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Cost Management in Challenging Times : The Tax Aspects. 26 March 2009 The Tower Hotel, Waterford. Waterford City Enterprise Board. Overview: < > Avoid the Negative - Prevent Arrears => Sanctions - Don’t pay unnecessary tax costs < > Embrace the Positive - PowerPoint PPT Presentation
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© M.K.Brazil
Cost Management in Challenging Times:
The Tax Aspects
Waterford City Enterprise Board
26 March 2009
The Tower Hotel, Waterford
© M.K.Brazil
I n t e r e s t P e n a l t i e sA g g r e s s i v e
R e v e n u e
P u n i t i v e C o m p l e xA d m i n
B u r d e n
I r i s h T a x S y s t e m
A n o m o l i e s I n c e n t i v e s R e l i e f s
R a i s e C a s hM a n a g e C a s h -
f l o w
R e d u c e
C o s t s
© M.K.Brazil
Overview:
<> Avoid the Negative
- Prevent Arrears => Sanctions
- Don’t pay unnecessary tax costs
<> Embrace the Positive
- Avail of Planning Opportunities
- Maximum Tax Efficiency
<> Questions & Answers
© M.K.Brazil
Prevention
© M.K.Brazil
Avoid Tax Problems:
• Back to Basics– Keep Books & Records in Order
– Financial Information = Resource (not a Cost)
• Revenue not a Bank– Penalties 3% -> 100%
– Annualised Interest 10% -> 12%
– Statutory Fines - per offence
– Other Consequences, e.g. no C2, no TCC, etc
• Avail of advice and help
© M.K.Brazil
Costs
&
Cash-Flow
© M.K.Brazil
Costs & Cash-flow:
• VAT– If Possible, Switch to Cash Receipts Basis
– If Not - Payment Requests v Invoices
– Monitor DD - Falling Sales / Permanent Refunds, etc
– Switch back to Bi-Monthly if Refunds
– W/O Bad Debts and seek Refund
– Forfeited Deposits - Refund - Prior Years?
– Monitor Supplier’s Invoices - Multiple v Composite
– If Property Involved (e.g. lease) => Seek Advice
© M.K.Brazil
Costs & Cash-flow continued…
• Payroll / Staff
– Flexible Remuneration Packages
• Job insecurity, Childcare Costs, etc
=> part-time, reduced hours, work from home, etc
• 3-day week => DSW for remaining days?
– Exploit Anomalies in Payroll System e.g. < €352 no Income Levy, no PRSI, < €500pw = no 2% Levies, etc etc, for example switch 10 Employees from €505pw to €495pw
=> No net loss for Employees,
=> Employer Saves €5,600+
© M.K.Brazil
Costs & Cash-flow continued… Payroll / Staff cont...
– Tax Efficient Remuneration Packages
• Medical Insurance
• Share Schemes• Travel Passes / Car Parking
• Implement Expense Scheme
• Training Courses / Exams
• Phone / Lap-top
• Pool Vehicles v BIK (Car v Van)
• Exploit ‘Small BIK Exemption’ - €250
• New BIK-Free Bike Scheme
© M.K.Brazil
Costs & Cash-flow continued… Payroll / Staff cont...
– Revenue Job Assist Scheme• New Employees only
• May change in April Budget
– Switch Bonuses from Turnover to Receipts
– Temporary lay-off rather than Redundancy
– If Redundancies - Get Advice and Do It Right
– Employees can also provide funding - see below
© M.K.Brazil
Costs & Cash-flow continued...
• Owners - Directors
– Director’s Loan v Repayment of Loan
– Family Members
• Must be Bona Fide
• Use Tax Credits and/or SRCOP
• Termination Payments
– Mileage & Subsistence
– Pension Position (payment without a plan)
© M.K.Brazil
Costs & Cash-flow continued...
• Various Other Considerations
– Complete Structural Review• Sole-trade v Company etc
– Adjusting Accounting Year End
– Rental Income• Sub-letting of Office Space
• Pre-Letting v Between Letting
• VAT implications
– Green Tax Incentives• e.g. Electric Car = Lower BIK = Increased Allowances, etc
© M.K.Brazil
Cash Injection /
Raising Funds
© M.K.Brazil
Cash Injection:
• Traditional– BES - Seed Capital - Grants etc
• Owner - Directors– Loan Interest Deduction
• Private Investors– Share Option Agreements - Complicated but possible
– Private Loan Agreements - Standard-Rated Income etc
– Exempt Patent Dividends
© M.K.Brazil
Cash Injection cont...
• Employees
– S.479 - Once Off Investment• €6,350 per employee
• Ord shares for minimum of 3 years
– Loan Interest Deduction• Money to buy shares or to loan to employer company
– Share Schemes - e.g. PSS in lieu of Bonus
– BES - if Employer qualifies
© M.K.Brazil
Tax Planning
© M.K.Brazil
Tax Planning:
• Restructuring– Expansion – Mergers – Rationalisation, etc
– Tax Planning - Group – Trade Sale - etc
• Retirement Planning– Fund Retirement
– Facilitate Hand-over
• Succession Planning– Family Company - Investment Assets – House
– On-going financial assistance
© M.K.Brazil
Tax Planning cont…:
• Event / Transaction Planning
– Purchase / Sale of Property or Assets
– Purchase / Sale of Business – Whole or Part
– Inheritance - Gift
– MBO, Bonuses, Retirement, Termination etc
• Routine / On-going Planning– Rental Income – S.23, Loan Interest, etc
– Property Development
– BES, Remuneration Packages etc
© M.K.Brazil
Miscellaneous
&
Summary
© M.K.Brazil
Sundry Other Considerations:
• New Company Exemption– Restrictive Conditions, but...
• R & D Credit – Complex but very valuable
• Losses– Consider how best utilised
– Cash Flow v Tax Efficiency
– Patents - Significant Tax Breaks
© M.K.Brazil
Sundry Considerations cont...
• Class S v Class A– Take part-time role = PAYE Credit = Stamps
• Rental Losses– Can they be utilised, e.g. Storage
• Pre-Budget Planning– Income & Capital Taxes to Increase
– Trigger Tax Charge pre-budget?
– e.g. Director’s Bonus, CCS Dividends, Retirement Plan, Gifts to Children, Extracting Property, Liquidation
© M.K.Brazil
SUMMARY:
• Irish Tax system can help businesses– Raise Funds, Cut Costs, etc
• Watch Budget Changes
• Tax Planning requires Time and Information– Tax is only part of the picture but often a critical part
• Get Advice Regularly
© M.K.Brazil
O’Connell Court, 64 O’Connell Street, Waterford.
Tel:051 840800 / Fax: 051 - 874504
E-mail:[email protected]
Thank you for your attention.
QUESTIONS?