Revenue’s Exchange Rates for 2016 Tax Returns

February 2, 2017

Revenue have just published the official 2016 average foreign currency exchange rates which should be used to convert foreign currency amounts in 2016 tax returns.

You should use these rates when converting to Euro, any income (whether from trading, rental, employment, investment or other sources) which is denominated in Sterling, Dollars or other currencies.

The rates are based on average Central Bank exchange rates throughout 2016. These, and the corresponding rates for earlier years, are as follows:

Average Market Mid-Closing Exchange Rates v. Euro
2013 2014 2015 2016
Australian dollar AUD 1.3777 1.4719 1.4777 1.4883
Brazilian real BRL 2.8687 3.1211 3.7004 3.8561
British pound Sterling GBP 0.84926 0.80612 0.72585 0.81948
Canadian dollar CAD 1.3684 1.4661 1.4186 1.4659
Chinese yuan CNY 8.1646 8.1857 6.9733 7.3522
Danish krone DKK 7.4579 7.4548 7.4587 7.4452
Indian rupee INR 77.9300 81.0406 71.1956 74.3717
Japanese yen JPY 129.66 140.31 134.31 120.20
Norwegian krone NOK 7.8067 8.3544 8.9496 9.2906
Russian ruble RUB 42.3370 50.9518 68.0720 74.1446
Swedish krona SEK 8.6515 9.0985 9.3535 9.4689
Swiss franc CHF 1.2311 1.2146 1.0679 1.0902
US dollar USD 1.3281 1.3285 1.1095 1.1069

Unsurprisingly, the 2016 rate for the British Pound reflects its fall after the Brexit referendum vote last June, but note that it’s still only marginally higher than the corresponding figure for 2014, and it’s actually lower than the 2013 figure.

Lloyds Accounts

A special rate applies for conversion of Lloyds Account amounts from sterling to euro.

This is based on the sterling mid-closing rate on the last market day of each  calendar year, as per the Central Bank. The rate for 2012 is Stg £1 = €1.16798.

The new Revenue eBrief publishing these details is here.


Finally, High Court Rules NPPR IS Tax-Deductible

January 16, 2017

The High Court has ruled that the Non Principal Private Residence (NPPR) charge is a deductible expense against rental income  for Income Tax purposes.

The NPPR was levied at a rate of €200 per residence for the years from 2009 to 2013.  It was very unpopular and was widely seen as unfair and discriminatory against property owners, not least because of the outrageous penalty charges for late payment.

On top of this, Revenue claimed the charge was not tax-deductible, as it did not meet the definition of “a rate levied by a local authority” as set out in tax legislation.

Capital Gains Tax Deadline 2010

This did not make sense to me, nor to many other accountants and tax professionals, but without proper clarification it was widely deemed to be dangerous and perhaps irresponsible to claim the NPPR charge as a tax deduction.

Late last year, a man named Thomas Collins bravely challenged this anomaly in the High Court, and Ms. Justice Reynolds ruled in his favour on 28 November last. The decision has now just been published.

Its timing is unfortunate in that the Revenue “four-year rule” on tax refunds means that taxpayers who followed Revenue’s own guidance and opted not to claim tax deductions for the annual NPPR charges up to and including 2012 cannot now do so, as the time limit for 2012 claims expired on 31 December 2016.

Ironically, had the High Court decision been made public when it was made in November, this would have allowed a one-month window for taxpayers to seek deductions for their 2012 NPPR charges. This wasn’t done and the window is now closed.

It is still up to everyone who has yet to claim a tax deduction for their 2013 NPPR charges on rented properties to do so by the end of 2017.

Notwithstanding this, it is clearly unjust that it is now too late to claim the appropriate deductions for the 2009, 2010, 2011 and 2012 charges.

Hopefully somebody as equally brave and diligent as Thomas Collins will go to the High Court and successfully challenge this injustice.


New Revenue Guide to eTax Clearance System

July 22, 2016

Last December, the Revenue Commissioners unveiled their new eTax Clearance system.

This new system enables (almost) all tax clearance applications to be processed online. For most of us, paper tax clearance certificates are now a thing of the past.

Instead a special code, known as a Tax Clearance Access Number, now issues to each successful applicant. They can then give this number, along with their PPSN/tax reference number, to a third party to verify their tax clearance status online.Tax Clearance SuccessIt’s important to note that your tax clearance certificate can be withdrawn without notice unless you remain tax-compliant and when you again become compliant, you’ll need to make a fresh application.

Revenue have now updated their FAQs (frequently asked questions) on how the new system works.

If you’re a PAYE taxpayer, you should use the myAccount service to apply for tax clearance.

If you’re self-employed or run a company, you can use ROS.

You’ll first need to register for myAccount or ROS.

If you’ve no computer or web access, you can still apply by completing a paper form TC1 and posting this to your local tax office or the Collector General’s office in Limerick.   You can also use this paper form if you’re a non-resident or representing an unregistered voluntary body.


Protect Yourself Against Tax Payment Fraud

July 15, 2016

I’ve only recently become aware of the Irish Tax Rebates service and know practically nothing about them, but they seem to be a highly reputable and professional company.

Still, I’m rather disturbed by their Facebook advert which shows a young lady holding a company cheque she received from them for her tax refund.

Irish Tax RebatesLady

You should never, EVER, allow the Revenue Commissioners to pay your tax refund to a middleman.

This is a basic protection against tax payment fraud and applies regardless of whether the middleman is a tax refund agency, another service provider, or even your trusted  accountant.

It’s far safer to have the taxman pay you, and for you to pay your accountant or agent fees separately.

Also, if you owe a tax bill to Revenue, you should always make your payment directly to Revenue. You should never, ever make a tax payment to an accountant, lawyer or other middleman.

