Preliminary Tax Obligations for Income Tax & Corporation Tax

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Preliminary Tax Obligations for Income Tax & Corporation Tax

Individuals who file income tax returns and companies who file corporation tax returns have an obligation to pay preliminary tax:

1. Individuals

Preliminary tax is your estimate of the Income Tax, PRSI and USC that you expect to pay for a tax year. You must pay this by 31 October of the tax year in question.

The amount of preliminary tax for a year must be equal to, or more than, the lowest amount of the following:

  • 100% of the tax due for the immediately previous tax year
  • 90% of the tax due for the current tax year

It is necessary that you make a sufficient preliminary tax payment based on the above rules, as we have seen Revenue impose interest on underpayments.

As income tax returns are filed a year in arrears, i.e. your 2023 tax return will be due in October 2024, it is important to note that if you do not make a preliminary tax payment for the year in question, interest at a rate of 0.0219% will be incurred from the date that the payment was due.

For example, your 2023 tax return is due for filing on 31 October 2024. Your preliminary tax payment would have been due for payment on 31 October 2023. If you did not make the payment on 31 October 2023, Revenue may impose interest from 31 October 2023 when you file your return in 2024.

2. Companies

Irish resident companies and non-resident companies must pay Corporation Tax on taxable profits if:

  • a resident company trades in Ireland
  • a non-resident company trades in Ireland through a branch or agency
  • from 1 January 2022, a non-resident company is in receipt of profits or gains in respect of rental property in Ireland.

The rules of when a company should make their preliminary tax payment depends on whether they are classified as a Small Company or Large Company.

Small Companies

A small company is a company whose CT liability is not above €200,000 in the previous accounting period.

Small companies can base their preliminary tax for an accounting period on:

  • 100% of their CT liability for the previous accounting period
  • 90% of their CT liability for the current period (and there is provision for a top up payment to be made).

This must be paid on the 23rd of the eleventh month after the accounting period ended. For example, if the company’s year end is 31 December 2024, preliminary tax is due by 23 November 2024.

Large Companies

Large companies can pay their preliminary CT in two instalments when their accounting period is longer than seven months. The first instalment is due on the 23rd of the sixth month of the accounting period. The amount due is either:

  • 50% of the CT liability for the previous accounting period
  • 45% of the CT liability for the current accounting period.

The second instalment is due on the 23rd of the eleventh month. This will bring the preliminary tax up to 90% of the final tax due for the current accounting period.

For example, if the company’s year end is 31 December 2024, and they are a large company, the first instalment of preliminary tax is due on the 23rd of June and the 2nd instalment is due on the 23rd of November.

If preliminary tax isn’t paid by the above dates, interest is due at a daily rate of 0.0219% on late payments or payments that are not made in full. The interest is calculated by multiplying together the:

  • amount of tax underpaid
  • number of days the tax is late
  • interest rate.

If you have any queries about your preliminary tax obligations, please contact us.

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Infrastructure Guidelines – Outline of Changes to the Public Spending Code

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Infrastructure Guidelines – Outline of Changes to the Public Spending Code

From January 1st 2024, changes have been made to the Public Spending Code (PSC) concerning infrastructural and large-scale capital projects. The new “Infrastructure Guidelines”, which have replaced the PSC requirements for capital expenditure as previously outlined in Public Spending Code: A Guide to Evaluating, Planning and Managing Public Investment, December 2019, apply to all Government departments, local authorities, the HSE, public bodies, and any other body in receipt of public funding. The new “Infrastructure Guidelines” describe a new project lifecycle, with a series of stages to be completed prior to implementing a project. Here we will cover the key areas you should be aware of, while our Expert Team is available to provide further explanation and assistance.

Key Players in the new Guidelines

Addressed mainly to stages in project lifecycle relating to evaluation, planning and management of public investment projects, the “Infrastructure Guidelines” create new responsibilities for key individuals involved in these areas. Three individuals or positions are of particular importance, these being the Accounting Officer (AO), the Approving Authority (AA), and the Sponsoring Agency (SA).

The AO’s responsibilities are considerable here. It falls to the AO to ensure that their Department/Office/Body and any other relevant agency under their remit are compliant with these guidelines. Additionally, the AO is responsible for managing the budgets of the individual projects and the capital budget for their area overall.

