Exit Strategy: How to Pass your Business on to the Next Generation

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Exit Strategy

Passing on your business and developing your exit strategy is one of the most important business decisions you will ever have to make.

Many of the tax reliefs one may wish to claim on a transfer of assets can be subject to very stringent conditions, such as minimum periods of ownership or active involvement in the business. Succession planning can often seem like something which should be considered close to retirement. However, the risk of waiting is that many of the key tax reliefs available to business owners are not accessible when the time comes to pass on assets, as the relevant conditions cannot be met.

What can help avoid this problem is advance planning. Through preparation, a business owner can identify some of the key conditions required to avail of certain tax reliefs, allowing them sufficient time to take the necessary steps to qualify for these reliefs. Therefore, it is not unusual to see a succession plan being put in place 5 to 10 years prior to its implementation.

The transfer of a business can trigger several taxes such as:

  • Capital Gains Tax (CGT) which is a tax payable by the person selling or transferring an asset. The current rate of CGT is 33%.
  • Capital Acquisitions Tax (CAT) which is a tax payable by the person in receipt of a gift or inheritance. The current rate of CAT is 33%.

This article will focus on the key tax reliefs available to business owners and their family members on the transfer of their business.

CGT Reliefs

In order to mitigate or eliminate the CGT liability on the transfer, there are two main reliefs which may be availed of provided certain conditions are met. These are:

  • Retirement Relief
  • Entrepreneur Relief

Retirement relief provides for relief from CGT on the disposal of qualifying assets.

To qualify for this relief, the main conditions are that the individual must be aged 55 or over and must be disposing of or transferring qualifying business assets. In addition, the individual must have been a working director of the company for 10 years and a fulltime working director for at least 5 of the years prior to the transfer. The latter condition can be a stumbling block for many individuals seeking to claim this relief. For example, an individual may be a director of more than one company and therefore may not meet the full-time working director requirement. This is why it is so important to prepare a succession plan early in your lifetime.

If retirement relief is not available, the individual may qualify for Revised Entrepreneur Relief which limits the rate of CGT to 10% on the first €1m of gains on the disposal of certain business assets. In contrast to retirement relief, this relief has no age requirement and the individual can qualify for it at any stage provided the relevant criteria is met.  To qualify for the relief, the individual should have owned the shares in the business for a continuous period of 3 of the last 5 years and spent 50% or more of their working time as an employee or director of the company.

CAT Reliefs

An individual can receive gifts/inheritances up to a certain amount tax-free throughout their lifetime. Currently, a child can receive a gift or an inheritance up to €335K from his/her parents.

In the context of a business, a child may, on receipt of a relevant business property, qualify for what’s known as Business Relief. This reduces the value of the gift or inheritance being received to 10% of the market value of the business property, resulting in a significant tax saving. Similar to the reliefs already discussed, there are certain conditions that need to be met around ownership and the level of involvement in the business.

Farmers may qualify for Agricultural Relief on the receipt of a gift or inheritance of agricultural property. Agricultural property includes agricultural land, crops and trees growing thereon and farm buildings appropriate to the property. By qualifying for this relief, the market value of the property being received will be reduced by 90%. This makes it a very valuable relief.

There are two tests that need to be passed before a person can avail of the relief:

  1. The farmer test requires 80% of the beneficiary’s assets to be agricultural property immediately after receipt of the inheritance.
  2. The trading test requires the individual to farm the land themselves for at least 6 years or alternatively lease the land out to a qualifying farmer for 6 years.

If a CAT liability arises with or without claiming any of the CAT reliefs, it may be possible to reduce or eliminate the liability by claiming a credit for the CGT paid by the parent on the transfer of property.

Although there are many commercial considerations to be made when passing on wealth as well as discussions with family members as to suitable successors, tax plays a key role in informing the business owner as to the extent of any tax liability. Knowing this information prior to implementing a succession plan enables the owner to make more informed decisions and allows for maximising the amount of reliefs that may be claimed. This will reduce the overall tax costs of the transfer.

For more information on tax reliefs related to your exit strategy, please contact us.

