An excellent website on Irish Employment Law

February 26, 2010

In these difficult times, employment law can be a minefield for employers to negotiate. Similarly, employees can often find it difficult to find accurate, relevant and up-to-date information on their entitlements.  These complications can cause confusion and conflict in the workplace.

NERA, the  National Employment Rights Authority,  have set up a new website www.employmentrights.ie which helps both employers and their staff to resolve these questions.

The NERA logo

The site includes extensive guidelines on issues such as the following:

  • Holidays and Public Holiday entitlements,
  • Compassionate Leave,
  • Part-Time / Fixed Term Workers,
  • Minimum Notice,
  • National Minimum Wage,
  • Pay & Wages Records,
  • Redundancy,
  • Sick Leave,
  • Starting a New Business,
  • Terms of Employment,
  • Transfer of Undertakings ,
  • Unfair Dismissals,
  • Working Hours

In addition, the website outlines the specific arrangements and regulations applying to particular industry sectors, including

  • Agriculture
  • Hotels & Catering
  • Construction,
  • Contract Cleaning,
  • Drapery & Textiles
  • Electrical Contracting
  • Hairdressing
  • Mushroom industry
  • Printing
  • Milling
  • Retail Grocery
  • Security Industry

The website presents this information in seperate sections for employees and for employers. In general the facts are outlined clearly, simply and concisely.

This site is a fantastic resource and is essential reading both for employers in Ireland and their staff.  Well done to NERA.


The Corporation Tax exemption for Start-ups

February 24, 2010

Start-up Companies can now enjoy exemption from Corporation Tax on their first three years profits.  The relief applies to companies formed after 14 October 2008 who start trading in 2009 or 2010.

It is available to companies with an annual Corporation Tax liability below €40,000 (this would represent profits of approx. €320,000).  It does not apply to all businesses, as some types of trade are excluded. These exception include:

  • agricultural production, processing and marketing,
  • road freight transport,
  • certain export-related trades, and
  • professional services.

It is not possible to claim the exemption in relation to an activity that has previously been carried on by another entity.  For example, if a company manufactures bread and cakes, it cannot avail of the relief by setting up a new company to manufacture the cakes.

Obviously this exemption will be very useful to many start-ups. That said it is not without its flaws.

For a start, it refers only to companies. It does not apply to sole traders or partnerships.  Many new businesses trade as sole traders or partnerships in the initial years, mainly for reasons of flexlibility, simplicity and minimising costs.

In addition,  although companies will be exempt from Corporation Tax, they will still face sizeable tax bills if and when the directors extract these funds from the company for their own use.

This is a key issue. Very few small company directors can afford to leave significant sums of retained profits sitting indefinitely in a company bank account.  It generally makes sense for them to withdraw reasonable levels of ongoing salary for personal use, and have the company deduct PAYE/PRSI in accordance with Revenue rules.

For these reasons, I generally find that, for most small  start-ups, Corporation tax is largely a non-issue.  I  would guess that only a minuscule percentage of start-ups pay more than a few thousand Euro in Corporation Tax in any given year  – unless they are highly successful or badly advised, or both.  In comparison, the PAYE/PRSI costs attaching to directors salary payments will normally greatly outweigh the Corporation Tax bills.

That said, the Corporation Tax exemption will be very valuable incentive for some companies. As such it is to be warmly welcomed.

Important Update 27/2/14 – See this blog post for subsequent changes to how this exemption works.


Time to renew your EHIC Card?

February 22, 2010

I have just noticed that my EHIC Card will expire shortly. You should check if your own Card is also due for renewal.

The European Health Insurance Card or EHIC allows an EU-resident individual to access public health care services when travelling abroad in Europe. The card is issued and administered by the HSE.

You can use it to access treatment if you become ill or have an accident while abroad. It is valid for temporary stays within the EU and EEA countries and in Switzerland.

The EHIC Card was introduced in June 2004, and replaced the old paper E111 forms.

I received my own EHIC Card shortly after it was launched, and I now see that it is due to expire this summer.  At this stage of year it would be a good idea for you to check the EHIC Cards in your own household to see if they are shortly due for renewal.

If your EHIC Card is due to expire within the next 3 months, You can renew it online. To do so, you need your existing EHIC Card Number.


Tax Exempt Charities and Sports Clubs

February 18, 2010

The Revenue have published updated lists of charities and sports clubs who enjoy tax exemption for donations received.  The schemes are obviously  very popular, as a mind-boggling total of 1,820 charities and 2,052 sports clubs are included on the current lists.

The lists of eligible charities and tax-exempt sports clubs are both downloadable from the Revenue website.