Ultimately the AO is responsible for the project and the “Infrastructure Guidelines” provide a wide range of specific responsibilities for the AO to fulfill, such as monitoring the project as it is implemented and Assessing the Final Business Case. Alongside the AO in fulfilling these responsibilities is the AA, referring to the Department funding the project. Both the AO and AA should be aware of the wide-ranging responsibilities set out in the “Infrastructure Guidelines”.

The SA may be a government department, local authority, state agency, higher education institute, cultural institution or other state body and its responsibilities lie in evaluating, planning and managing public investment projects. Again the “Infrastructure Guidelines” set out key tasks that must be fulfilled.

Stages in Project Lifecycle

The core of the new “Infrastructure Guidelines” relates to the new stages of the project lifecycle which have been established and which all projects must follow. The new guidelines focus on three preliminary stages in the lifecycle which occur prior to implementation, these being:

  1. Strategic Assessment & Preliminary Business Case
  2. Pre-tender – Project Design, Planning and Procurement Strategy
  3. Post Tender – Final Business Case

It should be noted that the guidelines provide a simplified version of this process for projects with an estimated capital cost of less than €20m. For these projects, the following two approval stages must be fulfilled prior to implementation:

  • Preliminary Business Case
  • Post Tender – Final Business Case

The “Infrastructure Guidelines” emphasise that these stages are “incremental”. This means that a project is not locked in merely from having passed the first or second stage. Should a project at, for example, the third approval stage, be deemed to be no longer worthwhile for whatever reason, the project can be set down.

Extensive guidelines for following these phases have been made available by the Department of Public Expenditure, National Development Plan Delivery and Reform. Below are the key areas relevant parties should consider:

1. Strategic Assessment & Preliminary Business Case

This “Strategic Assessment” refers to the process of determining and defining the rationale for a project and ensuring that it is in line with government policy. This assessment should be submitted to the Approving Authority which will then, if acceptable, move the project to the Preliminary Business Case.

At this stage, the Sponsoring Agency must develop a Business Case which sets out, for instance, the investment rationale and objectives of the project. It should include a description of the short-list of potential options to deliver objectives set out, assessment of affordability within existing resources, assessment of delivery risk, and several other areas. The purpose of the Preliminary Business Case, then, is to provide the AO and AA with information regarding the viability and desirability of public spending proposals. It also creates a framework for assessing  a project’s costs, benefits, affordability, deliverability, risks and sensitivities.

2. Pre-tender – Project Design, Planning and Procurement Strategy

The purpose of this stage is to develop the options set out in the Preliminary Business Case, with the end goal of developing a Detailed Business Case which will set out procurement strategy and project execution plan. This is a process of reviewing and confirming assumptions; approval from the AO and AA here moves a project to Tender. The critical issue to be considered in the Design and Planning Stage is ensuring that output requirements are given strong definition to avoid amendments later in the project.

3. Post Tender – Final Business Case

The development of the Final Business Case represents the final stage in the approval process for a project. Again the purpose here is to subject a project to critical scrutiny, using understanding developed relating to costs, benefits, risks, and delivery and applying this. The Final Business Case will be the document which will be used by the Approving Authority to determine whether a project is to progress to the award of contracts. It should be noted that this occurs after tendering. However, completion of the tendering process does not represent the award of a contract.

Major Projects

As noted above, for projects costing below €20 million, the above process has been simplified, requiring a Preliminary Business Case and a Final Business Case. For projects costing above €200 million, considered as “major projects” in the new guidelines, there are additional requirements in the project lifecycle.

Specifically, all “major projects” must, at the Preliminary Business Case stage, pass through an External Assurance Process. Furthermore, at this same stage, the Preliminary Business Case must be submitted to and reviewed by the Major Projects Advisory Group. Finally, Government consideration must be given to the project at both the Preliminary Business Case and Final Business Case stages.

