Position Offered

ANDREWS Tax Consulting – tax trainee position

Andrews Tax Consulting provides practice management and business strategy advice to businesses in manufacturing and export, life science and technology, software development, aviation and agri-food industries.

The firm also provides tax consultancy advice to accountancy and law firms throughout Ireland.

The position

We are looking to recruit a tax trainee to work in our Dublin office in Dublin 3 (Clontarf) office.

The position will involve working mainly on projects and consultancy assignments and will offer a wide range of tax experience and interaction with a diverse client base.

Minimum experience required

Because of the project nature of the work candidates must hold a university Degree and be interested in project work and problem solving.

Other attributes sought in a candidate for this role include:

• Good communication skills
• Good interpersonal skills
• Self motivated with good initiative
• Experience in excel, word, outlook
• Some relevant practice experience is an advantage but not essential

How to apply

Please send a typed covering letter (no more than one page) together with a CV and copy of Degree to:

By email: info@andrewstax.ie

By post: Michael Gilmartin, Andrews Tax Consulting, 12 Merrion Square, Dublin 2

The closing date for applications is 31 January 2012

Critical date for claiming BES relief

Persons involved with BES companies will be interested to know that the new Employment Investment Incentive  or EII (the scheme that will replace BES relief) has been approved by the EU.

The EII scheme differs to BES relief in a number of respects.  For investors, the key difference is that the initial relief is limited to 30% of the amount invested (rather than 41% under existing BES rules).  The remaining 11% is given at the end of 3 years provided that all of the various conditions for entitlement to relief have been satisfied throughout that period.

Because of this overlap there was some doubt about what tax relief would operate in respect of investments made in the period from 25 November until the end of this year.  Revenue have confirmed that both the BES and EII schemes will run concurrently throughout the period from 25 November 2011 to 31 December 2011.  Where shares are issued during this period, the qualifying company that issued the shares can elect in writing to the Revenue Commissioners, on or before 31 December 2011, to have the investment treated as a BES investment.

To ensure maximum upfront tax relief for investors, it is critical that the target company make an election before year end to qualify for BES relief.

For more information on this contact Derek Andrews @ 01 6316075 or derek@andrewstax.ie

Tax trap to avoid when transferring property to children to avoid creditors

Here's a salutory lesson for those contemplating the transfer of a family home to children to take advantage of record fall in house prices and the current 1% rate of stamp duty on such transfers.  A client of mine - who didn't take tax advice from us - did this and triggered a tax liability of €73,500.  What happened? you might ask.

The steps in transferring a family home to children are quite straightforward.   In this case, my client and his wife gifted the family home worth c€1.2m to their two children.  On the advice of their lawyer a right of residence for the parents was included in the contract.  This measure is designed to protect the parents from one or both children deciding to change the locks.  It also had a tax benefit for the children.

Let's examine the tax treatment of the transaction - as understood by the client.

1. The disposal of the property by the parents to their children triggers tax (capital gains tax).  That said, no liability arises as the property has been the principal private residence (ie family home) throughout the period of ownership.  This is correct.
2. The receipt of a half-share of the family home by each child is a taxable gift and this must be valued for tax purposes to determine what, if any, tax arises for the children.  As the parents retain a right of residence this must be taken into account in valuing this gift.  This is also correct.
3. The value of the gift taken by each child is calculated as follows.  A) Take the value of the property, ie €1.2m.  B) Deduct from the value of the property the value of the "right of residence".  This is calculated by a formula in tax law and is not important.  In this case the right of residence was valued at €660k therefore the value of the gift taken is €540k (i.e. €1.2m less €660k.) C) Divide this figure by 2 - as there are two children - to calculate the value of the gift taken by each child, ie €270k.  If this amounts exceeds €333k (the class threshold for tax-free gifts by a parent to a child) the excess is subject to gift tax at 25%.  Clearly the value of the benefit taken by each child does not exceed €333k therefore no such liability arises.  This is were my client is wrong.

As structured, a tax liability arises for the children of €73,500.  Let's look at where this liability comes from.

