Dentists Feel Pain As Taxman Hits a Nerve

June 7, 2012

A new Revenue move could mean bigger tax bills for dentists and their workers.  

Following their previous focus on the tax status of locum doctors, Revenue have now turned their attention to the Dental sector. In recent weeks, they have written to the Irish Dental Association stating that Dental Associates and Dental Hygienists, “who in Revenue’s view are employees”, must have PAYE/PRSI operated on their earnings with effect from 1 January 2012.

The net effect of this move will be to prohibit many dental associates and hygienists from working as self-employed contractors for dental practices. They must instead be treated as employees, and have PAYE/PRSI deducted on their earnings.

This is in line with the Code of Practice for Determining Employment or Self-employment Status of Individuals, agreed by the Employment Status Group, under the Social Partnership process in 2007.

The biggest impact of this change will be the imposition of 10.75% employer PRSI on the earnings of affected workers.  This will represent a major additional cost for dental practices. Given the current state of the economy it will be difficult if not impossible for practices to pass on these cost increases to paying customers.

While the Irish Dental Association have asked Revenue to defer the implementation of the changes to 1 January 2013, it is clear that the new rules will take effect sooner or later.

Of course Revenue will be anxious to implement the changes as soon as possible in order to maximise their own Income Tax, USC & PRSI take from the dental sector, so it is difficult to see them agreeing to the dentists’ pleas.

The key message for dental practitioners, associates and hygienists is that they will need to take immediate action to review their current status, and ensure that they stay Revenue-compliant.

Their first step should be to review the recent Revenue letter to the Irish Dental Association, copies of which are presumably being circulated to dentists nationwide.  Chartered Accountants Ireland have published extracts from the letter online and these are also reproduced below:

Practices will also need to review their contracts with dental associates and hygienists as many of these workers may now be entitled to additional employee rights which did not arise while they worked as contractors, eg rights to annual leave, unpaid breaks, minimum notice, redundancy etc.

Whether or not individual practices and their dental associates and hygienists are affected by the new rules will depend on the existing contractual working arrangements in place in each case. Revenue have pledged “to consider each case on its own merits”. In cases of doubt, they are urging dentists and hygienists to make a submission to their local Revenue District, outlining the terms and conditions of the particular engagement(s) and asking for Revenue’s opinion on their correct status.

I recommend that affected dental practices, associates and hygienists should seek expert professional advice on their status and working arrangements before making any such submission to Revenue.

It may well transpire in individual cases that existing ‘independent contractor’ arrangements already conform with the self-employment criteria set out in the Code of Practice, and (more importantly) existing case law precedents. In such cases there may be no need to treat the workers in question as employees.

However given the stakes involved, and the risks attaching to non-compliance with any Revenue matter, it would be foolish to ignore this issue in the coming weeks and months.

Extract from Revenue correspondence to Irish Dental Association:

“Employment Status of Dental Associates and Dental Hygienists engaged by Dental Practices

Revenue have considered the circumstances surrounding the engagement of dental associates and dental hygienists in dental practices, having regard to the criteria set out in The Code of Practice for Determining Employment or Self Employment Status of Individuals and relevant case law. It is the Revenue view that generally speaking associates and hygienists engaged by dental practices are engaged under a contract of service (i.e. they are employees) and their remuneration comes within the scope of PAYE and that PAYE should be operated on all payments from 1st January 2012.

It is accepted that there may be exceptional cases where the terms of engagement differ from the norm and in these instances Revenue is prepared to look at these on a case-by-case basis. Revenue will consider each case on its own merits and in cases of doubt a submission, outlining the terms and conditions of the engagement should be submitted by the dentist or the hygienist to their local Revenue District for consideration.”


Revenue scrap ROS online Amend Tax Return facility

April 30, 2012

Revenue have withdrawn their ROS facility to amend an income tax return online.

