Revenue’s Two Fingers to Road Safety Puts Lives At Risk

June 29, 2015

Today’s changes to Revenue subsistence expenses rules fly in the face of road safety messages – and common sense.

Revenue have today tightened the circumstances in which an employee or company director can claim tax-free reimbursement of subsistence costs incurred in the course of their work.

From Wednesday, 1 July, an employee or director can only claim an overnight allowance when they spend the overnight at least 100km away from both their home, and their normal place of work.

In addition, the standard a day allowance (which can be claimed for absences of 5 hours or more) can only be claimed when the employee is more than 8km away from both their home and their normal place of work.

Revenue's Two Fingers to Road Safety Puts Lives At Risk 1

The first change has rather peculiar, and worrying implications.

It means, for example, that an employee or director living and working in Portlaoise cannot claim an overnight allowance for a hotel stay at Dublin Airport, (100.88km away, according to AA Route Planner) even if they have a 7am flight!

According to Route Planner, it takes 1 hour 11 minutes to drive from Portlaoise to Dublin Airport – and Aer Lingus are now advising their customers to check-in at least 2.5 hours before Dublin departures.

So Revenue are obviously expecting employees and directors to drive from the early hours of the morning rather than incur expenses, which then can’t be reimbursed tax-free by their employer. And if they are reimbursed, they will be taxed on the privilege!

And this means that the poor worker in Portlaoise could be getting into her car as early as 3.30am, in order to have enough time to drive the journey, park her car, catch her shuttle bus and check in at the airport before finally sitting down for a well-earned coffee. All this before her flight, onward travel, and a day’s work at her destination.

The situation is actually worse still, for workers who work within, but live outside, the 100km range of their temporary work location.

It’s not inconceivable that many workers could be driving, say, 140km to a temporary work location, and needing to set off at an unearthly hour to beat the morning traffic rush.

Meanwhile the Road Safety Authority remind us that “one in every five crashes on Irish roads could be caused by driver fatigue”

This crazy move puts lives at risk and should be reversed.

The Revenue announcement is in this eBrief.  The updated Revenue Subsistence expense rules are here.

At Last! – Revenue Update Subsistence Expenses Rates

June 12, 2015

Revenue have today announced a limited and long-overdue increase in the maximum rates of subsistence expenses that  employees and directors can claim tax-free for time spent working away from their normal base.

From 1 July 2015, the following daily rates will apply:

Day Allowances From 1 July 2015  Up to 30 June 2015
10 hours+ €33.61 €33.61
 5-10 hours €14.01 €13.71

And the new overnight rates are as follows:

Overnight Allowances From 1 July 2015  Up to 30 June 2015
Normal Rate €125.00 €107.69-108.99
Reduced Rate €112.50 €92.11-€100.48
Detention Rate €62.50 €53.87-€54.48

This is the first increase in allowable Subsistence rates since the late Finance Minister Brian Lenihan slashed them by 25% during the 2009 financial crisis.

Subsistence Claims

It is telling that the maximum day rate of €33.61 (which remains unchanged since 2009, for some reason) is 13% lower than the corresponding rate of €38.57 that applied 10 years ago in 2005.

Can the shortfall be explained by lower food and other costs? I don’t think so…

There is no mention by Revenue of any changes to the allowable rates for motor expenses. Did the recent falls in global oil prices allow the government off the hook here?

An increase in the allowable motor expenses rates is long overdue. Like the subsistence rates, motor expense rates were dramatically cut by 25% in March 2009, and haven’t been restored since.

At that time, the price of a litre of motor diesel was below €1. Today, despite recent falls, it is still over 30% higher.

The updated Revenue guide to subsistence claims also outlines their notoriously complex terms and conditions.

if these are breached, some or all of the payments will attract a tax charge, and possibly interest & penalties.  So tread carefully…

Companies Act 2014 – A Nasty Shock for Small Company Directors

June 9, 2015

How would you feel if you were legally obliged to publish your earnings on the internet?