There are no rules in gift/inheritance tax law to determine the value on a right of residence.  It is generally understood that Revenue will, by concession, value such right at 10% of the market value of the property for each parent (I call this the "10% rule").  The value of the gift taken by both children is actually €960k (i.e. €1.2m less 20% (for right of residence)).  This is signficantly higher than the amount expected by my client.  The value of the taxable benefit taken by the children is €295k (i.e. €960 less €666k (the tax-free thresholds of €333k for each child)) which at 25% triggers gift tax of €73,500 (or €36k each).

What is the solution?

Fortunately, there are two possible solutions to this problem.  We made a slight alteration to the wording of the contract to enable the client to benefit from a Revenue concession so that the interest retained by him and his wife is valued at more than 10%. 

We redrafted the relevant legal papwork to ensure that no liabiltiy to gift tax arises for the children.  We saved the client €73,500 in gift tax, put his mind at ease and avoided a potential legal dispute between the parties.

The lesson when Estate Planning or implementing Asset Protection is to take tax advice and to ensure that your tax advisor is involved in the drafting and reviewing of all legal paperwork.  As this case shows, the omission of just one word can have significant consequences.

For more information on Estate Planning contact Derek Andrews at Andrews Tax Consulting by email derek@andrewstax.ie or phone + 353 (0)1 631 6075.

List of software development activities that qualify for R&D Tax credit relief

Although many IT companies carry out R&D, little information is available to help these companies identify qualifying R&D activities for tax purposes.  How does a software developer distinguish between activities that qualify for relief and those that don’t? And, when do R&D activities cease to continue to qualify?

Through a simple google search of the term R&D companies will be able to establish that the key criteria for accessing R&D tax credit relief is that work “should be seeking to achieve a technological advance or by overcoming technological uncertainty”. What does this mean in practice?

When reviewing the activities of a qualifying business we start by separating software projects into three categories;

• those likely to contain R&D,
• those unlikely to contain R&D, and
• those that could contain R&D.

We do this based on information made available by the Irish Revenue authorities and also based on guidance from authorities in the UK, the US, Canada and the OECD.  For the benefit of software developers we have categorised typical software development activities into the above three categories.  You can access this list by downloading our briefing paper using the link below

 

http://www.andrewstax.ie/ATC_SDRD_LE_110608.pdf

 

Please note this is a limited extract.  For the full version contact Derek Andrews or Michael Gilmartin at Andrews Tax Consulting.

Email : info@andrewstax.ie
Skype : AndrewsTaxConsulting
Phone : +353 1 544 4434

Do you qualify for the new 9% rate of VAT?

Last week the Minister for Finance announced a second reduced VAT rate of 9% will be introduced for certain goods and services (mainly related to tourism) from 1 July to 31 December 2013.

The 9% rate applies to restaurant and catering services; hotel and holiday accommodation; admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions; fairgrounds or amusement park services; the use of sporting facilities; hairdressing services; printed matter such as brochures, maps, programmes, leaflets, catalogues and newspapers.

Full details of goods and services which qualify for the new 9% rate include:

• e:catering and restaurant supplies, including vending machines and take-away food (excluding alcohol and soft drinks sold as part of the meal)
• hotel lettings, including guesthouses, caravan parks, camping sites etc
• cinemas, theatres, certain musical performances, museums, art gallery exhibitions
• fairgrounds or amusement park services
• facilities for taking part in sporting activities including green fees charged for golf and subscriptions charged by non-member-owned golf clubs
• printed matter e.g. newspapers, brochures, leaflets, programmes, maps, catalogues, printed music (excluding books)
• hairdressing services.

Supplies of goods and services that will remain at the higher rate, 13.5%, include:

• bakery products, excluding bread
• residential property
• building services related to residential property, including installation
• routine cleaning of residential property
• minor repairs of bicycles, shoes or leather goods, clothing or household linen
• non-oral contraceptive products
• goods used for the agricultural production of bio-fuel
• agricultural services
• certain nursery or garden centre stock
• animal insemination services and livestock semen
• children's car safety seats
• waste acceptance and disposal services
• greyhound feeding stuff and live poultry and live ostriches
• fuel for power and heating, coal, peat, timber, electricity, gas (other than auto LPG), heating oil
• non-residential property
• building services related to non-residential property, including installation
• routine cleaning of non-residential property concrete
• tour guide services
• short-term hiring of cars, boats, caravans, mobile homes, tents or trailer tents
• repair and maintenance of cars, other vehicles, vessels and aircraft
• health studio services
• jockey services
• photographic services including photographic prints
• car driving instruction
• veterinary services
• certain works of art, antiques and literary manuscripts
• List of frequently asked questions from businesses relating to a change in VAT rate.

