CORPORATION TAX EXEMPTION FOR NEW COMPANIES – DEADLINE 31 DECEMBER 2009

This relief enables start up companies, which are incorporated and commence trading in 2009 to have an exemption from corporation tax and capital gains tax in each of the first 3 years of trading. This tax break is the first of its kind and is a major advantage to eligible companies.

How it works:
The exemption is granted by reducing the total corporation tax liability (including chargeable gains) relating to the trade to nil. Full relief is granted where the total corporation tax liability does not exceed €40,000.

Marginal relief applies for companies with corporation tax liabilities of between €40,000 and €60,000.

No relief applies where corporation tax payable is €60,000 or more. The exemption is only available for a period of three years from the commencement of the new trade.

There are separate exemptions available for each new trade.

Where the relief doesn’t apply:

· When existing trades have been transferred to a new company

· Service companies and companies carrying on excepted trades cannot qualify for this exemption.

· The relief will cease if the trade qualifying for the exemption is transferred to a connected person.

Claiming a tax refund

CLAIMING A TAX REFUND

If tax has been deducted from your pay since 1 January last and you are now unemployed you may be entitled to a tax refund. If you have not paid any tax, you cannot claim a refund on becoming unemployed.
If you are entitled to a tax refund the amount of the refund will depend on:
The length of time you have been unemployed
The amount of tax you have paid
The amount of tax credits utilised by you.

When to apply?
Generally you should wait a minimum of 4 weeks from the date you became unemployed before you apply for a tax refund.
If however you are in receipt of any taxable sources of income (which would include taxable income from the Department of Social, Community and Family Affairs) you should wait a minimum of 8 weeks, as, any tax credit will be utilised in part or full against the other income.
If emergency tax was deducted by your former employer, you may apply immediately for a refund on becoming unemployed.

How to apply:
Complete Form P50 and send it to your district office together with Form P45 (Parts 2 & 3) given to you by your former employer.
The district office will send you details of the refund (if any) and a cheque for the amount overpaid.

Time Limit
Claims for refunds must be made within 4 years of the end of the year to which the claim relates and claims made after this time cannot be repaid.

If you are in receipt of Jobseekers Benefit while unemployed, this will affect your claim for a tax refund. Jobseekers Benefit is a taxable source of income. However, any child dependent element and the first €12.70 per week of benefit are exempt from tax. When you make a claim for a tax refund the taxable portion of the Jobseekers Benefit will be added to your pay and the appropriate refund, if any, will be made. You should note that if the weekly amount of your Jobseekers Benefit exceeds your weekly tax credit you will not be entitled to a refund.

Voluntary company strike off – CRO Requirements

Voluntary company strike off – CRO Requirements


If the company has any outstanding annual returns and CRO fees due, these must be filed and paid two weeks before an application can be made to the CRO to strike off the company.

A letter of no objection must be requested from Revenue. Before a letter of no objection can be issued by Revenue, all the companys tax returns must be filed up to date. The current waiting time for a letter of no objections is approximately 6 weeks. If there are outstanding tax returns to be filed then this waiting time will be longer.

Please also note that if you are striking off a company in the middle of a tax year, you are still obligated to file a P35 within 2 weeks of the trade of the company ceasing even though this return is not usually due until 15th February the following year.

If you are a Vat registered company, don’t forget to claim the Vat on the professional fees in relation to the strike off in your final Vat return.

Once issued the letter of no objection is valid for 6 months.

Once you receive the letter of no objection, an advertisement must be placed in one daily newspaper published and circulated nationwide in the Republic of Ireland

If the company has changed its name within 12 months prior to the date of publication, the former name as well as the current name of the company must appear on the advertisement

The business name of the company if difference to the company name must also appear on the advertisement.

If the company had changed registered office in the last 12 months, the former registered office must also appear in the advertisement.

Please note that once published, the entire newspaper page on which the advertisement appears must be submitted to the CRO within 4 weeks. Sample texts of advertisements are available on the CRO website http://www.cro.ie/

A Form H15 must be completed and signed by a current director of the company.

The following is submitted to the CRO:

Completed Form H15
Letter of no objection received from Revenue
The full page of the newspaper on which the advertisement to strike off the company appears

This documentation must be sent to:
The Companies Registration Office,
O’ Brien Road,
Carlow.

