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Welcome to the FMB Chartered Accountants Blog. We answer all of your financial and accountancy questions, as well as keep you up-to-date with the latest news from FMB.

LPT - Deduction at source from wages, salary or pension

David McArdle - Friday, June 27, 2014

The legislation governing Local Property Tax provides for payment by a liable person of the amounts due in respect of 2013, 2014 and arrears of 2012 Household Charge in either a single payment per year, or by phased payments over the course of each year.

Advised in the Revenue eBrief of 2013, employers and pension providers have been required to make this facility available to their employees/pension recipients since July 2013. Deduction at the source is the means by which LPT/HHC is to be paid.

It is organised that Revenue will notify the employer/pension provider through the Tax Credit Certificate (P2C) to deduct the amount from the employee’s net salary or pension recipient’s occupational pension.

The employer/pension provider must also account for and remit the deducted LPT/HHC to Revenue on Forms P30 and P35, and to employees on payslips, P60s and P45s.

If you need any advice, contact FMB by calling 01 645 2002 or emailing enquiry@fmb.ie.

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Automatic Exchange of Information

David McArdle - Wednesday, June 25, 2014

‘Automatic Exchange of Information ("AEOI") is a relatively recent component of international cooperation in tax matters. Ireland fully supports the global move towards AEOI and is actively involved in progressing AEOI within the EU, the OECD, and on a bilateral basis.’ - Revenue.ie

The Foreign Account Tax Compliance Act (FATCA)

In December 2012, Ireland concluded an Intergovernmental Agreement with the United States. This was put in place to improve International Tax Compliance and Implement FATCA. In order for the exchange of information, the Irish financial institutions must report to Revenue the details of accounts held by them.

1, July 2014 is the deadline for the Regulations to be enacted and in force. This will allow Financial Institutions to commence the required due diligence and account information gathering from that date. The Guidance Note is in the final stages of review.

Common Reporting Standard (CRS)

The Common Reporting Standard ("CRS") for the automatic exchange of financial account information was approved by OECD in February 2014. This is a common model of AEOI which draws on the work of global anti-money laundering standards and the model FATCA Intergovernmental Agreement. Over 40 countries, including Ireland, have committed to the early adoption of the CRS.

Ireland will bring forward legislation to enable Revenue to make regulations to govern the collection of data from Irish financial institutions when the Commentary for the interpretation of CRS is finalised.

EU Directive on Administrative Cooperation (Council Directive 2011/16/EU)

The EU Directive on Administrative Cooperation states that ‘EU Member States shall engage in the automatic exchange of available information concerning residents of other Member States in respect of 5 categories of income and capital:

  • Employment income;

  • Directors’ fees; Life insurance products not covered by other Directives

  • Pensions;

  • Ownership of and income from immovable property.’


If you need any advice, contact FMB by calling 01 645 2002 or emailing enquiry@fmb.ie.

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PAYE: Employer’s obligation to Register Employees

David McArdle - Thursday, June 19, 2014

On 13th June 2014 the Revenue Office released a Tax Briefing with regard to new responsibilities for employers in relation to the PAYE system. Employers are now obligated by law to maintain and keep a Register of Employees and may at any time be requested to produce a hard or soft copy of the register.




The Register of Employees details

The Register of Employees must contain certain details of each employee beginning from the tax year 2012 and cover all subsequent years. Details that must be included in the register for each employee are:

  • the name,

  • address and

  • Personal Public Service Number (PPSN) of each employee;

  • the date of commencement of employment of each employee;

  • and where relevant, the date of cessation of employment of each employee.


The brief also states that employers must keep and maintain the Register of Employees (or a copy of it) either at the normal place of employment of each employee or at the main place of business of the employer. In the event of an employer having more than one place of business, the Register of Employees may be kept in one location where the records are held may be accepted as that employer’s main place of business for the purposes of being the place of retention of that employer’s Register of Employees.


Producing the Register of Employees

Revenue officers carry out pre-arranged and unannounced visits to businesses to ensure that such businesses comply with their tax and duty obligations (including obligations on employers to register with Revenue for the purposes of the PAYE system and to keep and maintain, for PAYE purposes, a Register of Employees). Such visits may be random, may be part of a "sectoral review" of specific types of businesses or may stem from complaints to Revenue as regards an employer’s failure to operate the PAYE system (or to operate the PAYE system correctly).