Contributors
                                                    

Vincent Teo | Partner & Head of Public Sector & Government Services

Vincent Teo
Partner & Head of Public Sector & Government Services

 Dr. Conor Dowling | Research & Policy Executive | Risk Consulting

Dr. Conor Dowling
Research & Policy Executive
Risk Consulting
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Central Government Accounting Standards – What You Need to Know

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Central Government Accounting Standards – What You Need to Know

From January 1st, new Central Government Accounting Standards (CGAS) will see significant reform of financial reporting for all Government Departments and Offices of Government. These new standards, being based on the International Public Sector Accounting Standards (IPSAS) generally favoured by the European Commission, aim to modernise financial reporting in Ireland along lines proposed by successive IMF and OECD reports.

The CGAS will change how public sector Vote accounts are to be prepared, requiring that financial statements also include information prepared on an accruals basis in the Statement of Financial Position. This article will run through the key changes imposed by the CGAS and explain the principles behind these.

Requirements

The CGAS coming into effect from January 1st are envisioned as a stage in a wider process of reform of financial reporting in Ireland. For the moment, the CGAS and their requirements apply to the following bodies:

  • All Departments and Offices of Government
  • The Houses of the Oireachtas Commission
  • The National Training Fund
  • The Social Insurance Fund

For these bodies, the CGAS imposes requirements as to how their Statements of Financial Position are presented. Specifically, they are now required to account for all of the following in their Statements:

  • Property, Plant and Equipment
  • Intangible Assets
  • Impairment of Non-Cash Generating Assets
  • Impairment of Cash Generating Assets
  • Service Concession Arrangements
  • Inventory
  • Leases
  • Provisions, Contingent Liabilities, Contingent Assets
  • Short-Term Employee Benefits

For each of these areas, a relevant CGAS detailing the exact requirements has been prepared by the Department of Public Expenditure, NDP Delivery and Reform. In addition, each of the CGAS has been provided with a manual, or Central Government Accounting Manual (CGAM). These manuals provide guidance on how the CGAS should be implemented and are a support for Finance Officers working to bring their organisation into line with the CGAS.

Government documents relating to the CGAS have emphasised that all relevant bodies must ensure that the principle of materiality is observed in their financial reporting. As an accounting principle, materiality requires that financial statements include all information and items that relevant decision makers, such as investors, might consider to impact their activity. In other words, an organisation’s economic activity can be considered to be material if it might be of interest to any and all bodies which would view that organisation’s financial statements.

In principle, then, the CGAS are to replace a cash-based system of financial reporting with reporting carried out on an accruals basis. Under the CGAS, an organisation must record economic activity regardless of whether cash was exchanged or involved in that activity. For example, under the CGAS, contingent liabilities such as guarantees, where no cash exchange has yet occurred, have to be reported.

Transitions and Enforcement

As noted, the CGAS are being adopted as part of a modernisation of Irish financial reporting, with the aim of bringing Ireland into line with the majority of OECD and EU countries. Ultimately, this reform project will formalise accrual accounting financial reporting in Ireland. Given that this reform is to secure the international credibility of financial reporting in Ireland, Central Government guidance has emphasised the importance of compliance with the CGAS.

Where a relevant body is unable to comply fully with any of the CGAS, sanction for a temporary derogation should be secured from the Government Accounting Unit in the Department of Public Expenditure, NDP Delivery and Reform. This application should include a timeline for how the body will build its compliance with whatever elements of the CGAS it cannot currently meet. This sanction will have to be renewed on an annual basis; sanction received in 2024 will not apply in 2025, and so on. Where a Department or Office is non-compliant, this must be stated in their Statement of Accounting Policies and Principles in the Appropriation Accounts, as should whether any temporary derogation has been received.

It should be noted that as government reform of financial reporting is an ongoing project, future CGAS with new requirements are imminent. Continued monitoring of this area is recommended to ensure key reforms are not missed.

Contributors
                                                    

Vincent Teo | Partner & Head of Public Sector & Government Services

Vincent Teo
Partner & Head of Public Sector & Government Services

 Dr. Conor Dowling | Research & Policy Executive | Risk Consulting

Dr. Conor Dowling
Research & Policy Executive
Risk Consulting

 

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Share Options: New PAYE Withholding Requirements from 1 January 2024 – What does this mean for Employers?

