Call Us+353 (0)1 645 2002

Welcome To Our Blog
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 financial news.
                                     Sign-up

Our Blog

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.

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.

Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.



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.


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.



Five is the Magic Number

David McArdle - Wednesday, April 23, 2014


With the recent decision to hike up DIRT on deposits and exit tax gross savings and investment policies to 41% from 1 January 2014, more people will seek greater net investment returns. But beware… speculating is not investing and choosing funds and investments based on whatever is flavour of the day or is hotly tipped on the web or is leading the performance tables should set the alarm bells ringing.

Investment is all about you and your personal objectives and financial goals. In order to build and manage a successful investment portfolio it is recommended that you identify where your overall assets are invested and build a portfolio that has the right balance and risk that is right for you.

 The following five steps are easy to follow:

1. Have Clear Goals

Is the objective of your investment to seek a real return i.e. a net return ahead of inflation? Is it to generate income? Is it a combination? Can you invest part of the money with a longer term time horizon? What will you do for accessible cash?


2. Know Your Investment Risk Tolerance

Risk and return go hand in hand and if you want higher returns you have to take higher risks. There are no shortcuts and if an investment offers more than the risk-free rate (i.e. deposits) then it comes with higher risks in terms of capital loss and the possibility of lower returns than anticipated. Higher risk investments such as equities are generally expected to return more than lower risk-free investments such as cash. However, taking on a high level of risk does not guarantee greater returns or it wouldn’t be risky! There are numerous ways to measure risk but checking the volatility of your investment is a good place to start with (volatility being the extent to which your investment fluctuates in value). Volatility of an investment in isolation is not enough to assess an investment.


3. Focus on a Mix of Assets

Asset allocation is the process of dividing up your capital and allocating it to more or different types of asset classes. An asset class is the term given to a group of investments that share similar risk and return characteristics and includes cash, equities, fixed interest, property, commodities and alternative investment styles. The key is getting the mix aligned with your risk profile.


4. Select High Quality Funds

Investors derive much of their financial knowledge from what they read, hear or see in newspapers, magazines, websites, television and books not to mention the internet. However, just because there is a lot of information does not mean that it is necessarily accurate, objective or relevant to your situation.


The best solution is to take advice from an experienced independent financial adviser who has a predefined process to his/her advice and investment strategy.


5. Monitor and Review

Investment does not finish at the point when you buy your fund or investment. With multi-asset class portfolios that use funds, over time, each asset class will generate different returns, which will cause your portfolio’ asset allocation and consequently its risk profile to change, or rather drift away from its original position. Other facts such as tax implications and if a fund manager moves job or a poor economic outlook can affect the reasons for holding an investment. It is therefore important to periodically reappraise your investments and discuss with your adviser.


Summary

Slow and steady wins the race! The greater the portfolio loss in any given year then the higher the level of future growth required to recover from that loss. Remember a 35% fall in a portfolio requires 54% growth to recover whereas a 5% fall in a portfolio requires only 5.3% growth. Once you are clear of your goals, minimising portfolio volatility should be a key objective and will prove its worth when we experience the next market downturn.


This article is intended to provide a general guide to the subject matter and is necessarily in a condensed form. Advice should be taken before acting on information in it.


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.



Small Claims Court

David McArdle - Friday, April 18, 2014

The Small Claims Court was set up as an alternative method of commencing and dealing with a civil proceeding in respect of a small claim, without the need for a solicitor. The aim of the Small Claims Court is to provide an inexpensive, fast and easy way for ‘consumers’ and ‘businesses’ to resolve disputes. The matter is dealt with in your local District Court office.



To be eligible to use the procedure, you, the ‘consumer’ must have bought the goods or services (or the service) for private use from someone selling them in the course of business. As a ‘business’ you must have bought the goods or services (or the service) for use in business from someone selling them in the course of business. Furthermore, the claim cannot exceed €2,000.


The following claims can be dealt with under the Small Claims procedure:

  1. A claim for goods or services bought for private use from someone selling the in the course of a business. (Consumer claims)

  2. A claim for goods or services bought for business use from someone selling them in the course of a business. (Business claims)

  3. A claim for minor damage to property (but excluding personal injuries); and

  4. A claim for the non-return of a rent deposit for certain kinds of rented properties (excludes claims which are handled by the Private Residential Tenancies Board).

Claims cannot be made in the Small Claims Court for debts, personal injuries or breach of leasing or hire-purchase agreements.


The person against whom the claim is made will be given an opportunity to admit the claim, defend the claim and/or put in a counterclaim. Once everything is ready for Court you receive a letter from the Small Claims Office telling you the date and time of the court hearing and the location of the court itself.


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


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.


Debt for Equity Swaps

David McArdle - Wednesday, April 16, 2014

What is it all about?


In recent years, in particular, we hear a lot about debt for equity swaps. Debt for equity deals occur when large companies run into serious financial trouble, and often result in these companies being taken over by their principal creditors.


A debt for equity swap is a capital reorganisation of a company where a bank or other creditor converts indebtedness owed to it by the company into one or more classes of the debtor company’s share capital. This is typically driven by the bank or other creditors of the company.

Such a reorganisation may occur where the debtor company is in distressed state but its creditors do not believe that the situation warrants the appointment of a receiver or liquidator. Any such appointment would mean that the creditors are likely to receive a lesser return than if they substitute some of their debt for equity. The hope is that with a lower debt repayment profile they will receive an acceptable return on their equity once the company returns to profitability or is sold.