Employers may be requested to produce an extract of their Register of Employees within a specified time period. There is a statutory obligation on employers to produce either their Register of Employees or an extract of same, upon request from a Revenue Officer, within a specified time period.


Penalties

Where an employer is obliged, but fails, to keep and maintain a Register of Employees at the normal place of employment of each employee or at that employer’s main place of business, Section 987 Taxes Consolidation Act 1997 provides that that employer shall be liable to a penalty of €4,000. In addition to the penalty of €4,000, where that employer is a company, the secretary of that company is liable to a penalty of €3,000.

In some instances, an employer may, for the purposes of payroll, human resources or fulfilling a non-tax related statutory obligation, hold a record or register of all employees (and former employees). Such a record or register will suffice as a Register of Employees for PAYE purposes provided that it includes the relevant details outlined above.


If you need any advice, contact FMB by calling 01 645 2002 or emailing enquiry@fmb.ie.


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Taxman gets €9m in expenses crackdown

David McArdle - Tuesday, June 17, 2014


The Tax authority has been conducting a National Audit Project on those who work for one client and provide services through their own company, mainly contractors in the IT, Scientific, Technical and Administrative sectors.


It is said that the claim of excessive expenses from professionals through a company has yielded €9.3m for the Revenue Commissioners since last year.


Quoted by Finance Minister Michael Noonan, the expenses reimbursed tax free “was found to be excessive and several cases included expenses which had not been incurred at all or were personal rather than business related.”


Michael McGrath of Fianna Fail advised, "In light of these startling figures any self-employed contractor providing services through a company under contract to a third party client would be well advised to have their tax situation independently checked to ensure they are not building up a massive bill of underpaid tax,"


Following a Revenue pilot project which yielded €4.5m in the South West region, a total number of 385 audits have been closed with additional tax due in 299 cases. 49 have agreed to settlements. 368 companies are still under audit, and €9.3m in interest tax and penalties has been collected.


If you need any advice, contact FMB by calling 01 645 2002 or emailing enquiry@fmb.ie.


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FOREIGN EXCHANGE: Risk Management

David McArdle - Friday, June 13, 2014

The Irish economy generates foreign exchange (FX) flows of approximately €200 bn every year from the import and export of goods and services in addition to financial flows. Volatility in the FX markets is an ever present challenge to financial managers and business owners who are trying to minimise the impact that movements in FX rates can have on their core business.



An effective and flexible hedging strategy can achieve the dual aim of protecting the bottom line while giving the business the opportunity to benefit from an improved exchange rate environment in the event it becomes achievable throughout the year. The reality is that nobody can predict where the market will be in 3, 6 or 9 months time but we can examine current conditions, weigh up how these factors will evolve over the coming months and make informed decisions based on these considerations


What you can do?


SPOT

Spot contracts are suitable for those who need to buy or sell a currency quickly, and need to make payments to suppliers or convert sales proceeds immediately. Price and speed of delivery are the most important factors to consider.


FORWARDS

This type of contract allows you to book an exchange rate for a specified date in the future. Forward contracts are a useful hedging tool that allow you to lock in a rate now for a transaction at a later date, providing certainty as to the Euro equivalent of your income or expenditure. This allows you to protect your business against adverse movements in the currency markets.


OPTIONS

Typically an option is a contract that gives you the right, but not the obligation to exchange money at a pre-agreed exchange rate on a future date. However, for the extra flexibility that foreign exchange options can provide, there is a cost to purchase these contracts in the form of an up-front premium.


ORDERS

LIMIT ORDERS

Orders can be left out in the market, allowing you to target an exchange rate that is better than what is currently available. When the target rate is reached, you will automatically buy or sell the currency required. These can be useful if you have specific currency requirements but are not restricted by tight deadlines.


STOP LOSS ORDER

A stop loss order allows you to set a minimum or 'worst case' exchange rate at which you will buy or sell your currency. It is put in place to ensure that, should rates move against you, you have a safeguard in place to protect against further dis-improvement beyond your 'worst case' rate.


If you need any advice or information, contact FMB by calling 01 645 2002 or emailing enquiry@fmb.ie.


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CGT Exemption for Assets

David McArdle - Monday, May 19, 2014

Capital Gains Tax Exemption for Assets

Land or Buildings acquired between 7/12/2011 and 31/12/014


TIME IS RUNNING OUT!