There is no fee required to be paid to the CRO to strike the company off.

New €200 levy on second homes

New €200 levy on second homes

Liability to pay the charge is determined on the basis of ownership of the property in question on a single day each year. For 2009 this date is 31 July 2009.
The charge must be paid within two months of the liability date (i.e by 30 September 2009).
Payments made after 31 October 2009 will face a late fee of €20 per month or part of a month.

A new website http://www.nppr.ie/ has been established to answer frequently asked questions and allow payments to be made electronically. Payment can also be made by cheque, bank draft or postal order and sent to the relevant local authority.

A declaration of ownership must accompany the payment. This can be made on-line through the website or on the relevant form. Forms are be available for download from the website.

The liability date for the charge in 2010 will be 31 March 2010.

Grant Application deadline – 31st August 2009

Grant Application deadline – 31st August 2009

The deadline for the submission of grant applications is 31st August 2009.

Information you may require for your application:

You may need to send a PAYE Balancing Statement (Form P21) to your Local Authority, Bank, Building Society etc. as proof of earnings for the purpose of obtaining an education grant, a house or a loan etc.

A PAYE Balancing Statement gives details of your total income, tax credits and PAYE tax paid for a particular tax year. It also shows whether you have overpaid or underpaid tax for the year. If you have overpaid tax, a cheque for the amount overpaid will be attached. If you have underpaid tax your district office will indicate if, and how the underpayment will be collected - usually by reduction of your tax credits for a subsequent tax year.

Why your P60 is not sufficient for the grant application:

You may have more than one source of income or you may be jointly assessed with your spouse which means that a P60 from one employer would not give the full information required.

How to get a P21

You can request a P21 online from www.revenue.ie/en/online/paye-anytime.html

You can also request a P21 by forwarding your Form P60 (and, if relevant, a Form P60 for your spouse) for the tax year to your local Revenue office and asking for a P21. If you wish to claim any additional tax credits you should submit the necessary information e.g. details of PRSA contributions etc. Receipts etc must be kept for 6 years as Revenue may ask for them at a later stage. Your district office will advise you if any further information is required. You can also claim additional tax credits online from PAYE anytime.

Waiting period for a P21

A P21 requested from PAYE anytime will be issued immediately and should be received within 3 to 4 days. A P21 requested in writing, by phone or by calling into a local office is not as quick as the online request and there may be some delay during peak periods.

It is essential that if you are applying for a P21 now that you indicate that it is required urgently for the purposes of a grant as the deadline is fast approaching.

For any further information contact us on 021 4810080.

Source information www.revenue.ie

Mortgage Interest Relief

Tax Refief at source (TRS)

Changes to Mortgage Interest Relief since 1st January 2009

From 1st January 2009, tax relief at source is calculated based on:
a) Whether you are a First Time Buyer or non first time buyer
b) How many years you have been a First Time Buyer
You can only get relief on the interest charged/paid on your mortgage and the relief you receive depends on the upper limit allowable.
With effect from the 1st May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for first time and non first time buyers.

Ceilings for Mortgage TRS
Status:
First Time Buyers: 01/01/2007 - 31/12/2007
Single: €8,000
Married/Widowed: €16,000

First Time Buyers: From 01/01/2008
Single: €10,000
Married/Widowed: €20,000

All Others: From 01/01/2007
Single: €3,000
Married/Widowed: €6,000

The higher limits for first-time buyers apply for the tax year in which the mortgage is taken out plus six subsequent tax years.

Are you a First Time Buyer or Non First Time Buyer?

