.

The report provides a useful summary of supervisory expectations:

  • An effective and comprehensive governance framework should be evident in the credit union, including clear accountabilities and an appropriate performance management framework for relevant officers and staff.
  • Effective engagement with internal audit, risk management and compliance functions should be evident. Boards should have an awareness, challenge and undertake action in relation to findings and issues identified by these functions.
  • Clear separation between the roles of the board (non-executive) and management (executive). This separation should be underpinned by clear roles, responsibilities, reporting lines and accountabilities.
  • A strategic, forward-looking focus at board level, with quality discussion and challenge of strategic plans and associated targets evident at board meetings. The ongoing monitoring and tracking of metrics to assess the implementation and effectiveness of the strategic plan is key to effective governance and driving the future direction of the credit union.
  • Appropriate and timely reporting to the board in order to support decision-making on key strategic issues. Such reports should be well understood at board level and there should be evidence of discussion, challenge and follow-up from the board in relation to such reports.

Risk governance

The report highlights the importance of internal audit, risk management and compliance, stating:

“Those credit unions demonstrating stronger governance have typically moved beyond a mere ‘tick-box’ compliance attitude to exhibiting a more integrated risk governance culture, with a strong awareness and understanding of the impact of unmanaged risk. Such credit unions are more likely to leverage appropriately the important supports to the board provided for in the 2012 enhanced governance framework of internal audit, risk management and compliance in order to provide them with an improved understanding of the risk profile of their credit unions so that they can drive the necessary changes and improvements.”

Directors should keep in mind that, as in other sectors, the risks that credit unions face continue to evolve as circumstances change.  Risk registers and policies must be regularly reviewed and updated to take account of regulatory, sectoral, economic and technology-related developments. Recent regulatory developments include the changes to the investment and liquidity framework being implemented in 2018. Emerging economic risks include Brexit while cyber risks include vulnerabilities in areas such as fintech, cloud computing, mobile technologies, the Internet of Things and ‘big data’. Directors are responsible for ensuring that these, and other existing and emerging risks are identified and documented and that appropriate plans are devised and implemented to mitigate them.

How we can help

Understandably, with the regulatory and compliance burden increasing and new and complex challenges emerging, credit unions and their directors need help to keep pace with developments. Crowleys DFK has more than 25 years’ experience advising clients in this sector and offers a broad range of specialist services, including governance support, to assist boards and directors to meet their legal and regulatory obligations.

For more information and to find out how we can help, please get in touch.

Talk to us

 

Fiona O’Sullivan
Director, Audit & Assurance Services
fiona.osullivan@crowleysdfk.ie

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Crowleys DFK Partner meets Minister Bruton

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Crowleys DFK Partner and Chairman of the Ireland Malaysia Business Association, Vincent Teo, had the pleasure of meeting Minister Richard Bruton, Minister for Education and Skills, and Ambassador Eamon Hickey, Irish Ambassador to Malaysia, at Enterprise Ireland’s business breakfast in Kuala Lumpur on Thursday, 20th September.

Minister Bruton addressed the local network of business and education leaders for Enterprise Ireland’s business breakfast as part of his five day education and trade mission to Malaysia and Indonesia.

“I am delighted to have the opportunity to greet an Irish Minister in my home country,” Vincent commented, “Congratulations to Ambassador Hickey and Enterprise Ireland on hosting a successful business breakfast.”

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Crowleys DFK Partner meets the Irish Ambassador to Malaysia

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Crowleys DFK Partner and Chairman of the Ireland Malaysia Business Association, Vincent Teo, met with Ambassador Eamon Hickey, Irish Ambassador to Malaysia at the Embassy of Ireland in Kuala Lampur last week.

Vincent commented, “I am very grateful to have had the opportunity to meet Ambassador Eamon Hickey in the Embassy and for his continued support to our efforts in promoting bilateral trade relations between Ireland and Malaysia.”

“We plan to reach out to the relevant Ministries in Malaysia in the hope of hosting a ministerial visit to Ireland in the near future,” stated Vincent.

The objective of the Irish Malaysia Association is to support bilateral business links between Ireland and Malaysia. Crowleys DFK is a patron member of the IMA and is dedicated to supporting its development.

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Crowleys DFK launches Overview Video on Foreign Direct Investment Service Offering

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Crowleys DFK is delighted to launch an overview video of the Firm’s Foreign Direct Investment service offering.

Edward Murphy, Partner and Head of Foreign Direct Investment and Siobhán O’Hea, Partner, Tax Services provide an insight into how Crowleys DFK can help foreign owned companies to set up operations in Ireland.

For more information on our Foreign Direct Investment service offering, please contact Edward Murphy.

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Avoiding VAT Pitfalls on Property Transactions

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  • VAT pitfalls on property transactions
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Crowleys DFK are currently running a series of CPD accredited VAT on Property briefings for solicitors in Cork and Dublin. The purpose of the seminars, presented by Tax Partner Siobhán O’Hea, is to raise awareness of common VAT pitfalls on property transactions.

VAT on property can be a complicated area but it is vital to thoroughly investigate the potential VAT impact before embarking on any property transaction, Siobhán advises.

“We are seeing problems crop up in many different situations. For example, more people have got involved in letting property in recent years and this is an area where VAT issues can often arise. While lettings are exempt from VAT, landlords can opt to tax the letting and charge 23% VAT on the rent. This can be advantageous if the landlord wants to claim repayment of VAT incurred on the acquisition or development of the property, however it is important to be aware that there are restrictions. For example, you cannot opt to tax the letting if the property is occupied for residential purposes or occupied by the landlord or a person connected with the landlord.

“On sales of commercial property, liability to VAT depends on whether the property is considered ‘new’. There are Revenue rules governing the definition of ‘new’ for property VAT purposes. Generally, the supply of older properties is exempt from VAT however, in some circumstances, the vendor and purchaser may jointly opt to have the transaction subject to VAT.

“Where property is supplied in connection with an agreement to develop the property, these transactions are always taxable.

“In our experience, there are VAT pitfalls in many every day property transactions and these can prove very costly for clients. This is why Crowleys DFK are running these seminars for solicitors. It’s an opportunity to raise awareness and to help ensure common mistakes are avoided,” Siobhán concluded.

For further information on Crowleys DFK VAT briefings, please get in touch.

Talk to us

Siobhán O’Hea
Partner, Tax Services
siobhán.ohea@crowleysdfk.ie

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The Importance of a Company’s Registered Office

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Choosing an appropriate location for a company’s registered office arises under the Companies Act 2014. It is the duty of each director and secretary of a company to ensure the requirements are complied with.

The location must be disclosed publicly on the Companies Registration Office (CRO) website.

It must be an actual physical location within the State. A post office box number is not sufficient.

Company statutory registers must be kept at a Company’s registered office and members of the public can inspect registers at that location. Documents may be delivered by hand to the registered office.

It is the address to which all legal notices, including correspondence from the CRO and at times the Revenue Commissioners, may be sent.

Any document will be validly served on a company by leaving it at, or sending it by post to the registered office of the company.

Crowleys DFK’s Corporate Compliance team have been providing a professional registered office facility for a number of years through offices located in Cork and Dublin.

For further information please contact Emma Dunne, Manager of our Corporate Compliance Department.

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