A debt for equity swap has no set structure. The swap may simply comprise a direct exchange of debt or shares in the company. In more complex cases, a new company funded by debt and equity provided by the bank and other creditors and investors may be formed to acquire the existing business from a liquidator or examiner appointed to the financially distressed debtor company.


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


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.


Capital Gains Tax Exemption

David McArdle - Friday, April 11, 2014

Principal Private Residence Relief can be extended to a second residence in a individuals ownership for any period during which a dependent relative occupies the residence rent free. Therefore for the period that such a relative occupies a residence other than the individuals main residence, a capital gains tax (CGT) exemption can be claimed for both parties.



A dependent relative includes a relative of the individual or of his/her wife/husband. The relative must be incapacitated by old age or infirmity from maintaining himself or herself in order to be deemed dependent. A dependent relative can also include:

  1. The widowed mother or father, whether or not incapacitated, of the individual or of his/her wife/husband, who is maintained by the individual, or

  2. A person who is the father or mother of the individual or of the wife or husband of the individual and is a surviving civil partner who has not subsequently married or entered into another civil partnership.


There is no income test for the above reliefs.


The principal private residence exemption from CGT can only be extended to include one additional residence irrespective of whether or not individual is married.


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


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.


Home Renovation Incentive

David McArdle - Wednesday, April 09, 2014

The Home Renovation Incentive provides for tax relief for homeowners by way of an income tax credit at 13.5% of qualifying contractors.


Tax relief may be claimed on qualifying expenditure from €5,000 to a maximum spend of €30,000 inclusive of VAT. The income tax credit is payable over 2 years following the year in which the work is undertaken. Unused tax credits may be carried forward to the next tax year.


Qualifying works must be carried out on or after 25th October 2013, and up to 31st December 2015. Qualifying works carried out between 25th October 2013, and 31st December 2013, and paid for during that period will be treated as though they were paid in 2014 for credit purposes. Where planning permission is required, and is in place prior to 31st December 2015, works carried out up to 2016 will qualify for relief. The works may be phased, and multiple payments to different contractors are allowed. Claims may be made for costs at the 13.5% rate of tax and excluding anything subject to VAT at 23%.


In order to qualify for relief Homeowners must be LPT (Local Property Tax) compliant and Contractors must be registered for VAT and RCT (Relevant Contracts Tax) and must have a tax clearance certificate.


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


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.


Funding by the Masses

David McArdle - Friday, April 04, 2014

A new type of funding concept which is fast gaining popularity is Crowdfunding. It’s the practice of financing a project or venture by seeking many small amounts of money from a large number of people, typically using an online platform.


Crowdfunding is used to raise money for a variety of purposes, from donations for charitable or other philanthropic initiatives to reward-based investment for start-up businesses. In a depressed world-wide economy, it is seen by many as having the potential to be a very useful tool for businesses and other projects to access finance in a cash-starved environment.




The European Commission has recognised the growth in Crowdfunding and as a result has launched a consultation paper covering the forms of crowdfunding and what it describes as a range of “soft-law measures”. The ideas which the Commission is considering in order to unleash its full potential include raising public awareness of crowdfunding and ensuring that EU-wide access is given to crowdfunding platforms. Apart from its many benefits, the consultation paper also addresses the risks and challenges of crowdfunding and the potential safeguards required to protect against illegal or undesirable practices in the areas of fraud prevention, intellectual property protection and anti-money laundering.


Crowdfunding may provide an alternative to the many Irish entrepreneurs and businesses struggling to access finance. The accessibility of the internet and social media makes its reach almost universal, a very different scenario from the traditional method of raising finance which generally involves seeking larger investments from a much more limited pool of potential investors.


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.


Relief For Long Term Unemployed Starting A Business

David McArdle - Wednesday, April 02, 2014

Where an individual who has been unemployed for 12 months and has been in receipt of inter alia jobseekers benefit, jobseekers allowance or a Single Parent Child Carer Credit that individual may be entitled to claim relief from income tax on the first two years of trading capped at a value of €40,000 per annum. USC and PRSI will continue to be payable.



The new business must:

  • be set up between 25 October 2013 and 31st December 2016

  • be a new business and not a business that was bought, inherited or otherwise acquired

  • be an unincorporated business (i.e. it must not be registered as a company


The relief can apply to multiple new trades carried on by the one individual provided the limit of €40,000 is not breached.


For more advice contact FMB on 01 645 2002 or Email enquiry@fmb.ie.


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.


Importance of Succession Planning

David McArdle - Friday, March 28, 2014

One of the toughest decisions that any family business may face is whether the business will be passed on to family members or sold by the retiring generation. This decision not only threatens the continuity of the business, but can threaten the family unit itself and often leads to costly litigious disputes. 


There are many other obstacles to successful continuation. Fortunately these can be overcome by detailed succession planning on both a personal and business level.


Initially, most family businesses are straightforward in terms of ownership and management as they develop a relatively simple system of natural governance. However, as a family grows, the demographic changes and the roles of different family members become more complex. It can be difficult to establish, and in particular agree upon, a clear balance of power and to have clarity of roles within the business.


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


Sign up for our quarterly Newsletter and keep up-to-date with FMB news on business, finance and more.











  
Registered to carry on audit work and authorised to carry on investment business by Chartered Accountants Ireland.  
CONTACT US: 4 ORMOND QUAY UPPER, DUBLIN 7, Ireland • Phone: +353-1-645 2002 • Fax: +353-1-645 2049 • E-Mail: enquiry@fmb.ie
HomeAbout UsMeet Our TeamOur ServicesOur ClientsContact us