‘Where land or buildings are acquired between 7 December 2011 and 31 December 2014, and held for at least 7 years, the chargeable gain will be reduced in the same proportion that 7 years bears to the period of ownership of the relevant asset.


For example, if a building which has been held for 10 years is disposed of, the chargeable gain in respect of that building will be reduced by seven-tenths.


This relief applies in respect not only of land or buildings in the State but also to land or buildings situated in any EEA State.’


Finance minister, Michael Noonan, has indicated that this very generous relief will not be extended beyond 31 December 2014. Therefore, to ensure you can avail of this relief you need to act prior to 31 December 2014.


Remember, this relief applies to all commercial property, residential  property and land.


If you need advice on this topic or any other tax matter please do not hesitate to contact any of our team, call FMB on 01 645 2002 or email enquiry@fmb.ie.

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FMB 12th place in Top 1000 Auditors

David McArdle - Friday, May 16, 2014


FMB Chartered Accountants has been ranked 12th place in the Irish Times Top 1000 Auditors list. 

Compiled by the Irish Times journalists, Top 1000 Audit Watch offers a comprehensive market analysis including audit firm, audit fees and non-audit fees. 

As their Audit Methodology states, Top 1000 Audit Watch is the first survey of its kind, analyzing who audits Ireland's largest companies and how much they charge for doing so.

See the full list HERE


Get in touch with FMB and call 01 645 2002 or email enquiry@fmb.ie.

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iXBRL filing

David McArdle - Wednesday, May 14, 2014

Phasing in of mandatory iXBRL filing for corporation tax: a brief summary

Since November 2012, those obliged to file corporation tax and income tax returns have had the option to file financial statements in iXBRL format via ROS (Revenue On-line Service). iXBRL (or inline eXtensible Business Reporting Language) is a language that allows financial information to be communicated and presented in a format that may be read and analysed, both by people and computers.




This process involves presenting the data (financial statements) in a normal document format but with iXBRL “tags” embedded in the soft copy document. Tagging involves the application of computer-readable tags to business data, which enables the data to be processed and analysed automatically by software. iXBRL tags are interpreted by reference to a “taxonomy” which is, in essence, a dictionary linking each tag with the concept it identifies.


In line with the approach taken to e-filing on ROS, Revenue is rolling out mandatory filing of iXBRL financial statements for corporation tax payers in stages and has made the necessary changes in Finance Acts 2012 and 2013 to enable this. The first group, cases dealt with by

Large Cases Division (LCD), has been required to do so for all corporation tax returns (Forms CT1) submitted from 1 October 2013 on, for accounting periods ending.


Phase 2 will extend mandatory iXBRL filing to all corporation tax payers, except those meeting the audit exemption criteria below, for Forms CT1 submitted after 1 October 2014 for accounting periods ending on or after 31 December 2013.


The three criteria for exclusion from this phase are

  • The balance sheet value of the company does not exceed €4.4 million;

  • The amount of the turnover of the company does not exceed €8.8 million; and

  • The average number of persons employed by the company does not exceed 50.


These criteria correspond to the current audit exemption criteria; note that to be excluded from the Phase 2 filing obligation, a company must meet all three criteria.


Phase 3 will involve virtually all remaining corporation tax payers (though exemptions may still be available for “inactive” companies or companies in liquidation). It is currently expected that this will commence in 2015. Further details are to be announced in due course.


Companies not yet subject to mandatory iXBRL filing may do so on an optional basis. Revenue strongly encourage companies to use either the optional filing period or the test filing facilities to ensure they are fully prepared for mandatory filing. It seems likely that very few companies within the charge to Irish corporation tax will escape mandatory iXBRL filing.


If you need advice on this area please get in touch with us and call FMB on 01 645 2002.


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Revenue 2013 Annual Report - Board Review

David McArdle - Friday, April 25, 2014

Board's Review

After several difficult years, the Irish economy is showing signs of recovery. In 2013, domestic demand contributed to growth for the first time since 2008, augmenting the on-going strong performance by the export sector. Signs from the labour market are encouraging, with employment estimated to have grown by 2.5% during the year. These signs are reflected in the tax and duty receipts for 2013 when net receipts grew by 3.3% to €37.87 billion. All of the main taxheads recorded growth, with Excise Duty up 4.8%, Income Tax up 3.97% and VAT up 1.56%.

Data from Revenue’s Relevant Contracts Tax system provides us with a range of positive indicators, pointing to a growing level of activity in the construction sector, particularly in the second half of 2013.

