Revenue To Self-Employed: Drop Dead

January 20, 2016

Two Revenue eBriefs in the past 24 hours outline new income tax exemptions on travel expense payments to teachers who do State exam work, and non-executive directors who attend corporate board meetings.

Yet no such concessions are available to self-employed small business owners and entrepreneurs.

Instead, their travel expense claims are subject to a battery of arbitrary and complex restrictions – with no leeway and serious penalties for disallowed motor and subsistence costs.

angry aggressive woman driving car

In Ireland, it always pays to pursue a career in the public or corporate sectors.

Because, if you’re brave & independent enough to stand on your own two feet and run your own small business, you’ll be nailed to the wall at every turn.


New Report Slays Tax Myths

January 8, 2016

The Irish Tax Institute (ITI) has today released Reshaping Ireland’s Personal Tax System, a fascinating analysis of Ireland’s personal tax system.

It’s a bold document, slaying many common tax myths.

Among its key findings are:

  • Ireland has the second most progressive personal tax system in the OECD, with only Israel ranking higher.
  • Irish taxpayers earning above the average industrial wage pay more personal tax than their counterparts in other countries
  • Irish low-income taxpayers pay less personal tax than their counterparts elsewhere.

New Report Slays Personal Tax Myths

  • 29% of income earners pay no personal tax whatsoever.
  • The top 1% of income earners pay 22% of all income tax and USC. The bottom 75% pay just 19%.
  • Our tax system continues to discriminate against the self-employed.

The Institute warns that the heavy tax burden on higher earners is likely to damage Ireland’s international competitiveness, both in attracting business investment and skilled workers to locate here.

It’s good to see these important issues being highlighted. Hats off to the ITI.


Noonan’s Useless Tinkering With Landlords’ Interest Relief

January 6, 2016

Finance Minister Michael Noonan has recently moved to restore the full 100% interest tax deduction to landlords who rent properties to tenants availing of social housing supports – but only after a waiting period of 3 years.

At present, a residential landlord’s income tax deduction for interest paid is restricted to 75% of the interest they incur on borrowings used to purchase, extend or refurbish a rental property.

noonan

The 75% restriction dates from 2009 when the late Minister Brian Lenihan adopted a number of tax measures aiming to discourage investment in rental residential property in the wake of the Celtic Tiger crash.

Unsurprisingly this policy has since proven disastrous. Today, not only do we have severe housing shortages in most major towns and cities, with spiralling rents to match, but new property investment remains at a standstill.

So the problem is set to get worse – much worse – before it gets better.

In these circumstances, I would have expected Minister Noonan to finally bite the bullet and roll back his predecessor’s failed policies.  An obvious, and relatively straightforward start would have been to restore the interest deduction against taxable rents to 100% of the interest cost.

This, the Minister has done, in an amendment to the 2015 Finance Bill – but only for a very narrow range of landlords and only after a 3-year waiting period.

From 1 January 2016, a landlord can enjoy the full 100% interest deduction where they provide accommodation to tenants in receipt of social housing supports, eg Department of Social Protection Rent Supplement, and the Housing Assistance Payment (HAP) and Rental Accommodation Schemes (RAS) operated by local authorities.

However they can only claim the additional 25% interest deduction after 3 years (ie starting in 2019), and subject to a number of additional and as yet unspecified, conditions.

For example, if you’re a landlord availing of this new relief, and your annual interest cost is €10,000, you can claim the following tax deductions for interest incurred:

2016  Claim:  €10,000 @ 75% = €7,500

2017  Claim:  €10,000 @ 75% = €7,500

2018  Claim:  €10,000 @ 75% = €7,500

2019  Claim:  €10,000 @ 75% =  €7,500

              + 2016 25% interest        €2,500

              + 2017 25% interest        €2,500

              + 2018 25% interest        €2,500

Total claim                                    €15,000

In my opinion, this is ridiculously complicated, so much so that it’s actually unworkable.

It’s time for the Minister to act decisively and scrap the interest restriction altogether, instead of this timid and probably counterproductive tinkering.

Such a move would help to relieve the notoriously heavy tax burden on landlords, and also assure anyone considering a new property investment in the next year or so that the Government won’t rip them off on a whim whenever it suits them to do so.

Is this too much to ask?


Don’t Forget the 2016 Minimum Wage Increase

January 4, 2016

If your business employs staff, don’t forget that the National Minimum Wage increased on 1 January 2016.

The standard minimum wage for an experienced adult employee is now €9.15 per hour.

A payslip with a calculator and pen

Youth rates

Lower minimum wage rates apply to employees under 18 years old and to those who have recently turned 18.

The minimum wage for a worker:

  • under 18 is €6.41 per hour (70% of the adult minimum wage).
  • in their first year of employment since their 18th birthday is €7.32 per hour (80% of the adult minimum wage).
  • in their second year of employment since their 18th birthday is €8.24 per hour (90% of the adult minimum wage).

Apprentices & Trainees

The new minimum wage rates for an apprentice or other trainee are as follows:

  • First one-third of training course €6.86 per hour (75% of national minimum wage rate)
  • Second one-third of training course €7.32 per hour (80% of national minimum wage rate)
  • Final one third of the training course €8.24 per hour (90% of national minimum wage rate).

If you employ staff, it is your responsibility to ensure you are complying with the updated minimum wage law, by paying all staff members at least the applicable minimum wage.

The WorkplaceRelations.ie website answers many of the key Frequently Asked Questions on how the minimum wage works.

If you have any doubts on any aspect of how the minimum wage works in practice, I recommend you obtain professional advice.