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Share Options - PAYE Withholding Requirements

The shift of share options from the Irish self-assessment system to PAYE withholding from 1 January 2024 is a significant change arising from Finance (No. 2) Bill 2023. Prior to this, employees were required to report and remit taxes within 30 days of exercising an option on Form RTSO1.  Additionally, they were required to file an income tax return for the relevant year.

The changes set out in the Finance Bill outline that under the new system, employers are now required to report and make withholdings under the PAYE system on any gains arising after 1 January 2024 on the exercise, assignment or release of share options by employees.

While employees are certain to welcome this change, companies have been given a limited time frame to implement additional procedures to ensure they are compliant with the new obligations.

What should employers do to prepare for the upcoming change in employer reporting obligations?

  • It is advisable that employers communicate this change in the tax treatment to their employees. Companies should also update their share option plan documentation in light of this change.
  • Employers will need to review the share option plan documentation in the context of funding the liabilities. This is because employees will need to be able to fund the tax liability collected through the PAYE system. A number of shares (received from the exercise) may need to be sold under a ‘sell to cover mechanism’ to ensure the necessary funds are available. This is particularly important for companies that allow previous employees to exercise their share option after their employment has terminated.
  • Employers should also ensure accurate records are maintained on an ongoing basis for all share option grants. With regards to mobile employees, employers will also need to monitor both Irish and worldwide workdays during the grant to vest period. This is required to calculate the Irish taxes due on the date of the exercise of the options. Furthermore, a process must be in place to determine whether the gain is subject to PRSI or exempt.
  • Employers will need to ensure that the process for reporting the gains arising from the exercise of share options is completed within the required timeframe. Gains arising from the exercise of share options are regarded as notional payments. Therefore, they must be reported on or before the exercise of the option.

Employer Annual Share Reporting

Employers are still obliged to file an RSS1 return by 31 March following the calendar tax year to report the grant, exercise, assignment, or release of an option.

If you require assistance with the annual share reporting return for share options, please contact us.

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Enhanced Reporting Requirements (ERR) – What You Need To Do

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Enhanced Reporting Requirements (ERR)

Signed into law in December 2022, the Finance Act 2022 has changed the requirements governing the reporting of expenses to Revenue. Under a new system referred to as Enhanced Reporting Requirements (ERR), companies are now required to report any “reportable benefits” paid to employees and/or directors. These are benefits which are not currently subject to tax under the PAYE system and are the following:

  • The remote working daily allowance of €3.20
  • The payment of travel and subsistence expenses
  • The small benefit exemption

Anyone wishing to examine these changes themselves should consult Section 897C of the Finance Act. However, here we will provide an overview of these changes, the system for reporting these expenses, and advice on how to prepare. The new ERR regime is effective from 1 January 2024.

There are 3 options from which employers can choose to make ERR submissions:

  1. Completion of an online form on ROS Online
  2. Manually upload a file to ROS Online
  3. Directly from their payroll or expense management system

What information does ERR require?

Compliance with the “reportable benefits” system involves sending on employee-related information such as the employee’s name, address, DOB, PPSN, staff number, and employment ID. Additionally, the payment date, value, and category are all be included. However, the three categories of expense all have slightly different requirements, which can be broken down as follows:

Travel & Subsistence: this covers payments an employer makes to an employee/director regarding travel or subsistence incurred by the employee, where no tax is deducted. When submitting a report to Revenue, the amount and date paid should be provided for each of the following categories:

  • Travel Vouched
  • Travel Unvouched
  • Subsistence Vouched
  • Subsistence Unvouched
  • Eating on site
  • Site based employees (includes “Country Money”)
  • Emergency Travel

Small Benefit: this covers any tax-free benefits that an employee/director may be provided by their employer. These can include vouchers but extends to many kinds of benefits. When making these payments, the employer should ensure the payment conforms to the standards set out in Section 112B of the Taxes Consolidation Act 1997.

Notable conditions here are that the voucher or benefit cannot exceed €1000 in value and only two vouchers or benefits may be given in any one tax year (it should be noted that these conditions have also only been in effect as a result of the Finance Act 2022; previous limits were €500 in value and only one voucher per year).