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Guide to Global Mobility – Managing Tax Obligations of Outbound Workers

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Global Mobility - Tax Obligations of Outbound Workers

As the expansion of remote working continues, more employees are no longer obliged to work at their employer’s premises or, indeed, even in the same country as their employer’s premises. This presents a number of opportunities and challenges for employers. In the first of our global mobility series, we will examine the tax compliance obligations for Irish employers with employees working abroad.

Situation One – an Irish employer hires a new employee based abroad

An Irish employer does not need to operate Irish payroll taxes on the salary of an employee who:

  • is not resident in Ireland for income tax purposes
  • was recruited abroad
  • carries out all the duties of their employment abroad
  • is not a director of your company; and
  • has no Income Tax liability in Ireland.

For any employee in these circumstances, an Irish employer does not have to apply for a PAYE Exclusion Order to Irish Revenue and is not required to include the employee on the employer’s payroll submissions to Revenue. Employers should maintain a record of each such employee with a record of any payments made to them each year.

This is a useful exemption for Irish employers who recruit employees to work abroad as it means the non-resident employee does not need to apply for a PPS number.

Situation Two – an existing employee of an Irish employer moves abroad

An Irish employer may find that an existing employee, who lives and works in Ireland, decides to move abroad indefinitely while retaining their existing employment. In this instance, the tax obligations for the Irish employer depends on the employee’s tax residence in Ireland. This must be reviewed each year.

An individual is tax resident here if they are in Ireland for 183 days or more in the calendar year or for 280 days or more across the current and preceding calendar years. An individual is not tax resident in Ireland if they are here for 30 days or less in any calendar year.

a. The employee is tax-resident in Ireland in the year of departure

An Irish employer can apply to Irish Revenue for a PAYE Exclusion Order where an employee:

  • leaves Ireland during the year
  • becomes tax resident elsewhere
  • will carry out their employment duties wholly outside of Ireland, and
  • will be resident outside Ireland in the following tax year.

Once issued in these circumstances, the PAYE Exclusion Order will relieve the employer from the obligation to deduct Irish income tax and USC from that employee’s salary from the date of departure.

b. The employee is not tax-resident in Ireland

An Irish employer can apply to Irish Revenue for a PAYE Exclusion Order where an employee:

  • is not resident in the State for tax purposes for the relevant tax year, and
  • carries out the duties of the employment wholly outside of Ireland.

Once issued in these circumstances, the PAYE Exclusion Order will relieve the employer from the obligation to deduct Irish income tax and USC from that employee’s salary for the full tax year.

PAYE Exclusion Orders have an expiry date. An employer may apply for another PAYE Exclusion Order if the employee continues to work abroad after that date and continues to be non-resident.

It is important to note that the PAYE Exclusion Order does not cover PRSI. Determining the country in which social insurance is to be paid by and on behalf of the employee is a separate issue.

Situation Three – an existing employee of an Irish employer splits their year between working in Ireland and working abroad

This situation is arguably the most complex for an Irish employer. If the employee remains tax-resident in Ireland, Irish Revenue will not issue a PAYE Exclusion Order. As a result, the employer must continue to apply Irish payroll taxes to the employee’s salary as normal.

However, the country in which the employee is working may require the employer to apply local payroll taxes on that part of the salary that relates to work carried out in that country.

Where there is no relief available, employers may have dual payroll withholding responsibilities in both Ireland and the foreign country. They will often run what is known as a “shadow payroll” in respect of an employee’s salary. Shadow payroll is run to ensure that tax compliance obligations are met in both countries without affecting the employee’s net take-home salary.

Running shadow payroll is an extra compliance burden for the employer. Furthermore, the Irish employer must contribute payroll taxes to the Revenue authorities in both countries. This can come as an unpleasant surprise to both employers and employees.

It is therefore crucial that an Irish employer recognises if they will have to operate shadow payroll before an employee carries out any work abroad.

If shadow payroll is required, an employer must establish what is required in both countries and must agree with their employee how any duplicate deduction of payroll taxes can be reclaimed.