In what year did you first receive tax relief on your mortgage? If the answer is 2003 or more recent, you are still a First Time Buyer for TRS purposes in 2009. If you received tax relief on your mortgage prior to 2003, you are no longer considered as a First Time Buyer.
If you have received Mortgage Interest Relief for more than 7 years on the same loan/property, you are no longer entitled to trs with effect from 1st May 2009.
If you are a non First Time Buyer and have taken out a NEW loan (not a Switcher Loan) or Top Up, you are entitled to mortgage interest relief at a rate of 15% for 7 years to a maximum of €3,000 interest paid from the date of first repayment on that loan.
If you are a First Time Buyer you must establish how many years you have been a First Time Buyer
If you became a First Time Buyer in 2003 or 2004 you are in your 7th or 6th year as a First Time Buyer and will therefore receive relief at a rate of 20% and up to a maximum interest ceiling of €10,000
If you became a First Time Buyer in 2005, 2006 or 2007 you are in your 5th, 4th or 3rd year as a First Time Buyer and will therefore receive relief at a rate of 22.5% and up to a maximum interest ceiling of €10,000
If you became a First Time Buyer in 2008 or 2009 you are in your 2nd or 1st year as a First Time Buyer and will therefore receive relief at a rate of 25% and up to a maximum interest ceiling of €10,000

Category A First Time Buyer (1st and 2nd Years)
You can calculate your relief at 25% of the interest paid by you on your mortgage up to a maximum of €10,000 interest paid.

Category B First Time Buyer (3rd, 4th and 5th Years)

You can calculate your relief at 22.5% of the interest paid by you on your mortgage up to a maximum of €10,000 interest paid.

Category C First Time Buyer (6th and 7th Years)

You can calculate your relief at 20% of the interest paid by you on your mortgage up to a maximum of €10,000 interest paid.

Changes from 1st May 2009

First Time Buyers:
If you are a First Time Buyer, i.e. are in receipt of mortgage interest relief for less than 7 years, you will continue to receive TRS until the end of the 7th year. This includes those mortgage holders where 2009 is the 7th year of relief.

Non First Time Buyers
If you are a non-first time buyers i.e. you have been in receipt of mortgage interest relief for more than 7 years it would appear, in the absence of detailed information, that you are no longer eligible for mortgage interest relief from 1st May 2009.

First Time Buyers and Non First Time Buyers
If you are a first time buyer and the other party to your loan is a non first time buyer who ceased to be eligible for relief from 1st May 2009, you will receive your full ceiling of €10,000 for 2009 while the non first time buyer will receive a ceiling of €1,000 in respect of the first 4 months of the year. This equates to 4/12 of the annual ceiling of €3,000.


Relief Rates:

Maximum Relief Rates

Status Years Ceiling per Year Maximun Relief
relief per year
First Time Buyer 1 and 2 €10,000 25% €2,500
First Time Buyer 3,4 and 5 €10,000 22.5% €2,250
First Time Buyer 6 and 7 €10,000 20% €2,000
Non First Time Buyer All 7 years € 3,000 15% € 450
of loan

Implementation of changes

Revenue has implemented all of the changes relevant to the January 2009 measures.

In relation to changes for 1st May 2009 the following is the position:

First Time Buyers
First Time Buyers who are within the first seven years of their mortgage continue to get the relief automatically until the end of the 7th year of their mortgage.

Non First Time Buyers
Revenue has been working closely with the relevant lenders to identify these accounts and the amount of mortgage interest relief payable under the new rules. Where Revenue is in a position to decide with certainty from the information provided by the lender that an account holder is entitled to mortgage interest relief then the account will be reactivated for TRS by Revenue.
In the case of non First Time Buyer accounts where it is still not clear that they are entitled to mortgage interest relief, Revenue has commenced writing to the account holder and will complete this process during the month of May. A prompt reply will ensure that where there is an entitlement to mortgage interest relief then it will be restored as quickly as possible.


If you get a letter from Revenue regarding mortgage interest relief…

If you are satisfied that you are no longer eligible for Mortgage Interest Relief through tax relief at source [TRS] i.e. you have received mortgage interest relief for 7 years or more on your current loan (or in combination with an original loan if you have switched lender), you do not need to do anything now as you are no longer entitled to TRS. Your entitlement to mortgage interest relief came to an end on the 30th April.
However, if you have an entitlement to mortgage interest relief, you need to submit your information online using a TRS re commencement form to have your mortgage interest relief recommenced.
Revenue will recommence payment of mortgage interest relief through tax relief at source [TRS] where eligibility is established.

How to apply for Mortgage Interest Relief
The most efficient way to claim mortgage interest relief on your home mortgage is to complete the application form online.

