For many SME’s and family businesses, dealing with banks has become a real challenge in 2011. As is common knowledge banks are under massive pressure trying to deal with the fallout from years of excess. Simply put they are short of funds, so have a real difficulty themselves. There are dealing with massive property related loan defaults and now trying to balance their books.
Beware – Revenue Commissioners are coming your way !
Over 90% of revenue audits are selected for a reason, meaning the chances of a random Revenue Audit is small. However recently Revenue are getting a lot smarter in their approach as we highlight with examples below;
New Relevant Contracts Tax (RCT) system to be introduced in 2012
Work is well advanced on developing a new system, which is expected to be introduced on 1 January 2012. It will be subject to a commencement order to be signed by the Minister for Finance.
These changes will affect all principal contractors and subcontractors performing relevant operations in the construction, forestry and meat processing sectors.
If you have ceased as a principal contractor you should contact your local Revenue district immediately to cancel your registration. If however, you are continuing to operate as a subcontractor, please advise your Revenue district that you are applying for cancellation as a principal only.
Launch of €5 million support programme by InterTradeIreland for companies working on all Ireland collaborative innovation projects
Level of investment provides vital financial support for SMEs to develop and commercialise innovative products and services
Collaboration is key to commercialising new ideas, according to Minister Sean Sherlock speaking at the recent launch of InterTradeIreland’s Innova Programme which offers up to €5 million to help companies benefit from all-island collaborative approaches to R&D. InterTradeIreland is seeking applicants for the 2011/2012 Innova programme which will support 18 collaborative projects with a funding package of up to €300,000 each.
“In the landmark decision delivered by Mr Justice Kevin Feeney on July 7th, the High Court ruled that the ERO system is unconstitutional. The judgment is far reaching and has ramifications not just for employees in the catering sector and other sectors governed by 13 EROs currently in existence, but the wider landscape of Irish industrial relations.
This decision clearly has ramifications for other sectors in the economy, including the contract cleaning, agriculture and hotel sectors, which are governed by the ERO system. The judgment will also impact on the constitutional challenge to the ERO system for agricultural workers which was launched by the owners of Coolmore Stud and Ballydoyle training facility in May.
The new reduced VAT rate of 9% for certain goods and services came into effect on 1st July and will remain in force until 31st December 2013. The reduction in the VAT rate mainly impacts on tourism and leisure related activities.
Goods and Services at the 9% rate:
- the supply of food and drink (excluding alcohol and soft drinks) in the course of catering or by means of a vending machine
- hot take-away food and hot drinks
- hotel lettings, including guesthouses, caravan parks, camping sites etc
- admissions to cinemas, theatres, certain musical performances, museums, art gallery exhibitions
- amusement services of the kind normally supplied in fairgrounds or amusement park services
- the provision of facilities for taking part in sporting activities by a person other than a non-profit making organisation
- printed matter e.g. newspapers, brochures, leaflets, programmes, maps, catalogues, printed music (excluding books)
- hairdressing services (beauty treatments remain liable at the 13.5% rate).
As experienced business and taxation advisors we see firsthand the practical difficulties in successfully transferring the family business to the next generation. Much of it comes from lack of communication and planning. Research shows that only 25% of family businesses successfully pass onto the next generations. However, if succession is looked on as an opportunity for capitalising on the goodwill the business founder has built up over the years things can work out very nicely if the correct steps are taken.
Is there a way to protect all capital allowances on your section 23 property for future use? Maybe, so
It is estimated that over 33,000 properties in Ireland remain eligible for Section 23 relief. Figures indicate that the remaining allowances on these schemes is costing the taxpayer €400m per annum. In light of the current financial woes, the Government put forward proposals in Budget 2011 to restrict and eliminate property allowances and Section 23 relief.
The changes can be summaries as follows:
Prior to Budget 2011
– Investors could use section 23 to shelter all rental income.
Post Budget 2011
– The following provisions are deferred subject to a Commencement Order whereby the Minister appoints the relevant date on which the provisions come into effect after the economic impact assessment is completed.
- Investors can only offset capital allowances against rental income from their Section 23 property.
- Any unused relief at the end of a 10-year period will be lost.
- If the property is sold within the 10-year period, the seller will be liable to a clawback of relief claimed, and the new buyer will not get any relief.
- Proposed guillotining of all property reliefs and allowances in 2014
There has being intense media discussion and speculation on the consequences of the Section 23 relief changes with some commentators stating the changes will leave many property investors unable to pay their tax bills and make their mortgage payments and ultimately will see some lose their properties or go bankrupt.
Not quite according to Patrick O’Rourke, Tax Partner at O’KellySutton.
There is nothing in Budget 2011 that affects correctly claimed Section 23 reliefs. Even if you have incorrectly claimed your Section 23 relief in earlier tax returns, there is still an opportunity to correct
it. However, you must act quickly as tax legislation is quickly evolving in this area.
There is a lack of understanding with regard to the most beneficial means for claiming section 23 allowances among taxpayers and unfortunately among some of their advisors. Where errors have been made in the past it is critical that any corrections are carried out by advisors who really understand the area.
O’KellySutton report that since the announcement of Budget 2011 there has been a substantial increase in enquiries from worried taxpayers that fear they will lose their unused Section 23 relief. In the majority of cases, O’KellySutton were able to correct the taxpayers tax computations and returns and protect all the unused Section 23 allowances for future use. Patrick O’Rourke, O’KellySutton, Kildare, firstname.lastname@example.org