Employers are required to report the following:

  • Date provided
  • Value

Remote working daily allowance: this covers any payment an employee/director may receive from their employer which relates to days the employee worked from home. These payments can come to no more than €3.20 per day. Employers are now expected to report:

  • Number of days
  • Amount paid
  • Date paid

How can we help?

  • Provide bespoke training to key stakeholders.
  • Review and analyse how your organisation currently collects information related to the reportable benefits.
  • Review your organisation’s policies to evaluate the different types of employee expenses your organisation currently makes and update the language used, where necessary, to bring your own records of these expenses in line with the ERR categories.
  • ERR Reporting on an outsourced basis (including reviewing databases, enriching file with the required data for ERR, preparing the final file to be converted to Revenue approved format and making ERR submissions to Revenue).

For further information, please contact Carol Hartnett, Manager in our Accounting & Financial Advisory Department.

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New Procurement Threshold to Significantly Increase Public Sector Accessibility to Goods and Services

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Changes to Procurement Rules, Changes to Procurement Thresholds

In March 2023, the Department of Public Expenditure and Reform issued updates to existing procurement guidelines This update, contained in Circular 05/2023, have made some significant changes to the thresholds for procurement and are intended to facilitate easier procurement for SMEs. To this end, there has been a loosening of procurement rules covering procurements of a value between €25,000 and €50,000. Below, we go through the most important changes to procurement regulations.

It should be noted that, at the time of publishing, the procurement guidelines PDF available on the Office of Government Procurement website has not been updated to take account of Circular 05/2023. However, Circular 05/2023 states that the new guidelines have come into effect immediately.

Changes to Procurement thresholds:

The updates have made changes to rules for procurement for goods and services and procurement for works. Under the previous guidelines relating to procurement for goods and services, there were three separate thresholds for procurement, each with a different set of requirements for a contracting authority. These thresholds were:

  1. less than €5,000;
  2. €5,000 – €25,000;
  3. €25,000 – EU threshold.

After the Circular 05/2023 revisions, these thresholds for procurement for goods and services are now as follows:

  1. less than €5,000;
  2. €5,000 – €50,000;
  3. €25,000 – EU threshold.

Guidelines for the €5,000 – €50,000 Procurement Threshold

The significant change here is clearly to the €5,000 – €50,000 threshold. What this means is that now procurement for goods and services for any amount within this range can be conducted according to the following guidelines:

  1. Seek at least three written tenders from interested and competent suppliers/service providers
  2. Evaluate offers against relevant requirements using a scoring sheet;
  3. Select the most suitable offer and advise all tenderers regarding the decision.

Previously, procurements above €25,000 were required to be conducted through a more extensive and formalized process. This included using an Open Procedure and advertising the contract on the eTenders website. These requirements now apply to procurements above €50,000. In other words, one way of understanding these changes is to see that the methods previously required for conducting procurement of a value between €5,000 and €25,000, now apply to conducting procurement of a value between €5,000 and €50,000.

However, it should be noted that there are several exceptions to this rule. Crucially, while procurement contracts between €25,000 and €50,000 do not have to be advertised on eTenders, contract award information does have to be published for these contracts. Upon award of the contract, you are still required to publish the contract information on eTenders, even if you are no longer required to advertise the contract on eTenders. Additionally, while there is no requirement to advertise on eTenders, the Circular still encourages contracting authorities to do so if they wish.

A further exception to the updates worth noting is that it remains the case that where Government Departments and Offices have agreed contracts above €25,000 without a competitive process, this should be reported to the Comptroller and Auditor General.

Works Thresholds and Other Issues in Circular 05/2023:

Similar to the goods and services changes, the thresholds related to works contracts have also been adjusted. Now, for works contracts of a value less than €200,000, it is sufficient to seek at least five written tenders from interested and competent contractors. As with procurement for goods and services, this represents a raising of the threshold.

However, the Circular is explicit in adding that “the threshold at which contracting authorities are required to advertise all contracts for works-related services remains at €50,000”. A typical example of this sort of service might be consultancy; for this sort of procurement, the threshold remains unchanged.