This is a question that many small company directors will soon be asking themselves as they digest the new Companies Act 2014, which came into effect on 1 June 2015.

Companies Act 2014 Privacy

For the first time, the new Act compels all companies to disclose Directors’ Remuneration (ie directors’ salaries and fees), in the annual Abridged Accounts to be filed with the Companies Office.

Once filed, any member of the public can access and download a copy of the accounts for €2.50.

This should not be a major issue for larger companies where the total Directors’ Remuneration figure is shared among several directors.

However, it will come as a nasty shock to family companies with one or two directors, most commonly husband & wife.  In such cases, the Directors’ Remuneration figure will clearly link to an identifiable individual or couple.

And once published, this information will be on the public record forever.

I’m amazed that the new Act provides no safeguards against the obvious privacy breach that this measure will entail for small company directors.

An exemption for companies with two or fewer directors would have been a reasonable solution. Yet no such exemption exists.

Will we soon see a stampede of small company owners fleeing the new disclosure rules and returning to sole trader status?

It would be ironic if the new Act, which was supposed to revolutionise company law and simplify company administration, ends up wrecking the entire concept of the small family company.

The ‘Inheritance Tax Trap’ That Hurts Us All

June 8, 2015

It is great to see the Irish Independent today highlighting the Inheritance Tax trap, where ordinary families are being hit by enormous tax charges on even modest inheritances.

The tax free threshold for parent-child gifts and inheritances has been cut by almost 60% since 2009.

Now, increasing property prices mean that more families than ever are being hit by Capital Acquisitions Tax (CAT).

The Inheritance Tax Trap

Worse still, CAT is now levied at 33%. This represents a breathtaking 65% hike on the 20% rate that applied up to November 2008.

This is bad news, and not just for those receiving inheritances and gifts:

  • The high rates and low thresholds actually stifle the tax take from CAT, as people who hold even modest levels of wealth are discouraged from gifting them to family members until after their deaths.
  • Such wealth-hoarding is particularly unproductive in the Irish economy which has suffered a major credit squeeze since 2008.

The situation is actually much worse for those who wish to leave assets to nieces, nephews or other relatives, where the tax-free thresholds are pitifully low.

Our high CAT regime is clearly delaying economic recovery, and must be reformed without delay.

For more, see Charlie Weston’s article and opinion piece, and the paper’s editorial in today’s Irish Independent.

The New Companies Act 2014 – How Will It Affect Your Company?

June 2, 2015

Yesterday, June 1, the new Companies Act 2014 finally came into effect. It now applies to all existing and future limited companies.

As a company director, you may be wondering how the Act will affect you and your company.

Companies Act 2014 DAC LTD

Under the new Act, you have a choice of legal formats for your company, for a transition period of 18 months, up to 30 November 2016.

In the vast majority of cases, your choice is simple. Your company can convert under the new Act to a Private Company Limited by Shares (“LTD”), or convert to the new format Designated Activity Company (“DAC”).

The LTD is a simplified new company format which aims to reduce the administrative burden on private companies.

LTD companies:
• can now operate with just one director,
• can adopt a single-document constitution in place of the existing and rather legalistic Memorandum & Articles of Association, and
• don’t need to hold AGM’s.

The DAC option is more complex, and is intended for
• charities,
• management companies,
• companies limited by guarantee, and
• other companies which operate for a clearly-defined specific purpose.

Each DAC must have at least two directors and must hold an annual AGM.

There are set procedures for registering your company as a LTD, or as a DAC. These effectively involve adopting a new company constitution which must be filed with the Companies Office together with a special form.

If you do nothing, your company will automatically become an LTD once the 18-month transition period expires. Its Memorandum & Articles of Association will remain unchanged but will form part of an automatic company constitution to comply with the new Act.

Where a company becomes a LTD by default, it may end up being saddled with an outdated and unnecessarily complicated constitution.

This may cause difficulties and added expense (ie more legal fees) when dealing with banks and creditors in the future.

My advice? Face up to this challenge within the next 18 months, and convert your company to the appropriate format before it’s too late.