Source information: http://www.revenue.ie/en/tax/it/leaflets/tax-relief-source-mortgage-interest-relief.html

Your PRSI class and the benefits you are entitled to:


PRSI Class A
People within CLASS A:
People in industrial, commercial and service-type employment who are employed under a contract of service with gross earnings of €38 or more per week from all employments; Civil and Public Servants recruited from 6 April, 1995 and Community Employment participants from 6 April, 1996.

CLASS A BENEFITS
Jobseeker's Benefit
Illness Benefit
Health and Safety Benefit
Maternity Benefit
Adoptive Benefit
Invalidity Pension
Widow's or Widower's (Contributory) Pension
Guardian's Payment (Contributory)
State Pension (Transition)
State Pension (Contributory)
Bereavement Grant
Treatment Benefit
Occupational Injuries Benefits
Carer's Benefit

PRSI Class J
People within CLASS J:
People in industrial, commercial and service-type employment who are employed under a contract of service and whose gross earnings are less than €38 per week from all employments;
People insured for Occupational Injuries Benefits only, e.g. employees aged 66 years or over;
People participating in certain FÁS training schemes who are insurable for Occupational Injuries Benefits only, and
People whose employment is of a subsidiary nature or of inconsiderable extent, e.g. people insurable at Class B, C, D or H in their main employment and who have a second job; attendants at Department of Education Examinations; Presiding Officers and Poll Clerks at Elections, and R.D.F. members on annual training.

CLASS J BENEFITS
Occupational Injuries Benefits

Self-Employment
PRSI Class S
People within CLASS S:
Self-employed people such as farmers, certain company directors, people in business on their own account and people with income from investments, rents and maintenance.

CLASS S BENEFITS
Widow's or Widower's (Contributory) Pension
Guardian's Payment (Contributory)
State Pension (Contributory)
Maternity Benefit
Adoptive Benefit
Bereavement Grant

Occupational Pensions
PRSI Class K
People within CLASS K:
People receiving income which is not subject to social insurance contributions but which is liable for the Health Contribution, such as occupational pensions, income deriving from positions of certain Office Holders (e.g. Judiciary and State Solicitors) and income of people aged 66 to 70 years who were previously liable for Class S.
CLASS K BENEFITS
Nil

PRSI Class M
People within CLASS M:
The M Class should be used for people with NIL contribution liability, e.g. employees under age 16 years, people within Class K with a NIL liability (medical card holders, widows/widowers, people aged 70 years or over), etc.

CLASS M BENEFITS
In certain circumstances, Occupational Injuries Benefits

Redundancy

Redundancy

Redundancy occurs where you lose your job due to circumstances such as the closure of the business or a reduction in the number of staff.

Not all employees are entitled to this statutory redundancy payment, even where a redundancy situation exists.

Redundancy criteria:

· An employee over the age of 16
· with 104 weeks (two years) continuous service
· You must be in employment that is insurable under the Social Welfare Acts. If you are a full-time employee you must be in employment that is fully insurable for all benefits under the Social Welfare Acts; this does not apply if you are a part time employee.

How do I calculate redundancy?
Two weeks pay for each year of employment continuous and reckonable over the age of 16
In addition, a bonus week. All excess days should be calculated as a portion of 365 days. i.e. 4 years 190 days = 4.52 years
Reckonable service is service EXCLUDING ordinary sick leave over and above 26 weeks, occupational injury over and above 52 weeks. All Breaks in Service should be within the last three years prior to the Date of Termination.
Reckonable service also excludes absence from work because of lay-offs or strikes. However, short-time work is reckonable.
All calculations are subject to the ceiling referred to above, which stands at €600 per week

Employer Rebate
Employers who pay the statutory redundancy entitlement and give proper notice of redundancy (at least two weeks) are entitled to a 60% Rebate from the Social Insurance Fund, into which they make regular payments themselves through P.R.S.I. contributions


What happens if I can’t afford to pay statutory redundancy?
In situations where the employer is unable to pay the employees their entitlements, the Department of Enterprise, Trade and Employment pays the full amount direct to the employees from the Social Insurance Fund (S.I.F.).

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Revenue Audits

Every year a certain number of Revenue audits are conducted as a cross check of the information provided by you in your tax returns against those in your business records. This system was developed by Revenue to monitor the compliance of each entity in the self assessment system of tax.