Finally, Circular 05/2023 does contain an extensive range of advice regarding how to go about conducting procurement. While this advice is not binding, it may be useful to for conducting procurement and includes recommendations such as:

  1. Undertake preliminary market consultations prior to tendering
  2. Subdivide contract into lots
  3. Sue Prior Information Notices to facilitate SMEs forming a consortium prior to tendering
  4. Use the “open procedure” for tendering where possible
  5. Ensure selection criteria set for tenderers are relevant and proportionate to the contract
  6. Ensure any turnover/financial capacity requirement is proportionate to the risk involved
  7. Indicate in tender documents where reasonable variants to the specifications are acceptable.
  8. Use a Dynamic Purchasing Systems (DPS) for the procurement of commonly used goods, works or services which are generally available on the market.

Contributors
                                                    

Vincent Teo | Partner & Head of Public Sector & Government Services

Vincent Teo
Partner & Head of Public Sector & Government Services

 Dr. Conor Dowling | Research & Policy Executive | Risk Consulting

Dr. Conor Dowling
Research & Policy Executive
Risk Consulting
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Public Sector Climate Action Mandate 2023 – What you need to know

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Public Sector Climate Action Mandate

In May of this year, the Government approved the updated 2023 Public Sector Climate Action Mandate (PSCAM). The Mandate, first introduced as part of the Climate Action Plan (CAP) 2021, sets out the goals Public Sector Bodies must achieve as part of the government’s overall strategy for reducing emissions. The newly updated Mandate is an expansion of the 2022 Mandate. New actions have been added and existing actions have been expanded. This article will talk through the updated Mandate, explain its purpose and describe the new requirements it presents.

What is the Mandate?

The CAP’s overall aim is to achieve a 51% reduction in greenhouse gas emissions in Ireland by 2030. While the CAP acknowledges that the public sector is not the major driver of emissions, the Mandate has been introduced to facilitate the public sector in taking a leading role in reducing emissions. The Mandate must be followed for those bodies it applies to, but it should be noted that it does not apply to every public sector body. Local Authorities, Commercial Semi-State Agencies and Schools are all exempt from the Mandate. Size is also a consideration when adhering to the Mandate. The Mandate places greater responsibilities on government departments and also on organisations that consume over 50 GWh of energy per annum than it does on smaller bodies, which can fulfil the Mandate’s minimum requirements.

Status of the 2022 Mandate

For those public bodies the Mandate does apply to, many of the requirements found in the updated Mandate are unchanged from previous years. For instance, the requirement to establish and support Green Teams has not been altered. Furthermore, nothing has been removed from the Mandate. This means that any work completed to fulfil the previous Mandate remains valid. Any organisation still working on fulfilling the previous Mandate can continue to use the guides made available by the Sustainable Energy Authority of Ireland. We anticipate that updated guidelines will be made available for the new Mandate, however, no timeline for this is available so far.

Changes from the 2022 Mandate

For those who are subject to the Mandate, the following are the major changes to be aware of:

  • A new requirement has been added stating that senior management complete a climate action leadership training course in 2023.
  • The requirement that sustainability and emissions be addressed in the annual report has been amended. The annual report must now also address: a) efforts to implement the Mandate; b) compliance with Circular 1/2020 related to air travel emissions.
  • The requirement to review use of paper has been amended to include the need to eliminate paper-based processes and, where this is not possible, to use recycled paper as the default.
  • The requirement to achieve formal environmental certification has been amended with distinct requirements for organisations spending more or less than €2m per annum on energy.
  • A requirement to implement Green Public Procurement (GPP) has been added. This should be performed in line with the EPA Green Public Procurement Guidance.
  • The requirement to create bicycle friendly buildings has been amended to indicate that the priority should be to facilitate moving away from individual car use.
  • A new requirement to phase out the use of parking in buildings, without compromising on supports for those with physical mobility issues, has been added.
  • New recommendations for retrofitting large building have been added.
  • The requirement to procure zero-emission vehicles only has been amended to include a requirement that any procurement contracts a public sector body enters into should use zero emissions vehicles whenever possible.