Often, to reclaim some or all of the payroll taxes withheld, the employee will be required to submit an income tax return. In this instance, any refund due will issue from the Revenue authorities to the employee. This can leave the employer out of pocket if a clear agreement is not put in place with the employee at the outset.

Conclusion

We have seen here the Irish tax compliance obligations for employers. An Irish employer with employees working abroad should always check their tax and social security obligations in the country where the employee is working. Often, the employer will be required to register for payroll taxes in the employee’s country and apply local payroll taxes on the employee’s salary.

In addition, depending on the number of employees that the employer has in that country and the type of duties that they carry out, the presence of these employees in that country may create a “permanent establishment” of the employer in that country. If an employer has a branch or permanent establishment in a foreign country, it may be obliged to pay local income or corporation tax on the profits of that branch.

For more information, please contact Siobhán O’Hea, Partner, Tax Services.

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A Guide to Avoiding the Most Common RCT & VAT Pitfalls for Non-Resident Principal Contractors

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An area that has continued to cause challenges and risks for businesses is the operation of Relevant Contracts Tax (RCT) and VAT.

The most common mistakes we see being made in this sector are by non-resident principal contractors who engage a subcontractor to carry out construction works in Ireland.

This article will focus on the most common pitfalls that we see occurring within this sector by non-resident principal contractors and the steps that can be taken to avoid making costly mistakes.

1. Compliance Obligations for Non-Resident Principal Contractors

When a non-resident principal contractor engages a subcontractor to carry out construction works in Ireland, the RCT system must be applied to payments made to the subcontractor.

The first potential pitfall for a non-resident principal contractor is not taking the reasonable care to familiarise themselves with their tax obligations under the RCT regime. In such a case, the non-resident principal contractor will eventually be contacted by Revenue, informing them of their failure to operate the RCT regime. This usually occurs following the commencement of the works in Ireland, at which point the mistakes have already been made and costly penalties can be imposed by Revenue.

As such, it is very important that a non-resident principal contractor is aware of their tax obligations prior to the commencement of any construction works in Ireland so that the necessary administrative steps can be taken to ensure that they are set up for the RCT system and fully compliant in operating RCT on payments to subcontractors.

The administrative steps to be taken by a non-resident principal contractor include registering for RCT on Revenue’s Online Service (ROS) and operating the RCT regime throughout the duration of the project in Ireland (further detail on this below).

2. Operation of the RCT System

Once a principal contractor is registered for RCT with Revenue, there are a number of steps that must be taken each time a principal contractor enters into a relevant contract with a subcontractor and each time a payment is made to the subcontractor. These steps are summarised as follows:

a. Contract Notification

  • The first step is to input a “Contract Notification” through Revenue’s online RCT system. A principal contractor must notify Revenue each time it enters into a new relevant contract with a subcontractor. The Principal will then receive a contract reference number and an indication of the applicable RCT deduction rate for the subcontractor.

b. Payment Notification

  • Before making a payment to a subcontractor, the principal must notify Revenue’s online eRCT system of the intention to make the payment and provide details to Revenue of the gross amount to be paid. This process is known as “Payment Notification”. This must be done for each payment made to the subcontractor.

c. Deduction Authorisation

  • Revenue will issue a deduction authorisation to the principle contractor which will specify the rate and amount of tax to be deducted from the payment to the subcontractor. This process is known as “Deduction Authorisation”. The principle is required to provide a copy of this authorisation to the subcontractor.

d. Deduction Summary (RCT Return)

  • Revenue’s eRCT system prepares a pre-populated period end return known as a “Deduction Summary (i.e. RCT Return)”, which is based on the deduction authorisations issued during the period. The due date for payment of the RCT withheld is the 23rd day after the end of the period covered by the return.

The most common pitfall we see occurring in practice are inconsistencies in notifying Revenue of each and every payment made to a subcontractor by the principal contractor. This can be a costly mistake for the principal contractor as the penalties Revenue can impose for failure to operate the RCT system in this way range between 3% to 35%, depending on the RCT deduction rate applicable to the subcontractor.

