By Helen Dyulgerov ACA AITI
Accounting & Bookkeeping Bureau
13th Feb 2018
Whether you are starting out in business or running a successful SME staying on-top of tax responsibilities is increasingly important. Nearly 80% of taxes in Ireland is collected for Revenue by Irish businesses and the role of Revenue authorities is largely counting and checking. In 2017 the tax collected was a record high due partially to Revenue enquiries, audits or investigations of taxpayers which yielded €492M. Revenue audits can be extremely costly to businesses as they disrupt normal business activities and can take months to resolve. Any business that requires a public licence could be unable to produce a tax clearance certificate to secure new contracts or retain existing work. In 2017 there were 24 tax and duty offences resulting in criminal convictions and 301 individuals were published on the List of Tax Defaulters. The list is published by the Revenue Commissioner and details are made available to the public, this could be detrimental to a business.
For these reasons, it is important to stay on the right side of Ireland’s tax requirements. Now that the tax clearance verification process has moved online it is also important to establish a tax compliance record throughout the year and not just at filing time. The following tips will assist you in keeping Revenue at bay.
Make Payments Before the Deadlines
This may seem obvious but making late payments can put you on alert at the Collector Generals’ office. The interest on unpaid and underpaid accounts is 8% per annum and 10% if VAT or PAYE. Any interest payments made are not tax deductible on your income tax or corporation tax liability for the year.
Make Payroll a Priority
The exchequer is heavily reliant on PAYE, employer PRSI brought in over €13B in 2017. Penalties are very heavy if there are discrepancies in your calculations and due to a change in the Finance Act 2017, it is now more costly to correct PAYE errors due to higher settlement amounts.
Link your Payroll
Most businesses use payroll software or outsource their payroll needs. Starting in 2019 nearly all businesses will be required to use a payroll system capable of connecting directly to Revenue’s system providing real-time information.
If a new business’s income is under a certain threshold it is not required to register for VAT. The business is obligated to register for VAT if the turnover exceeds €37,500 for services or €75,000 for goods. VAT registered companies must charge VAT on their goods and services. VAT returns are calculated based on turnover and as a business grows the taxable amount grows, this could mean large interest and penalties.
Accounting software is generally very good at managing VAT. Issues can arise when the wrong VAT rate is applied this should be monitored especially carefully if operating in the food sector where there are myriad Vat rates apply. Other issues may arise from the buying or selling of second-hand equipment or when buying/leasing property is involved.
Capital Gains Tax (CGT)
CGT is filed as part of the individual tax return, but this can be tricky because it is broken down into two pay periods:
- Tax on gains on the first 11 months is paid on 15 December
- Tax on gains in December is paid on 31 January
Directors have certain responsibilities under Irish tax law and may be regarded as self-employed. Directors who own shares of 15% or more are subjected to the same income tax filings as self-employed people. A personal tax return must be filed in October of each year even when no additional liability is due after PAYE. If a director doesn’t file Revenue can increase their tax liability up to 10%.
This may seem trivial, but an inspector of taxes may not see it that way. Normally there is no issue with reimbursing staff for expenses such as mileage or coffee runs but you must keep clear records including receipts, repayment amounts and the reason. When issues occur, it is often related to how the company reimburses rather than the amount that is reimbursed.
There is heavy tax law surrounding punitive taxes on funds transferred between the company and its shareholders. This is meant to prevent people from directing their earnings into companies (paying 12.5% tax) instead of accounting for them individually (paying tax, USC and PRSI). Be cautious when lending money to or borrowing from the company as private use of company assets can lead to unexpected taxes.
Industry Specific Rules
Certain businesses should be aware of certain rules applying to their industry. Building and meat processing businesses are subjected to Relevant Contracts Tax (RCT) and professional service providers to the Professional Services Withholding tax (PSWT). RCT and PSWT are tools for enforcing compliance in industries that can be difficult to regulate. Professionals in these industries will likely have experience falling on the wrong side of the rules which may require tax to be deducted from gross earnings.
Navigating the tax system can be tricky for businesses in Ireland, please review the Irish Tax Filing Deadlines to stay on top of the relevant deadlines. If you have any questions about the content covered in this article or if you would like more information on accounting or bookkeeping services, please contact the experts at Accounting & Bookkeeping Bureau on +353 1 6874523 or email email@example.com.