Contributors
                                                    

Vincent Teo | Partner & Head of Public Sector & Government Services

Vincent Teo
Partner & Head of Public Sector & Government Services

 Dr. Conor Dowling | Research & Policy Executive | Risk Consulting

Dr. Conor Dowling
Research & Policy Manager
Risk Consulting
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Non-Resident Landlord Withholding Tax (NLWT) System

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Non-resident landlords may have received a letter from Revenue advising of upcoming changes to the administration of withholding tax for non-resident landlords. Up to now, non-resident landlords had two options to report rental profits to Revenue:

  1. Non-resident landlords asked their tenant to withhold 20% of the rent and to pay this to Revenue on their tenant’s personal income tax return. The tenant should have given the non-resident landlord a Form R185 (certificate of income tax deducted) so that a credit could be claimed for the tax deducted when submitting a personal income tax return.
  2. Non-resident landlords appointed a Collection Agent, who registered for Income Tax on their behalf using a Collection Agent Income Tax Registration Form. Their Collection Agent was responsible for reporting the non-resident landlord’s rental profit for the year by filing an income tax return and paying any liability to Revenue on behalf of the non-resident landlord.

What are the upcoming changes?

A new Non-Resident Landlord Withholding Tax system is expected to go live from 1 July 2023 which will see changes to the obligations of tenants, collection agents and non-resident landlords.

  1. Tenants will be required to withhold and pay to Revenue 20% of the rent by making a rental notification through the new withholding tax platform. They will not be responsible for paying the 20% tax deducted on their personal income tax return.
  2. Collection Agents will no longer be responsible for filing an income tax return. A Collection Agent will be required to withhold and pay to Revenue 20% of the rent by making a rental notification through the new withholding tax platform.
  3. Non-Resident Landlords will be responsible for filing their personal income tax returns. A credit will be allowed for the tax withheld in the new system.

What actions are required by non-resident landlords?

If you are a non-resident landlord whose tenants already withhold 20% of the rent or if you have appointed a Collection Agent, there are no actions required by you at this time.  Further information will be released by Revenue shortly and a new Tax and Duty Manual will be published in due course.

All other non-resident landlords must now decide whether they want their tenants or a collection agent to withhold and pay to Revenue 20% of the rent under the new Non-Resident Landlord Withholding Tax system and take action accordingly.

Please contact us if you have further queries on this.

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Tax Treatment of Unapproved Share Option Schemes

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tax treatment of unapproved share option schemes

Employee share incentive schemes can be an effective way of offering tax savings to employees in addition to encouraging employee participation and loyalty. One type of share incentive scheme is an unapproved Share Option Scheme. We have set out below some frequently asked questions on the tax treatment of unapproved Share Option Schemes:

What do I receive when I am granted a share option by my employer?

When your employer grants you a share option, you receive the right to acquire shares in the company at a future specified date at a pre-determined price.  You must actually exercise the option in order to take beneficial ownership of the shares.

What information will I get from my employer when I am granted a share option?

Your employer will generally issue documentation covering:

  • The number of shares that you can acquire,
  • The price that you have to pay for the shares (“Option Price”),
  • The dates from which, and by which you can exercise your option (“Exercise Period”), and
  • The conditions regarding the right to exercise the option, which may include good leaver and/or bad leaver provisions.

What is meant by “date of exercise”?

The “date of exercise” is the date at which the employee takes up their right to acquire shares.

Must I pay to acquire the shares under a share option?

The shares may be at no cost to the employee (nil option) or at a predetermined price that the employer has set. In some cases, the employee will have to pay something for the option itself.

Are there different types of unapproved share option schemes?

There are two types of share options for tax purposes:

(a) a ‘short option’ – which must be exercised within seven years from the date it is granted; and

(b) a ‘long option’ – which can be exercised more than seven years from the date it is granted.

There are tax implications for employees participating in unapproved share option schemes and reporting obligations for both employers and employees:

Tax Implications for Employees

Date of grant

There is no tax or reporting obligations due at the grant of short options. Where a share option is a long option, a charge to income tax may arise on both:

  1. The grant of the share option (where the option price is less than the market value of the shares) and
  2. The exercise, assignment or release of the share option.

Credit is given for any income tax charged on the grant of the share option against the income tax due on the exercise, assignment or release of the share option.

Date of exercise

When an employee exercises his/her right to the share options and acquires the shares at the pre-determined price, the difference between the price paid to acquire the shares (the exercise price) and the market value of the shares at the date of exercise of the option is called the share option gain. The share option gain can be reduced by any payment made by the employee for the initial grant of the option.