What impact will the rate change have on traders?

In general, goods and services supplied before 1 July 2011 are liable to VAT at the rate in force at the time of supply, namely 13.5%.  However, where goods and services are supplied in June 2011, by a trader who is obliged to issue a VAT invoice, and that trader issues the invoice after 30 June 2011, the rate in force in July applies, namely 9%.

A trader supplying goods and services to private individuals should always apply the VAT rate in force at the time of supply.

How will credit notes be treated?

Any VAT credit note or debit note relating to a supply of goods or services, which contains a VAT adjustment, should show VAT at the rate in force at the time the original invoice was issued.  For example, if goods are supplied in June 2011 and a credit note is issued in July 2011 (due perhaps to an adjustment in the price of the goods or services), the rate of VAT on that credit note is 13.5%. This is because the goods or services were supplied when the rate of VAT was 13.5%.


How are advance payments received before 1 July 2011 treated?

In general, any advance payment, including a deposit, received by a trader before 1 July 2011 is subject to VAT at 13.5%. However, where the trader is obliged to issue a VAT invoice for that payment, and the invoice is issued after 30 June 2011, the new rate applies, namely 9%.


What is the effect of the change of VAT rate on contracts with fixed interval payments?

When payments for continuous supplies, due at fixed intervals over an agreed time-frame, are invoiced and due before 1 July 2011, they should be treated as taxable at the 13.5% rate; where invoiced and due after 30 June 2011, they should be treated as taxable at the 9% rate. This applies even if the interval over which the supplies take place spans the time both before and after I July 2011.

What is the position with contracts existing on 1 July 2011?

Where a contract to supply goods or services is entered into before 1 July 2011, and the contract is not completed until after that date, the agreed VAT inclusive price may be subject to an appropriate adjustment due to the change in the VAT rate, unless there is agreement to the contrary between the contracting parties.

Stuck with patents?

Following the abolition of Ireland's patent income exemption (November 2010), a number of inventors are restructuring how they do business.  In many cases, patents are being transferred out of personal ownership into a company to avoid the payment of royalties to individuals resulting in tax, PRSI and universal social charge at 53%.

However, it is not widely known that the sale of a patent is treated for tax purposes as an income tax event not the disposal of an asset subject to capital gains tax.  Consequently, any consideration paid by a company for the acquisition of a patent from an individual may trigger significant tax exposure for the individual.  This has knock on consequences for advisors unfamiliar with IP tax law who may unwittingly expose themselves having given bad tax advice.

Similar issues exist for companies transferring patents within a group although these are often easily solved.

For more information on how this could affect you contact Derek Andrews at Andrews Tax Consulting: direct line : 01-544 4434 mobile : 087 9000133 email : derek@andrewstax.ie

Note to Irish SMEs with UK assets on benefits of UK tax planning - even if it doesn't work!

The Inland Revenue used to only worry about legal tax avoidance schemes being just too good in terms of doing what they said on the tin - not paying tax.  But it seems that the Exchequer has developed a concern for taxpayers being sold poor schemes by accountants, and then having to pay the tax anyway.  Buried away in the documentation for the UK Budget last month is this statement: 'The Government is aware of continued marketing and use of avoidance schemes which are believed not to deliver the tax advantages advertised.'


On close inspection it seems that rather than worrying about the flakiness of tax schemes, the UK Treasury is concerned about the hidden benefit of using them regardless of whether they are any good or not.  A spokeswoman said: 'some taxpayers are prepared to enter into such schemes to exploit a cashflow advantage of retaining tax while continuing to dispute a liability, in some cases even where the courts have ruled against similar transactions.'


Derek Andrews, tax partner at Andrews Tax Consulting said: 'Settling a dispute can take two or three years, during which time interest may be accruing to Revenue & Customs on the tax owed, but only at a low rate. That means the money involved can be used more profitably elsewhere. It is a cheap form of finance.'


He added that the proposed remedy - an official list of the dud schemes and the penalties for using them - was 'better than the alternative which would be to jack up the interest rate the Revenue charges as happens in Ireland'.