In 2013, Revenue collected €37.87 billion in taxes and duties, representing 93.4% of all Exchequer funding. We implemented new base broadening taxes and new schemes which were important elements of Government policy. These receipts and innovations reflect the important role played by Revenue and Revenue staff in effectively administering the tax and duty system and supporting the Government achieve its fiscal consolidation programme and Ireland’s exit from the bailout.

Over the past six years, very strong filing and payment compliance rates have been maintained and marginally improved at a time when the opposite might have been expected. The compliance rates achieved in the first year of Local Property Tax are exceptional. We recognise and acknowledge the part played by individual taxpayers and tax and customs practitioners in the achievement of these results.


Supporting Voluntary Compliance

Our strategy of making it easy to comply is key to ensuring that we collect taxes and duties in a manner that is cost effective for our customers and for Revenue. To achieve this we offer a wide and growing range of easy to use and efficient electronic services to meet the expectations of an increasingly e-literate public. The take-up and use of these services shows that our ongoing investment in online channels is paying dividends. In 2013, we collected €38.1 billion (gross) via the Revenue On-Line Service and by year-end over 780,000 customers had used our PAYE anytime service, a 112% increase on 2012. The effectiveness of our strategy is recognised internationally: for the seventh year running, Ireland was rated the easiest country in the EU in which to pay business taxes (and the sixth easiest in the world). Our own survey of SME customers showed that 86% of them were either satisfied or very satisfied with the services we provide.

Introduction of a New Tax and New Electronic Services

In 2013, the introduction of Local Property Tax (LPT) was a major undertaking for us. Within nine months we prepared the legislative framework and designed, built and implemented a fully functioning tax system, complete with a comprehensive register of residential properties and valuation guidance. We redeployed staff to administer the tax and contracted call centre resources to help us respond effectively to customer contacts. Given the very tight timeframe and the many technical and logistical challenges, the results to date have been encouraging. The compliance rate for 2013 LPT currently stands at 94% and €242 million has been collected in respect of the half year charge. An online easy to use pay and file facility was a key feature of our approach and 76% of returns were filed electronically. For 2014 LPT, the compliance rate currently stands at 90% and €319 million has been collected. Since taking on responsibility for Household Charge arrears in July 2013, €7.6 million has been collected.

The year wasn’t all about Local Property Tax. 2013 also saw the introduction of an innovative suite of services all underpinned by our strategy to establish electronic channels as the norm - our Customs e-Manifest system, a Diesel Rebate Scheme, a Vehicle Registration Tax Export Repayment Scheme, full self-assessment for Corporation Tax and developments to facilitate the roll-out of the Single European Payments Area.

Debt Management

Despite difficult economic circumstances, maintaining timely payment and returns compliance levels continues to be a priority for Revenue. We do this by intervening where necessary and at the earliest possible opportunity; by supporting viable businesses with phased payment arrangements and, ultimately, by pursuing vigorously those who fail to meet their obligations.

This strategy is serving us well. Timely compliance for filing and payment of the main business taxes in 2013 ranged from 98% to 83%, depending on case size. This means that the overwhelming majority of our customers filed and paid on time with no intervention from us – a key indicator of a fit-for-purpose tax system.

While the economic outlook is improving, we are acutely aware that many businesses and individuals are still experiencing financial hardship, particularly with regard to temporary cash-flow problems and access to credit. For several years now our approach has been to offer limited debt rescheduling to viable businesses while at the same time pursuing enforcement action against those who will not engage constructively with us or who simply refuse to comply. This has enabled us to manage our debt position in a sensitive but prudent way. In 2013, total outstanding debt fell by 8.28% to €1.84 billion while the debt available for collection fell by 14.52% to €1.01 billion.

Confronting non Compliance

Activity in the shadow economy deprives the Exchequer of funds and puts compliant business at a competitive disadvantage. Where voluntary compliance is not forthcoming, it is our job to intervene. Utilising data, technology and analytics, our approaches are increasingly sophisticated, risk driven and calibrated to achieve the maximum result in the most cost-effective manner. In 2013, we carried out fewer audits but increased our focus towards less resource intensive, lighter touch, earlier interventions, a growing number of which are carried out in ‘real time’. This approach saw our audit and compliance programme yield €548.3 million. In 2013, we again paid particular attention to business sectors where cash transactions are the norm. Our audit activity in these sectors resulted in a yield of €125 million.