What is examined?
Revenue audit covers the following types of tax returns:
Income Tax, Corporation Tax or Capital Gains Tax returns and/or
The returns submitted in respect of VAT, PAYE/PRSI or Relevant Contracts Tax (RCT)
How are the cases selected?
Revenue selects cases based on perceived risk. Three methods of selection are used:
Screening tax returns:
The vast majority of audit cases are selected in this way. Screening involves examining the returns made by a variety of taxpayers and reviewing their tax compliance history. The figures are then analysed in the light of trends and patterns in the particular business or profession and evaluated against other available information.
Projects on business sectors:
From time to time, projects are conducted to examine tax compliance levels in particular trades or professions. The returns for a large number of taxpayers in a particular sector are screened in detail and a proportion of these are selected for audit.
Random selection:
This is in addition to the first two methods. It means that all taxpayers have a possibility of being audited. Each year, a small proportion of audit cases is selected using this method.

*Technology has enabled Revenue to enhance their screening process and they now utilise a computer-based risk analysis program REAP. This enables revenue to interrogate information across a range of taxes and duties from Revenue’s own systems as well as information received from third party sources. This system now ensures that 100% of all self assessed tax returns are analysed and monitored for compliance.*

Revenue audits can be costly and time consuming. Accountancy fees can range from hundreds to thousands of euros depending upon the commitment and size of the audit. If significant discrepancies arise the auditor may extend the examination for prior or subsequent years.

*In 2007 14,308 Revenue audits were completed yielding €668 million. A further €30 million of tax arrears was also collected by Revenue auditors in the course of audits. The 2007 National Construction Sector Project yielded €130 million through Revenue audit. A further €15.5 million was collected in tax arrears.*

Due to random selection anyone who is self assessed may be subject to a revenue audit. To minimise the impact of this on you and your business you should ensure that your returns are filed on time and are accurate, that your accounts reflect your returns, and that you keep a copy of your records for at least 6 years

*Source revenue annual report 2007

Value Added Tax

There are numerous ways we can save cash with effective VAT management.

We have outlined below just some of the ways of effective VAT management.

Firstly I would like to outline when it is actually necessary to register for VAT.

A taxable person is any person who independently carries out any business in the State and is required to register for VAT when their turnover from the supply of taxable goods and services in a period of 12 months exceeds or is likely to exceed the following limits.

€75,000 - where at least 90% of turnover derives from the sale of goods
€37,500 - Other supplies of goods and/or services
€41,000 – Acquisition of goods from within the EU
€35,000 – Foreign mail order business

VAT is normally accounted for on the invoice basis, i.e. VAT is payable on the total sales invoiced in the relevant period regardless of whether or not the trader has been paid for the supply in that period. However, certain traders can opt for the moneys received (cash) basis of accounting. Under these circumstances the trader is not required to account for VAT until payment for the supply is actually received. However certain conditions have to be satisfied

• 90% of your turnover must be derived from taxable sales to unregistered persons.
  
• You must also satisfy Revenue that your total taxable sales which you expect to receive has not exceeded and is not likely to exceed €1,000,000 in any continuous period of 12 months.

Maximising VAT Recovery

All supplier invoices should be entered into the ‘Accounts Payable System’ as promptly as possible, to allow early recovery of VAT charged.

Ensure VAT is claimed on receipt of purchase invoices and is not delayed until payment is made.

VAT Return Management

Proper management of VAT returns to maximize cash flow savings e.g. submission of VAT returns prior to 19th of the month where a VAT refund exists, and following up with Revenue to obtain a refund.

Invoicing

For continuous supplies of services the supplier should consider issuing a pro-forma invoice/request for payment. This does not create a tax point therefore delaying when VAT is paid. When payment is received a VAT invoice can be issued.

Other VAT Administration Points

Review VAT rates – are you charging too much VAT.

Check suppliers’ VAT rate and ensure that their invoices have been created with the correct rate.

There other ways of delaying the tax point of an invoice, pro-forma fee notes and claiming VAT on purchase invoices after you have filed your relevant VAT return. Please contact us if you have any queries in this regard.

Supplementary Budget 2009

Minister Brian Lenihan has delivered his second budget in less than 6 months on 7 April 2009. This has been the toughest budget this country has seen in quiet some time.