Back in September 2010, Revenue added a useful feature to their ROS site which allowed a user to amend online a previously-filed Form 11 Income Tax return.  At the time, I heartily welcomed this move and hailed it as ‘an important innovation’. In the intervening 20 months or so, I used it on a number of occasions, most commonly as a particularly easy way of claiming a tax credit or allowance that had been omitted from an original tax return.  I found the facility to be both useful and straightforward to use.

This morning I was reviewing the tax records of a client who had reached 65 years of age in late 2010 but hadn’t previously notified either myself or Revenue of this fact. He was therefore entitled to an Age Credit for 2010, along with PRSI exemption and partial Income Levy exemption for that year.

I accessed ROS to amend his 2010 tax return accordingly but I could not find any links to access the ‘Amend Form 11’ facility. A quick google search yielded a blank apart from my own blog post of September 2010 which outlined the steps involved in amending a return on ROS and a link to the relevant Revenue eBrief which was issued around that time.  I was dismayed to find the eBrief link was dead, bringing me to a ‘Page not found’ page within the Revenue.ie site.

Increasingly puzzled, I tried the ROS help section of ROS.ie and its ROS FAQ – Form 11 page which told me:

“Can I avail of ROS to file an amended Form 11?     
Unfortunately at this time if you have previously filed a Form 11, on either paper or through ROS, you will not be presented with the option of filing an amended return.”

Finally admitting defeat, I then had to resort to writing a letter to Revenue asking them to (i) update and amend my client’s 2010 Form 11 accordingly; and (ii)  issue a new Income Tax assessment including the Age Credit and exemptions. My letter has just gone off in the post. I expect that it will reach Revenue in 1-2 days time and they will presumably deal with it in due course. No matter how efficiently they manually process it, the service cannot match the speed and efficiency of the automatic ROS service.

I am disappointed that Revenue have withdrawn the facility to amend returns online via ROS, and it seems to be a retrograde step for everyone concerned.

It is doubly disappointing that they didn’t alert accountants and taxpayers of the move, choosing instead to merely delete the eBrief that had previously explained the feature. Maybe I’m expecting too much, but a fresh eBrief announcing the change would at least have made ROS users aware that the feature no longer existed – saving both their own and their clients’ time. Hopefully Revenue will reintroduce the facility before too long.


P35 & RCT35 Online Filing Deadline Tomorrow

February 22, 2012

Tomorrow, 23 February, is the online filing deadline for 2011 Employer PAYE/PRSI P35 & Contractor RCT35 returns.

A P35 return includes details of all pay, PAYE/PRSI/USC deductions and other employee details for the year ended 31 December 2011.

An RCT35 return must be filed by all principal contractors in the construction, forestry, and meat processing sectors. It includes details of all payments made to subcontractors in 2011, and tax deduction details where relevant.

The original deadline of 15 February 2012 which applied to both returns is extended to 23 February for returns filed online via ROS.

In a recent eBrief, Revenue stress the importance of employers recording their employees’ PPS numbers correctly on P35 returns. Presumably the same guidance applies to subcontractor PPS and tax reg. numbers recorded on RCT35 returns.

The Revenue.ie website contains more guidance on completing P35 and RCT35 returns.


Budget 2012 Live Updates

December 6, 2011

Michael Noonan, Minster for Finance is now delivering his Budget 2012 speech to Dáil Éireann.

Budget 2012 6 December 2011The Minister has announced the following Tax measures:

Corporation Tax

  • No change in the 12.5% Corporation Tax rate.
  • A special Assignee Relief Programme to attract multinationals’ executives to Ireland
  • New Foreign Earnings deductions for individuals developing markets abroad
  • International financial services sector boosted by measures to be announced in Finance Bill
  • First €100,000 of Research & Development expenditure to be allowed for R&D credit.
  • Corporation Tax exemption for new companies extended for a further 3 years.