To put this into perspective, if a subcontractor has been assigned a 35% RCT deduction rate and the principal contractor makes a payment of €25,000 to the subcontractor without first notifying Revenue of the payment and deducting the appropiate withholding tax, Revenue can impose a penalty of €8,750 (i.e. 35% of the invoice value) on the principal contractor for its failure to operate the RCT system.

These penalties can become very costly for a business where they fail to operate the RCT system on high value invoices.

3. Operation of RCT and Reverse Charge VAT

Typically, VAT is normally charged by the person supplying the goods or services. However, under the RCT regime, the person receiving the goods or services (the principal contractor) calculates the VAT due on the invoice from the subcontractor and pays it directly to Revenue. This is referred to as Reverse Charge VAT and it is common area in which mistakes are made by non-resident principal contractors.

The following should occur when a subcontractor invoices a principal contractor for construction services that are subject to RCT:

  1. The subcontractor raises an VAT invoice with the zero rate of VAT applied;
  2. The invoice should include the VAT registration number of the principal contractor and include the narrative “VAT on this supply to be accounted for by the principal contractor”;
  3. The principal contractor calculates the VAT due on the invoice value and records it as VAT on sales (Box T1) on its VAT return. Where it is entitled to do so, the principal contractor can claim a simultaneous VAT input credit (Box T2) on the VAT return, thus resulting in a VAT neutral position.

Although the RCT system can seem like a heavy administrative burden on a business, it can be managed relatively smoothly with the proper administration. Our tax specialists look after all administrative issues regarding RCT, provide effective advice and answer questions you may have regarding RCT.

Should you require any assistance, please contact us.

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eWorking Tax Relief

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With the recent outbreak of COVID-19, employees throughout the country have been asked to work from home. While these are challenging times for both employers and employees, Revenue offer a measure of relief for employers and employees who are engaged in “eWorking”. Revenue have today confirmed in their eBrief No. 045/20 that the current Government recommendations for employees to work from home as a result of COVID-10 meet the conditions for the “eWorking” tax relief.

Revenue define eWorking as where an employee works:

  • at home on a full or part-time basis
  • part of the time at home and the remainder in the normal place of work

eWorking involves:

  • logging onto a work computer remotely
  • sending and receiving email, data or files remotely
  • developing ideas, products and services remotely.

Employers can make a payment of €3.20 per workday to an employee who is working from home without deducting PAYE, PRSI or USC. This payment is to cover expenses such as heating, electricity and broadband costs. Amounts paid in excess of €3.20 are subject to tax as normal. Records of payments made must be retained by the employer for the purpose of any potential future Revenue compliance intervention.

In addition, where employers provide any of the following equipment to their employees, no benefit-in-kind arises as long as it is primarily for business use:

  • computer, laptop or computer equipment (eg. printers, scanners)
  • software to allow you to work from home
  • telephone, mobile and broadband
  • office furniture.

There is no obligation on employers to make this payment. If employers do not make this payment, employees can instead make a claim online at the end of the year by filing a tax return. Employees are not entitled to claim the round sum of €3.20. They are entitled to claim for vouched expenses that are incurred wholly, exclusively and necessarily in the performance of their duties of the employment. For most office workers this would be their home heating and electricity costs.

Any reimbursement of these expenses that has already been paid by the employer should be deducted from the claim amount. While receipts are not required to file the return, Revenue can request these for a period of up to six years after the year in which the claim relates, so employees should always keep a record of these.

In the case of utility bills, Revenue have advised that they are willing to accept that the average proportion of the house attributable to a home office is 10%. Therefore, for every day an employee works at home as a result of the current Government recommendations, they are able to make a claim for 10% of the utility bills for that day.

It is important to note that outside of the current Government recommendations regarding working from home, the eWorking relief does not apply to workers who bring work home outside of normal working hours, ie. evenings and weekends.

If any further information is required or if you have questions on the above, please don’t hesitate to contact our dedicated COVID-19 Client Response Team or our Tax Department.

