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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.

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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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.


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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.


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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.


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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.


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Mandatory Filing of iXBRL has Commenced

David McArdle - Wednesday, March 19, 2014

Since November 2012, Revenue Corporation Tax and Income Tax filers have had the option to file financial statements in iXBRL format via ROS (Revenue On-line Service). iXBRL (inline eXtensible Business Reporting Language) is a language which allows financial information to be communicated and presented in a format that may be recognised and read by both people and computers.



In line with the approach taken with e-filing on ROS, Revenue is rolling out mandatory filing of iXBRL Financial Statements for Corporation Tax Payers in phases:


Phase 1

Mandatory iXBRL Filing commenced with cases dealt with in Revenue's Large Cases Division (LCD) for Corporation Tax Returns filed on or after 1 October 2013, in respect of Accounting Periods ending on or after 31 December 2012.


Phase 2

Extended mandatory iXBRL filing to all Corporation Tax Payers other than those meeting the three criteria below. This will apply to Corporation Tax returns submitted on or after 1st October 2014, in respect of accounting periods ending on or after 31st December, 2013. The three criteria for exclusion from this phase are:

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

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

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


Each of the 3 criteria must be met - otherwise the company must file the financial statements in iXBRL format.


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Reduced Filing Requirements

David McArdle - Friday, March 14, 2014

From 1st, January, 2014, reductions in the filing and payment frequencies for VAT, PAYE/PRSI and RCT by smaller businesses are being extended as summarised below:


  • Businesses making total annual VAT payments of less than €3,000 are eligible to file VAT returns and make payments on a 6 monthly basis;

  • Businesses making total annual VAT payments of between €3,000 and €14,400 are eligible to file VAT returns and make payments on a 4 monthly basis;

  • Businesses making total annual PAYE/PRSI payments of up to €28,800 are eligible to make payments on a 3 monthly basis;

  • Businesses making total annual RCT payments of up to €28,800 are eligible to file RCT returns and make payments n a 3 monthly basis.


Reduced filing and payment requirements should result in improved cash flow as the business will have an extended period before payment of taxes are due and business’ should benefit from reduced administration costs through less frequent filing of tax returns.


Revenue will shortly write to each eligible business confirming that reduced frequency of tax returns and tax payments is applicable.


Pay and File Summary

The following is a summary of upcoming pay and file dates:


Corporate Tax

  • Filing date for Corporation Tax returns for accounting periods ending in June 2013 - 21, March, 2014
  • Balance payment of Corporation Tax for accounting periods ending in June 2013 - 21, March, 2014

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Local Property Tax Surcharge

David McArdle - Friday, March 07, 2014

Chargeable Persons for Income Tax, Corporation Tax or Capital Gains Tax who have not fulfilled their obligations with regard to Local Property Taxes (LPT) may fall foul of the LPT Surcharge of 10% of their Income Tax, Corporation Tax, or Capital Gains Tax liability, where their LPT Return is outstanding or an agreed payment arrangement is not being met at the date of filing the Income Tax, Corporation Tax, or Capital Gains Tax return. 


Given that the surcharge is 10% of the tax liability, it often can be significantly greater that the LPT liability outstanding and can create a significant cash flow issue. To that end it is imperative to comply with the LPT legislation.


Revenue had set a deadline of November last for a householder to nominate a method of paying the LPT, and had warned of penalties for those who failed to meet the deadline.


There is now a small window where interest and penalties will not apply, but on March 31st next, that window closes.


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