Fuel fraud and cigarette smuggling pose a serious threat to the Exchequer and to legitimate businesses. A range of legislative and operational measures were introduced to improve our ability to monitor the fuel supply chain and identify and address suspicious trading activities associated with fuel laundering. In 2013, Revenue closed down 30 filling stations, bringing the total number of fuel station closures since 2011 to 119. We also detected and dismantled 9 fuel laundering plants. In addition, Revenue obtained new powers to enable us to deal more effectively with the illicit manufacture of tobacco products, including new offences and provision for the forfeiture of equipment or materials used in illicit production.

The final link in the compliance chain is prosecution in the Courts. In 2013, we secured 35 criminal convictions for serious tax and duty evasion. At year-end, 150 cases were in the investigation process with a further 55 cases with the Director of Public Prosecutions or in the judicial system. We also secured 449 summary criminal convictions for a range of tax and customs and excise summary offences, resulting in fines amounting to €964,386 being imposed.

Contributing to Economic Development

2013 was particularly busy for us on the legislative and policy fronts. Three Revenue-related Acts were passed – two Finance Acts and the Finance (Local Property Tax) (Amendment) Act 2013. In addition to drafting the legislation, Revenue provided policy advice, costings and projections to the Department of Finance. We also played an active part in the planning and delivery of what was widely regarded as a highly effective EU Presidency in the first half of 2013. We chaired 9 Council Groups and provided technical support to 6 others, working with the Department of Finance and the Irish Permanent Representation and engaging with the European Commission, the Council Secretariat and other Member States.

Internationally, Revenue advocated and advanced Ireland’s tax and customs policy agenda at European Union, OECD and World Customs Organisation level. We participated in a range of initiatives relating to the automatic exchange of information between tax administrations to improve compliance and deter cross-border tax evasion. In this context, the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes gave Ireland a top rating of ‘compliant’ in relation to the availability, access to and exchange of information. This underpins Ireland as a transparent jurisdiction for tax purposes. During 2013 Revenue also actively participated in the OECD in relation to the BEPS (Base Erosion and Profit Shifting) Action Plan.

Resources

All of the activities mentioned above were carried out by a staff complement of 6,141 people (5,745 full time equivalents) at end-2013 - a 13% reduction since 2008. We have mitigated the effects of this substantial staff reduction by building capability, redeploying resources, exploiting technology and rationalising our work processes, all within the spirit of supporting public service reform and the Haddington Road Agreement.

Revenue performed well in 2013 and this performance was due to the dedication, skills, adaptability and integrity of our staff. We are proud to acknowledge and thank them for a job very well done.

Looking ahead

The economic environment in 2014 and beyond is looking more positive and first quarter tax and duty receipts are in line with expectations. We are implementing new schemes – the Home Renovation Incentive is likely to be the most popular - and managing compliance challenges, some new and some very old. Reform of the Tax and duty appeals process currently under consideration will impact significantly on our operating environment and we will need to put in place a substantial change management process. We can anticipate developments in international and EU taxation yet to be decided and some EU developments for example the VAT Mini One Stop Shop where the direction is clear.

Workforce planning for 2014 and beyond is likely to be one of our most critical challenges yet but it is essential that we continue to invest in people and technology and build capability by recruitment and training if we are to continue to serve the community as we should.

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Revenue Publishes 2013 Annual Report

David McArdle - Friday, April 25, 2014


In their 2013 Annual Report, Revenue claim that the introduction of Local Property Tax (LPT) was a major administrative challenge for them during 2013. The end result was “exceptional” compliance rates were achieved in the first year of LPT according to Revenue. The annual report confirms that more taxpayers are using Revenue’s electronic services to engage with Revenue.


Other points from the Annual Report include:

  • 626,561 interventions (including audits) yielding €548.3 million an increase of 11.4% on 2012.

  • 8,037 audits completed yielding €311.9 million

  • 14 avoidance cases, 13 of which were under section 811 Taxes Consolidation Act 1997, settled with a yield of €2.6 million and a restriction of losses of €1.1million.

  • Interventions in 2,585 PAYE cases yielded €2.6 million. Over €6 million saved from reducing or disallowing incorrect VAT claims.

  • Details of 450 settlements made in 2013 published in Iris Oifigiúl. The settlements involved €43.8 million in tax, €17.9 million in interest and €22.8 million in penalties

Find the Board's review of the Revenue Annual Report Here.


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