Budget Highlights

Income levy rates doubled.
First €75,036 2%
Next €99,944 4%
Remainder 6%

Health levy rates double to 4% and 5% and the higher rate threshold is reduced to €75,036.

Employees PRSI ceiling has increased from €52,000 to €75,036.

No change to Employers’ PRSI

Increase in CGT and CAT rates from 22% to 25%.

Decrease of 20% in the tax free CAT thresholds.

Threshold Changes	Gifts and Inheritance taken up to 7 April 2009	Gifts and Inheritance taken after 8 April 2009
Group A - Parent to Child	€542,544	€434,000
Group B - Related Persons	€54,254	€43,400
Group C - Unrelated Persons	€27,127	€21,700

The government intend phasing out Mortgage Interest Relief.
From 1 May 2009 relief will only be available in respect of interest paid over the first 7 years of a qualifying loan of a person’s home.

There have been no changes to the VAT rates.

There has been an increase in the cost of 20 cigarettes by 25c

There has been a 5c increase in the cost of diesel.

The Minister has stated that there are more tax increases to come.

Should you require any clarification on any of the budget points please contact Edel Walsh at O’Connor Pyne
021 481 0080
ewalsh@oconnorpyne.com

Income Tax

Are you satisfied that you are availing of all of the income tax reliefs and exemptions that you are entitled to?

As the tax system moves towards a full tax credit system, tax relief is granted by tax credits at the standard rate of 20%. However if your tax credits exceed the tax which you have to pay you are not entititled to a refund. Only the actual tax paid to revenue can result in a tax refund.

We have outlined below all of the available relief’s:

• Single Credit
  
• Married Credit
  
• Widowed Credit
  
• Single Parent Credit
  
• Age Credit
  
• PAYE Credit
  
• Blind Persons Credit
  
• Incapacitated Child Credit
  
• Dependant Relative Credit
  
• Home Carer’s Credit
  
• Widowed Parent Credit
  
• Mortgage Interest Credit
  
• Medical Insurance Credit
  
• Service Charges
  
• Rent Paid by Persons aged 55 or over
  
• Rent Paid by Persons aged less than 55 years
  
• Fees paid to Private Colleges
  
• Fees for Training Courses
  
• Donations to Eligible Charities
  
• Donations to Certain Sports Bodies
  
• Approved Gifts i.e. Universities/Colleges
  
• Gifts to Designated Schools
  
• Trade Union Subscriptions
  
• Dental Insurance
  
• Heritage Donations
  
• Relief for Premiums under Qualifying Long-Term Policies

What are the other ways we can shelter taxable income?

We have outlined below the ways that you can shelter your taxable income at the marginal rate and ultimately reduce you income tax liability.

• Maximise pension contributions to Revenue approved limits.
  
• Investing in a qualifying business expansion scheme **
  
• Investment in qualifying films
  
• Seed Capital Relief

Unrestricted interest relief is available to individuals who have borrowed money to invest in shares in a trading company subject to certain conditions.

• The company must be a private trading company.
  
• Individual is at least a part-time director or part time employee and owns over 5% of the ordinary share capital.

** O’Connor Pyne & Co has extensive expertise in assisting companies who are looking to be a qualifying business expansion scheme company. We also assist individuals who are looking to invest in qualifying BES companies.

Cork Society Of Chartered Accountants Annual Practice Day

Irish Times Friday March 13th 2008

PRACTICE MAKES PERFECT

Edel Walsh of O'Connor Pyne & Co with Sean Pierse Chairman of Cork Society of Chartered Accountants, Claire O'Neill and Gillian O'Halloran

Edel Walsh is a part of the Taxation department at O'Connor Pyne & Co and a member of the education committee in the Cork Society of Chartered Accountants.

Edel graduated from University College Cork with a degree in Finance in 2004 before going on to become a chartered accountant. Edel spent fours years in KPMG in Dublin where she trained as a tax consultant. During her time In KPMG she also lectured with the Business Management Institute.

Edel joined the tax department in O’ Connor Pyne in November 2008. She is also a part time lecturer with Griffith College in Cork where she lectures professional accountancy courses in particular for the ACCA and CPA. She primarily teaches advanced financial accounting and advanced taxation. Edel also delivers continued professional development (CPD) courses for the ACCA.