Tax relief is available on donations of €250 or more in a given tax year to an eligible charity.  The tax relief is granted at the donor’s marginal rate of tax

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P35 and RCT35 Deadlines Today

February 15, 2010

Today, 15 February, is the deadline for employers to file their annual P35 return for 2009 with Revenue.

If you file your P35 return online and pay your P35 liability online through ROS, you can avail of an extended deadline of 23 February.

Today is also the deadline for principal contractors to file their 2009 annual RCT35 subcontractors return with Revenue.  A similar extension to 23 February applies also to the RCT35 return. This applies only where both the return and the payment of the RCT liability are made through ROS.

Roofer

Subcontractors Tax (officially known as Relevant Contracts Tax or RCT) can be a complex tax to administer.  Errors and omissions in RCT returns can prove very expensive, due to the substantial penalties for non-compliance.

Back in 2007 the Revenue published a statement outlining the limited circumstances where they do not impose full penalties for breaches of RCT regulations.  Some of these concessions are subject to the matter being notified to Revenue and rectified within one month of the RCT35 filing deadline.

If you are completing an RCT35 return, or have recently done so, you should review carefully all issues in relation to your RCT compliance for 2009, in order that any outstanding matters can be resolved with Revenue within the one month’s grace period.

As always in relation to complex tax matters, I recommend that you seek professional assistance where necessary.


Revenue chasing PAYE landlords

February 10, 2010

The Sunday Independent reported last weekend that the Revenue is monitoring PAYE workers with rental income. If you have rental income, you are obliged to file a self-assessment tax return each year, and pay any tax outstanding.

The paper quoted a Revenue spokeswoman as saying “All information available to and information received by Revenue in relation to rental income is acted upon on an on-going basis. Projects, specifically aimed at investigating landlords in the private rented sector, are regularly undertaken in all regions to monitor this sector. Arising out of these projects, some cases are referred for further investigation and audit.”

Landlords under scrutiny

Ironically, this news comes at a time when many amateur landlords with 1 or 2 investment properties are making losses rather than profits on their properties. Rents have fallen and vacancy rates have risen significantly in recent years, and some owners are struggling to meet their mortgage commitments each month.

Even if they are incurring losses, and have no current tax liability, the onus remains on each individual landlord to file an annual tax return with Revenue.

Any property owner who has failed to file returns for past years should bring their affairs up to date as soon as possible. This is especially important if there is a possibility of tax arrears arising. If Revenue impose interest and penalty charges on top of tax arrears, the total bill could amount to a tidy sum. Interest continues to accumulate each month until the liability is paid

Unfortunately it is not possible to offset subsequent rental losses against previous rental profits.

You can find a guide to preparing your Rental Income Tax Return, on my website.

Here is the Sunday Independent article.


No need for Consumers to suffer new VAT hit

February 8, 2010

The Government should act now to ensure that the imposition of VAT on public service charges does not cost consumers a cent.

Last week’s Finance Bill confirmed that council and public body fees for services such as waste collection, parking and road tolls will soon be subject to VAT of 13.5% or 21%.

Refuse charges to rise?

This follows a recent European Court of Justice (ECJ) ruling, which found that the VAT exemption for Irish local authorities gave them an unfair advantage over private sector operators, who provide these services to the public on a commercial basis. The ECJ ruled that this VAT exemption must be removed in order to eliminate this unfair advanage. To this extent, the Government’s hands are tied.

That said, there is a very simple measure that the Government can take in order to protect consumers and households from any additional VAT cost arising from this move.

It should instruct all councils and public bodies to absorb the VAT charge within their existing revenue from these services. It should then calculate the net VAT cost for each council or public body, and refund this cost to them, from the proceeds of the new VAT charge. If these calculations are done correctly, it will not cost the Exchequer a cent.

On the other hand if the Government attempts to use this change as an excuse to extract more tax revenue from consumers, I believe it is doomed to fail.

Take the example of local council operating a refuse collection service. Normally a collection truck will visit each estate once weekly. If charges rise by 13.5%, at least some consumers will switch to private operators instead of paying the higher fee. To maintain their service, the collection truck will still have to visit each estate each week, but now collecting refuse (and revenue) from a dwindling base of customers. Its average cost per collection will increase and its revenue will decrease. Not a good result for the council.

Similarly, look at the M50 toll road, which is managed by the NRA on behalf of the State. If toll rates go up, less cars will use the road. As volumes decrease, so does revenue. Yet the NRA still must maintain the road to the same standard.

In a recession, the key to maximising toll revenue is not to jack up prices (a surefire way to lose revenue) but to increase the volumes of cars on the road. This is why the private-sector operators of the M4 Enfield toll plaza decided recently not to implement a price increase for 2010, even though they are legally entitled to increase tolls annually.

If the Government plays stupid on this one, demand answers from your T.D.