Farming

  • Farm transfers to the next generation are to be incentivised
  • Significant fall in the rate of stamp duty for farmland and other commercial property
  • Retirement relief for CGT to be modified – no detail of this measure included in the Budget Speech.
  • Farm partnerships to be encouraged by 50% Stock relief for participating farmers and existing 100% Stock relief for young farmers
  • The 9% rate of VAT to apply to Open Farms

Air Travel Tax

  • Government are ‘prepared to negotiate’ with Aer Lingus and Ryanair to incentivise tourist routes into Ireland

Construction Sector

  • Stamp duty for commercial property to be cut to 2% overnight – the previous top rate was 6%
  • The current rates for residential property will apply
  • CGT exemption for properties bought between tonight and the end of 2013 – if they are held for 7 years.
  • Commercial properties – NAMA can now approve rent reductions in certain cases, even in cases where ‘upward only rent review’ clauses apply
  • Those who bought homes at the end of the property boom will gain by an increase in mortgage interest relief to 30% for those homeowners
  • First time buyers will get 25% mortgage interest relief for property purchases in 2012

Property Reliefs

  • Detailed policy measures to be made in Finance Bill
  • s.23 Reliefs to small scale investors will not be cut
  • Surcharge of 5% will apply to sheltered income where one’s income is over €100,000

Income Tax

  • No increase in Income Tax bands, rates or credits.
  • Universal Social Charge to be changed to help low paid seasonal & temporary workers – the exempt income level rises from €4,004 to €10,036
  • the USC will be collected on a cumulative basis in 2012

Value Added Tax

  • The Standard rate of VAT will rise by 2% to 23%
  • The other rates of VAT remain unchanged

Capital Taxes

  • Capital Acquisitions Tax & Capital Gains Tax go from 25% to 30%
  • Standard Exemption for Capital Acquisitions Tax (parent-child transfers) cut from €332,084 to €250,000

Investment Income

  • Deposit interest retention tax (DIRT) increased from 27% to 30%
  • PRSI will cover rental and investment income from 2013

Approved Retirement (ARF) Funds

  • ARF ‘imputed distribution’ charge increased to 6%
  • ARF tax on death of a child over 21 goes to 21%
  • Citizenship condition on domicile levy is scrapped
  • Carbon Tax goes up from €15 to €20 per tonne – a 33% increase. This increase does not apply to home heating oil or solid fuel.
  • Double income tax deduction for Carbon tax for farming
  • VAT Refunds on farm buildings will include wind turbines

Other

  • The income tax relief on pension contributions remains unchanged – tax relief will remain at the marginal rate of tax.
  • A household charge of €100 per household is being introduced. Certain limited waivers will apply.
  • Motor Tax increases to raise €47 million
  • A new export refund scheme will apply to exports of motor cars
  • The existing tax exemption for the first 26 days of disability benefit per annum is to be abolished. The Minister described this as ‘an incentive for absenteeism’

Excise Duty

  • Alcohol excise duty is unchanged.

 

 

 

 


Revenue extend Pay & File Tax Return Deadline

November 7, 2011

In a surprising move, Revenue have announced today that they have extended next week’s ROS online Pay & File Tax Deadline by 24 hours. The original deadline of Tuesday 15 November is now extended until midnight on Wednesday 16 November.

This new deadline covers the following

  • online filing of Form 11 Income Tax Returns on ROS
  • online payment of 2010 Income Tax liability
  • payment of Preliminary Tax for 2011.

Today’s Revenue statement does not mention any extension to the deadline for making Pension/AVC contributions which qualify on a back-dated basis for tax relief for 2010. If you are considering making such a contribution in the coming days in order to obtain 2010 tax relief, I suggest that you do so by the original deadline of next Monday – at least until and unless Revenue confirm in the meantime that the pension relief deadline is also extended.

I have no idea why Revenue have at this late stage opted to extend the deadline by a day. Perhaps it is compensation of sorts for last week’s 31 October deadline for paper-filed tax returns, which fell on Bank Holiday Monday when Revenue offices were closed and many accounting and tax firms found themselves having to open on the Bank Holiday.

Either way, the deadline extension is very welcome, although it would have been simpler and easier for everyone concerned had this change been made months ago.  Spare a thought for your accountant or tax advisor if they have already made holiday or ‘quality time’ plans for Wednesday 16 November!