Corporation Tax Compliance

Preliminary Tax

Is your company a small company for preliminary tax purposes?

A small company is one whose prior year corporation tax liability was less than €200,000. A small company is required to pay preliminary for the year, one month before the year end. A small company can either pay 100% of the prior year's income tax liability or 90% of the current year's liability.

As most businesses certainly suffered the effect of the recession in the last year, you should estimate what you believe you current year corporate tax liability is and pay 90% of that amount as opposed to paying 100% of the prior year liability. Thus, you will avoid overpaying corporation tax for the year. This is certainly more efficient for your business as this money could be earning interest in a deposit account as opposed to holding the money with Revenue for a number of months.

Filing Tax Returns

Have you overpaid your preliminary tax for the year and are you due a refund of corporation tax?

Do not leave it until the due date to file your corporation tax return. The earlier you file your return, the earlier you will receive your refund from the Revenue Commissioners.

Late Filing of Tax Returns

Are you in the habit of filing your tax returns late? Revenue imposes interest and penalties on you for late payment and filing of returns. Ensure you file your return on time and do not waste cash on unnecessary interest and penalties.

Close Companies

Is your company paying an unnecessary close company surcharge of 20% on undistributed investment and rental income every year?

As the rate of corporation tax is generally less than the rate of income tax, there is an incentive for individuals who have no immediate requirement for income, not to extract those profits arising within a company. Instead they could allow them to accumulate within the company, suffer corporation tax rather than be distributed to the shareholders and attract income tax at the higher rate.

Close company legislation was primarily designed to counter this form of avoidance of income tax by imposing a surcharge at a rate of 20% on the undistributed after-tax investment and rental income.

This surcharge is an unnecessary tax cost to the company especially when there are ways we can shelter this cost. If the company were to pay a dividend to its shareholders for the amount that is subject to the surcharge, this dividend would provide a shelter against any surcharge payable.

If you are concerned about the close company legislation, please give us a call at O’ Connor Pyne & Co and we will be delighted to discuss with you the various disadvantages of close companies and how are they affecting you company.

Capital Allowances

There is no tax deduction available for capital expenditure or depreciation of fixed assets in arriving at tax adjusted trading profits.

However, a separate tax deduction is available for certain types of capital expenditure called capital allowances. Capital allowances are not available on all capital expenditure.
The expenditure must fall into the category of plant and machinery, industrial buildings or other type of capital expenditure approved under various Finance Acts and Urban and Rural Renewal Schemes.

Are you concerned that your company might not be availing of all the capital allowances that should be available to it?

It is important that you maximise capital allowances, which are available on plant and equipment at 12.5% per annum. Review your fixed asset register and ensure that you have claimed all available capital allowances.

At O’Connor Pyne we can review expenditure your company has incurred in particular on buildings to ensure that any plant element has been identified

Tax Savings and the Recession

In these recessionary times we all are looking to find ways to save cash.

One way of doing this is to ensure that we are maximising all the taxation reliefs and exemptions that are available to us.

O Connor Pyne & Co is delighted to provide you with some tax tips of saving cash during these recessionary times.

Corporation Tax

As we all know, during a recession the most successful entrepreneurs are born.

Are you considering starting up your own company?

Corporation Tax Exemption

A three year exemption from taxation on trading profits and capital gains for companies with a tax liability of less than €40,000 per annum was announced in the Budget 2009.

• The exemption works by reducing the corporation tax attributable to certain profits to nil. However a marginal relief applies where the total corporation tax payable by the new company is between €40,000 and €60,000. This relief applies for three years from the commencement of the trade, subject to certain conditions.
• The new company must carry on a qualifying trade.
  A qualifying trade is a trade which is set up and commenced by a new company in 2009 only.
• To constitute a new company, it must be incorporated anywhere within the EU on or after 14 October 2008 and commence a new trade during 2009.
  

The following items are also restricted from this relief:

• Capital gains tax which would arise on the disposal of development land;
• A trade which was previously carried on by another person in the State;
• Close Service Companies.

If you have decided to set up a new company and have prepared forecasts or projections for the next three years, perhaps you would like us to review these projections to determine whether or not you will be able to avail of the corporation tax exemption.