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Our Analysis of Budget 2020

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Analysis of Budget 2020

Minister Donohue delivered his “no surprises” Budget 2020 in the shadow of Brexit. Despite our economy being in a strong position and with a general election on the horizon, this was no give-away Budget. Both Minister Donohue and the Taoiseach had managed expectations in advance with talk of “safe choices in relation to taxation” and “modest, targeted welfare increases”.  Prudence seemed to be the order of the day.

There will be no deposit to our rainy day fund this year as the Government expects to have to borrow in 2020 to deal with a potential hard Brexit. A package of over €1.2 billion, excluding EU funding, was announced in the Budget to respond to Brexit.

Climate change was the other main influencer of Budget 2020. Increased carbon tax and other changes to vehicle-related taxes were all designed to support our transition to a low carbon economy. The balancing act for the Government was to ensure that the cost of these changes was distributed fairly. An increase to the weekly fuel allowance and allocations of €3 million to pilot new Agri-environmental schemes and €2.7 billion to the Department of Transport, Tourism and Sport in 2020 were some of the responses to this.

This Budget must have been a difficult one for the Government and partners to agree upon. It makes no moves towards the Taoiseach’s pledge to raise the 40% tax rate threshold to €50,000 and contains minimal social welfare increases. It looks like the possibility of a no-deal Brexit will haunt Irish politicians on the doorsteps long after Halloween and the current proposed Brexit date has passed!

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

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Highlights from Budget 2020

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Highlights from Budget 2020

Budget 2020 was delivered by Finance Minister Paschal Donohoe today. Below we highlight the main changes that could affect you.

Climate Measures and Carbon Tax

  • Benefit-in-kind on commercial vehicles to be linked to emissions from 2023.
  • Emissions thresholds in respect of capital allowances and VAT reclaim on commercial vehicles to be reduced.
  • 0% benefit-in-kind on electric vehicles will be extended until the end of 2020.
  • A Carbon tax increase of €6 per tonne likely to result in an increase of about 2c per litre of petrol and diesel immediately and about €15 per tank of home heating oil from May 2020.
  • Relief to be provided to hauliers through the Diesel Rebate Scheme for the increased cost of fuel.
  • A new nitrogen oxide (NOx) surcharge will replace the 1% diesel surcharge and will apply to all passenger cars registered from 1 January 2020.
  • VRT relief for hybrid vehicles will be extended until the end of 2020.
  • The weekly fuel allowance will increase by €2.

Brexit Package

  • A package of over €1.2 billion announced, excluding EU funding, to respond to Brexit. This includes:
    • €220 million immediately on October 31st if a no-deal Brexit occurs.
    • €110 million for the agriculture sector
    • €40 million for the tourism sector
    • €365 million for extra social protection expenditure in the event of a rise in unemployment
    • €390 million for Brexit contingency expenditure

Personal Tax

  • The reduced rate of Universal Social Charge for medical card holders to be continued until the end of 2020.
  • Income tax bands and rates remain unchanged.
  • The Home Carer Credit will increase from €1,500 to €1,600.
  • The Earned Income Credit will increase from €1,350 to €1,500.
  • Help to Buy Scheme will be extended until the end of 2021.
  • Living City Initiative will be extended until the end of 2022.

Corporation Tax

  • Confirmation of the 12.5% rate of tax.
  • Special Assignee Relief Programme (SARP) and Foreign Earnings Deduction will be extended until the end of 2022.
  • Enhancements to the Key Employee Engagement Programme (KEEP) and Employment and Investment (EII) programme announced.
  • For micro and small companies:
    • R&D Tax Credit to increase from 25% to 30%.
    • R&D Tax Credit will now be available for certain pre-trading expenditure.
  • The qualifying spend limit for R&D outsourced to third level institutions to be increased from 5% to 15% for R&D Tax Credit purposes.
  • New Anti-Hybrid Rules will be introduced, in line with the Anti-Tax Avoidance Directive (ATAD).
  • Transfer Pricing rules to be brought in line with OECD standards with effect from 1 January 2020.
  • Anti-avoidance measures to be introduced to the IREF and REIT regimes with immediate effect.

Agri Measures

  • Farm Restructuring Relief will be extended until the end of 2022.