It’s fine to give them a (preferably crossed) cheque made payable to the Revenue Commissioners or Collector General, but not one made out in their name.

Because if you do, and if they fail to pay it over to Revenue, all hell will break loose, and you could end up seriously out of pocket.

In the past, so many people have been badly ripped off by ignoring this basic rule.

Don’t risk becoming another victim of tax payment fraud.


Job Losses to Follow Taxman Squeeze on Sheriffs

June 17, 2016

Revenue have today announced an important change to the way they use Sheriffs to collect outstanding taxes.

Up to now, each Sheriff had a period of six months to collect the money owing on a warrant issued by Revenue.  This period has now been cut to three months.

Revenue curb Sheriffs

This change means that Sheriffs will now be much quicker to collect tax bills once a warrant has issued for them.

They will also have far less scope to allow individuals and businesses to settle bills gradually.

This is very bad news, particularly for the many businesses who experience short-term cashflow pressures and who occasionally are unable to settle their Revenue liabilities as they become due.

Although many people have a natural and terrible dread of having to deal with Sheriffs,  I have found over the years that they and their staff are usually very helpful, constructive and understanding in assisting taxpayers to manage and settle their debts to Revenue.

This change will inevitably put more pressure on Sheriffs to be the opposite.

It is bound to cause more business failures and job losses.

As if we didn’t have enough of both.

For more, see the new Revenue Guidelines for Sheriff Enforcement.


Tax on Rental Income – The Basics

April 14, 2016

Rental Income is taxable under the Irish tax system. For a given year, you can estimate your tax liability using the following formula:

Gross Rental Income  – Allowable Expenses – Capital Allowances = Taxable Rental Income x  Your marginal income tax, PRSI & USC rate = Your tax liability.

Tax on Rental Income.jpg

Allowable Expenses

You can deduct the following expenses in arriving at your taxable rental income.

  • Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property (note the restrictions below)
  • Mortgage Protection policy premiums
  • Water rates, Ground rent, Service charges, Waste Collection charges etc
  • Insurance costs
  • Management & rent collection costs
  • Advertising Costs
  • Legal fees for drawing up leases or collection of unpaid rent
  • Accountancy fees relating to rental income
  • Repairs, decorating and general maintenance
  • Cleaning & related costs
  • Cost of any unreimbursed services or goods provided to tenants by the landlord i.e. electricity, heating, etc

Mortgage Interest – Restrictions              

Your mortgage interest deduction is restricted to 75% of the total interest you incur.

Mortgage interest is only allowed as a deduction against rental income on a residential property if you have complied with your legal obligations under the Residential Tenancies Act, including registering tenancies with the Private Residential Tenancies Board (PRTB).

It is generally not possible to claim for the following expenses:

  • Pre-letting expenses, apart from auctioneer’s letting fees, advertising fees and associated legal fees
  • Capital expenditure.

Capital Allowances

You can claim an allowance for Wear and Tear on furniture and fittings in your property.   This normally will cover such items as carpets, electrical appliances, central heating, furniture, etc.    The allowance is 12.5% per year, each year for 8 years.

Rental Losses

You can only offset a rental loss against other rental income, in current or future years.

It is not possible to offset such losses against other non-rental income sources (e.g. PAYE, business profits etc).

Self-Assessment Tax Collection

The tax due on rental income is normally collected under the Self-Assessment system. A  PAYE taxpayer with low rental income can arrange to have their tax collected via the PAYE system if Revenue agree to adjust their tax credits and standard rate cut-off point accordingly.


The Tax Mistakes Builders & Tradesmen Are Making

March 25, 2016

Last August, the Revenue Commissioners warned builders and tradesmen to ensure they remain tax compliant as the construction industry recovers from the downturn.

They have obviously been busy in this area in the meantime, as they have now publicly flagged their concerns on some key areas where mistakes are being made.

These centre on the incorrect operation of the VAT Reverse Charge and Country Money systems.

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Under the VAT Reverse Charge system, each VAT-registered sub-contractor invoices a principal contractor net of VAT, and is paid the invoice total net of VAT.

The principal contractor must then calculate the appropriate VAT on the the sub-contractor’s invoice and must pay that VAT amount directly to Revenue in their VAT return.

Revenue have now highlighted the following specific problems in this area:

  • Failure by Principal contractors to calculate the VAT and remit it to Revenue.
  • Incorrect completion of VAT invoices by sub-contractors.
  • Incorrect application of the two thirds rule.
  • Errors in completing VAT returns (including ignoring the reverse charge altogether).
  • Failure to apply the VAT Reverse Charge to construction supply transactions between connected parties.

They have also issued a fresh reminder of the strict conditions for tax-free Country Money travel and subsistence payments  to transient building & electrical contracting workers.

In addition to the above issues, it almost goes without saying that full compliance with the Relevant Contracts Tax or eRCT system is absolutely essential for every contractor and sub-contractor in the building trade.

This system requires every contractor to register all contracts with, and payments to, all subcontractors, and obliges the contractor to deduct a percentage of tax from each payment where Revenue request this.

If you are a builder, tradesman or contractor, and have had difficulties or issues in complying with the various regulations, you may be liable to interest and penalties on any tax shortfall.

You can minimise your exposure by making an “unprompted voluntary disclosure” to Revenue and settling your tax, penalties and interest liabilities ahead of any Revenue audit or enforcement check on your business.

If you are considering such an option, I strongly recommend that you first obtain decent professional advice to protect your interests and ensure that you qualify for the concessions offered by the Revenue Audit Code of Practice.

Finally, here is the new Revenue eBrief outlining the above issues.