Where an employee exercises a share option he or she must pay what is referred to as “Relevant Tax on Share Options” (RTSO) in respect of any income tax due on any gain realised on the exercise of the share option.  The relevant tax at 40% is calculated on the share option gain as well as universal social charge (USC) at 8% and PRSI at 4% (unless you have advance approval from Revenue to pay at a lower rate).  RTSO is payable within 30 days of an option being exercised.

Example

Stock Option Exercise
Exercise of Shares
Market Price @ date of purchase $100
Purchase price $85
$15
Number of shares 10 shares
Total exercise price $150
FX rate at date of purchase 1.1014
Share Option Gain €136
Tax on exercise
Gross Gain €136
Income tax @ 4% €54
USC @ 8% €11
PRSI @ 4% €5
Total liability €71
Net Gain €65

 Sale of Shares

An employee who acquires shares by the exercise of a share option is chargeable to capital gains tax (CGT) on any chargeable gain realised on the subsequent disposal of those shares.

Where due, CGT must be paid to Revenue within the following deadlines:

Date of Disposal Payment Due
1 January – 30 November By 15 December the tax year
1 December – 31 December By 31 January in the following tax year

An individual must file a return by 31 October in the year after the date of disposal. A return is required even if no tax is due because of reliefs or losses. An individual must file a Form CG1 if not usually required to submit annual tax returns; Form 12 if a PAYE worker or a Form 11 if considered a chargeable person for tax purposes.

Reporting obligations for Employees

The employee must submit a Form RTSO 1 within 30 days from the date of exercise of the share option. A payment of Relevant Tax on Share Options must also accompany the submission.

Employees liable to pay RTSO must then submit an income tax return, containing details of all share option gains in a tax year, by 31 October following the year in which the gains are realised. The income tax return must be filed for the relevant year in addition to the form RTSO1.

Reporting obligations for Employers

The employer will have to complete and file a Form RSS1 by 31 March following the year of exercise.

Please contact us if you require assistance with the above.

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Director Obligations to Disclose PPS Number

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Director Obligations to Disclose PPS Number

Have you disclosed your PPS number to the CRO?

From 23 April 2023, all Company Directors of Irish companies have a statutory filing obligation to disclose their Personal Public Service (PPS) Number to the Companies Registration Office (CRO).

PPS Numbers are to be disclosed when filing the following forms:

  • Form A1 – Incorporation Application.
  • Form B1 – Annual Return.
  • Form B10 – Change of company officers or their particulars.
  • Form B69 – Notice of cessation of company officer where a company has failed to file the notice.

What is a PPS Number?

Your PPS Number is a unique reference number that helps you access social welfare benefits, public services and information in Ireland.

A PPS Number is always 7 numbers followed by either one or 2 letters. It is sometimes called a PPSN.

You have a PPS Number if:

  • You were born in Ireland in or after 1971
  • You started work in Ireland after 1979
  • You are getting a social welfare payment
  • You are taking part in the Drugs Payment Scheme

Note: The CRO plan to redact the PPS Number from all forms, by placing hashes over the numbers and letter(s). No publicly accessible form or document will display your PPS number.

What if I do not have a PPS Number?

If a director does not have a PPS number but has been issued with an RBO number by the Central Register of Beneficial Ownership, then the director can use their RBO number as their Verified Identity Number (VIN) for CRO filings.

If a director does not have a PPS Number or an RBO Number, they must apply to the CRO for a VIN which will be issued by the CRO.

Consequences for non-compliance

This new requirement is being introduced to help with the identification of directors and to prevent fraud.

A director that fails to comply with the regulations commits an offence under Section 35 “888A (2)” of the Companies (Corporate Enforcement Authority) Act 2021 and shall be guilty of a category four offence.

What should you do next?

We strongly advise all clients who have not already provided us with their PPS number, RBO number or obtained a new VIN to do so, as a matter of urgency, to avoid any material discrepancies and delays with the next in-scope filings due at the CRO.

Directors should further ensure that the information held at the DEASP with the PPS number is consistent with the information held at the CRO.

Please email our Corporate Compliance Team if you require any assistance.

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