Capital Gains Tax and Capital Acquisitions Tax

  • Capital Acquisitions Tax and Capital Gains Tax remain at 33%.
  • The threshold for capital acquisitions tax that applies to children receiving gifts or inheritances from their parents will increase by €15,000 to €335,000.

Other Measures

  • The rate of stamp duty on non-residential property will increase from 6% to 7.5%.
  • A new stamp duty charge of 1% will apply where a scheme of arrangement, in accordance with Part 9 of the Companies Act 2014, is used for the acquisition of a company.
  • The rate of Dividend Withholding Tax to be increased from 20% to 25% from 1 January 2020 with further changes to the DWT regime to follow from 2021.
  • The excise duty on a packet of 20 cigarettes is being increased by 50 cents with a pro-rata increase on other tobacco products.
  • A new relief from betting duty and betting intermediary duty up to a limit of €50,000 per calendar year to be introduced.

Social Welfare

  • The 100% Christmas bonus will be paid out in 2019.
  • The Living Alone Allowance to be increased by €5 in 2020. Increases announced in the Qualified Child Payment of €3 for over 12s and €2 for under 12s.
  • Free GP care will be extended to under-eights and free dental care to under-sixes.
  • Prescription charges for the over 70s are to be reduced from €1.50 to €1 per item.
  • There will be a reduction in the monthly threshold for the Drugs Payment Scheme from €124 to €114.
  • Medical card income threshold for the over 70s to be increased by €50 to €550 for a single individual and by €150 to €1,050 for a couple per week.

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

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Preparing for Brexit

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Do you trade with the United Kingdom, or transport goods to/from Europe via the UK? Then you will need to consider the impact of Brexit on your organisation and put in place an action plan to ensure you are best prepared for when the transition period ends on 31st December 2020.

Supply Chain
Review your supply chain. Map the movement of goods into and out of the UK and goods going to and from Europe via the UK, to understand the potential for disruption caused by Brexit (possible delays, clearance requirements, additional checks on goods etc.) Consider actions you can take to prevent this disruption.

Customs Clearance
If you intend to import/export goods to and from the UK, you will need to be registered with Customs. Customs declarations will be required in order to move the goods through the border.

  • Ensure you have an Irish Customs registration number- ‘EORI number’ beginning with IE
  • You will also need a UK EORI number beginning with GB
  • Engage with a customs clearance agent/broker to lodge Customs declarations on your behalf.

Customs Duty
Customs Duty will apply to the import of many goods from the UK into Ireland and vice versa. It is non recoverable and is an additional cost to the business.

  • Ensure you correctly assign the correct commodity codes to the goods imported/exported. The codes will be needed in customs declarations and will determine the amount of duty to be paid.
  • Consult with your agent/broker to see if any reliefs are available.
  • Establish whether you need to obtain a ‘Deferred Payment Account’, this will allow you to import goods into Ireland from the UK and defer the payment of Customs Duties and Import VAT to the month following import.

Vat on Importation
The Irish Revenue passed a bill allowing for the “Postponed Accounting” for VAT on importation where businesses would no longer pay VAT at importation. You can instead account for VAT through the normal monthly VAT return resulting in a significant cash flow saving.  However, they will introduce qualifying criteria for this provision over time. If you do not qualify, VAT (currently 21% for ROI) will apply to the import of many goods from the UK into Ireland and will be payable at the time of import of the goods into Ireland.

Product Certification
The area of product certification will change post-Brexit. UK notified bodies will lose their status as EU notified bodies and will not have any legal status in the EU. This means they cannot provide EU certification. If you rely on UK notified body, you must source an alternative notified body in the EU.

  • More detailed information is available at www.nsai.ie/brexit

Exchange Rates
Currency/exchange rate exposures are a risk for businesses trading in foreign currency. You can take steps to help reduce your exposure.

  • Consider Dual Invoicing
  • Currency Hedging/Forward contracts

ERP Systems
Companies should assess the changes required to be made to their ERP/Finance systems and the time/cost that it will take to implement these changes.

For further assistance, please contact Edward Murphy | Partner | Head of Tax services.