The ROS Technical Helpdesk will now be open until midnight on 16 November 2011.


Less Frequent Business Tax Returns on the way

November 4, 2011

Revenue have this week announced that more small businesses will be qualify for reduced frequency VAT, PAYE/PRSI, & RCT tax returns and payments in 2012.

With effect from 1 January 2012, businesses whose annual VAT bills are less than €3,000 will only be required to file VAT returns and pay VAT liabilities every 6 months. If their annual VAT bills are between €3,000 and €14,400, they will file and pay every 4 months.

In addition, employers and contractors whose annual PAYE/PRSI or RCT liabilities are less than €28,800 will be eligible to make quarterly P30 & RCT30 returns and payments.

Revenue state that this will mean improved cashflow and less form-filling for eligible businesses.

They will soon be writing to businesses that they believe to be eligible for these new arrangement. If you don’t hear from them, but feel that your business should be eligible, (for example due to falling turnover), you should get in touch with Revenue before the end of December.


Bizarre CRO Change To Cost Companies Thousands

August 30, 2011

A bizarre and pointless change to CRO procedure is set to cost some companies thousands of Euro in professional fees.

If you own a limited company and wish to close it down, you can no longer use the simple and inexpensive Companies Registration Office (CRO) Voluntary Strike Off process to have your company dissolved – if your company’s ‘Issued Share Capital’ exceeds €150. Instead, the CRO now will now require your company to undergo a Members’ Voluntary Liquidation  – a more complicated process that can cost you several thousand euro in professional fees.

This arises from a little-heralded administrative change announced by the CRO earlier this year.  Previously any company could avail of the Voluntary Strike Off process. Now it applies only to companies with ‘Issued Share Capital’ of less than €150.

Issued Share Capital is a technical term for the value of shares issued by a company. Most owner-operated companies will normally have an Issued Share Capital of €100, usually comprising 100 ordinary shares of €1 each.

However, a company that has been in existence since 2001 or earlier may well have an Issued Share Capital of €200, (eg 100 ordinary shares of €2 each). This is because such companies were encouraged, as part of the Euro Changeover, to convert their share capital from Irish Pounds to Euro. The most common way to do this at the time was to increase the value of their shares from £1 (€1.26973) each to €2 each. All such companies are now excluded from the Voluntary Strike Off procedure.

In addition, any company that was formed with a higher number of €1 shares (eg 3 shareholders with 100 shares each, making up a total of 300 shares) will also be barred from availing of a Voluntary Strike Off.

Furthermore, to qualify for Voluntary Strike Off, a company’s share capital must not have exceeded €150 anytime in the previous three years. If a company has a higher share capital, e.g. €200 or €300, it is difficult and problematic to have this reduced to a lower  figure. And, even if they manage to do so, they will then have to wait three years before they can qualify for Voluntary Strike Off.

This means three more years of preparing and filing accounts and other general administration – all the time incurring additional costs.

I am sure there is a technically and legally sound reason for this obscure change, but its logic escapes me. I can’t help thinking that it is bizarre and pointless to arbitrarily ban some companies from the very useful Voluntary Strike Off process, simply on the basis that their share capital is slightly higher than the norm.

According to the 2010 CRO Annual Report, last year a total of 5,488 companies underwent Voluntary Strike Off, which meant that they were dissolved in an orderly and legal manner, with no creditors or obligations left unpaid. In contrast, the CRO struck off  6,272 companies for failure to file returns. Practically all of these companies were dissolved while owing unpaid filing fees to the CRO (up to €1,240 for each unfiled return), while many among them would have also owed further sums to Revenue, banks and other creditors.

All the time, it seems that bureaucratic administrative rules are making it harder and harder for compliant companies and their directors to adhere to the law – while at the same time over 6,000 companies last year were allowed to flout the law and avoid both their public filing obligations and the associated compliance costs.

One more example of punishing the innocent for the sins of the guilty?