For further information you can visit the below websites or call your local enterprise office.

www.gov.ie/brexit

www.revenue.ie/brexit

www.localenterprise.ie/brexit

www.prepareforbrexit.com

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Home Carer Tax Credit

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Budget 2019 increased the Home Carer Tax Credit from €1,200 to €1,500 per annum. This tax credit is available to married couples or registered civil partners, where one spouse stays at home to care for a “dependant”.

A dependant can be:
  • a child for whom child benefit is payable;
  • a person aged 65 years or over; or
  • an incapacitated individual.

It does not include a spouse or partner. Often there may be one or more dependants being cared for by the carer spouse. This does not increase the tax credit available.

The Home Carer Tax Credit is often unclaimed as there is a misconception that you must be caring for a sick relative. This is not the case.

Conditions to qualify:
  • You must be jointly assessed for income tax.
  • The dependant person must normally reside with the carer for the tax year. However, if the dependant person is a relative, they can live next door, on the same property or within 2kms of the carer. A relative includes a relative by marriage or a person for whom the claimant is a legal guardian, but not a spouse or civil partner. However, there must be a direct communication link between the two residences such as a telephone or alarm system.
  • The carer spouse must have income of €7,200 per annum or less (excluding any carers benefit or payments received from the Department of Social Protection). If you earn more than €7,200 but less than €10,200 per annum, you may claim a reduced credit:

For example, if the carer spouse earns €8,200 per annum, the maximum tax credit that can be claimed is reduced by the additional earnings as follows €8,200-€7,200=€1,000/2 = €500. The tax credit is reduced by €500 giving a maximum credit of €1,000 available.

If the carer spouse earns €10,200 or above, no Home Carer Tax Credit is available.

This tax credit cannot be claimed alongside the increased standard rate bands for married couples/civil partners. Revenue will grant you the more beneficial option.

Remember; if you qualified for the Home Carer Tax Credit in any of the past 4 tax years (2018, 2017, 2016, and 2015), you can still make a claim to Revenue for it.

If you require any assistance with the home carer tax credit, please contact us.

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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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Taxation of Couriers

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Revenue has recently clarified the taxation of couriers, specifically the tax treatment of motor cycle and bicycle couriers. The following treatment applies from 1 January 2019. Previous agreements will come to an end on this date.

Motor cycle and bicycle couriers are generally engaged under a contract for service i.e. they are self-employed individuals. Whilst the facts of each case may differ, this is the general view adopted by Revenue.

From 1 January 2019 motor cycle and bicycle couriers engaged under a contract for service i.e. self-employed individuals, will need to file a tax return self-assessment.

Expenses

Self-employed couriers can make a claim for any expenditure incurred wholly and exclusively for the purpose of their courier activity, for example, motor expenses & telephone/internet bills.

Revenue’s previous agreement of flat rate deductions for expenses (20%,40% or 45%) will no longer apply with effect from 1 January 2019.

Voluntary PAYE

Voluntary PAYE systems of tax have been implemented by several courier firms to assist couriers in ensuring that they are tax compliant. Revenue has no issue with these arrangements continuing, however Revenue has reiterated that income tax, USC & PRSI should be applied on gross income.

Van Owner-Driver Couriers

Similar to motor cycle and bicycle couriers, Revenue are of the view that van owner-driver couriers are engaged under a contract for service and thus they are self-employed individuals.

Pay and File System for Income Tax Self-Assessment

Under self-assessment there is a common date for the payment of tax and filing of tax returns. You must file your tax return on or before 31 October in the year after the year to which the return relates.

This system, which is known as Pay and File, requires you to:

  • file your return for the previous year
  • make a self-assessment for that year
  • pay the balance of tax for that year
  • pay preliminary tax for the current year.

For example, by 31 October 2019 you must:

  • pay your preliminary tax for 2019
  • file your 2018 self-assessment tax return
  • pay any Income Tax (IT) balance for 2018.

When you pay and file through the Revenue Online Service (ROS), the 31 October deadline is extended to mid-November.

For more information on the taxation of couriers, please contact us.

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