Revenue Unveil New Film Tax Relief

January 14, 2015

Revenue have today announced guidelines for the new Corporation Tax relief scheme for film production.

This replaces the old, and highly successful, Income Tax relief that was previously available to individuals. The Minister for Finance announced the abolition of that particular relief in a recent Budget.

Corporation Tax relief for films

The aim of the new scheme is to direct the benefits of the tax relief towards the producer of a qualifying film rather than towards its investors.

The new scheme grants corporation tax relief at a rate of 32% of the lowest of:-

  1. eligible expenditure (as defined below)
  2. up to 80% of the cost of production
  3. €50,000,000.

A minimum production spend of €250,000 applies. At least half of that amount must be spent on eligible expenditure, which is defined as:

the employment of eligible individuals or on goods, services or facilities within the State on the production of a qualifying film.”

It is possible for applicants to receive up to 90% of the relief in advance of completion of the film.

The new scheme guidelines are online here.


Corporation Tax Exemption for StartUps – Updated

February 27, 2014

Did you know that your new company can be exempt from Corporation Tax for up to three years?

Back in 2010, the Government introduced a Corporation Tax exemption for new start-up companies.  This allowed companies to earn annual profits of up to €320,000 per year for 3 years, with no liability to Corporation Tax.

The relief has since been capped at the amount of employers’ PRSI paid by the company in a given year.

This applies subject to a maximum of €5,000 per employee and an overall limit of €40,000.

On the other hand, companies who fail to use up their exemption in their first three years are now allowed to carry forward unused relief to future years.

The Corporation Tax exemption for Start-ups

In calculating the capped amount, credit is given for any employers’ PRSI exempted by the Employer Job (PRSI) Incentive Scheme.

This means that the exemption is now only worthwhile to companies who employ staff (excluding directors) within the first 3 years of operation.

However, it can still be useful even if your company doesn’t make profits until year 4, or later.

If you have a new or recent startup company, it is well worth doing the sums to see if you can benefit by hiring a new staff member.

The relief currently applies only to companies that start trading before the end of 2014, so if you’re planning a startup, don’t delay.

As always, professional advice is recommended before making any major decisions.

My previous blog post explains how the exemption initially worked. See also the Revenue 2011 Tax Briefing and 2013 Tax Briefing updates, each with worked examples.


Is Your Company’s R&D Tax Credit Claim In Order?

August 12, 2013

Revenue are examining claims for Research & Development (R&D) Tax Credit, as audits reveal that some companies have overclaimed tax credits and refunds.

This is according to a Revenue statement quoted in Carl O’Brien’s article in today’s Irish Times.

Revenue probe R&D Research & Development Tax Credit Claims

The R&D Tax Credit Scheme allows companies a 25% tax credit for the cost of carrying out qualifying R&D activities.

This is in addition to the normal 12.5% writeoff against income for Corporation Tax purposes, and means that companies can recoup 37.5% of such costs against their tax liabilities.

For example a company spends €100,000 (eg wage costs) on a qualifying R&D activity.

They claim this expenditure as a deduction in their accounts and Corporation Tax return. This yields a 12.5% tax saving, worth €12,500.

They can also claim a further 25% credit if the cost relates to a “qualifying R&D activity”. This yields a further 25% tax saving, worth €25,000.

The total tax saving is €37,000, on spending of €100,000.

It is easy to see that the scheme can be very lucrative. Over 1,200 companies have availed of it to date, and in 2010 they claimed approx. €224 million in tax reliefs. However it is not a free lunch and there are detailed terms and conditions.

Revenue are now concerned that some firms have breached these terms by overclaiming R&D credits, and they are now beefing up their audit programme in response.

The Irish Times claim that audits of 32 companies have uncovered 26 cases where a total of €6 million was overclaimed. However the majority of cases are said to have involved “accounting errors” and in only one case was a tax credits claim ruled fully out of order.

If you own or work in an R&D claimant company, the lessons are clear:

  • You must ensure that each claim refers to a properly qualifying research and development activity.
  • Where a cost refers only partly to an R&D activity (eg staff hired to carry on R&D and other work) it is important to correctly apportion the R&D and other elements. If anything, it pays to be conservative in apportioning R&D and non-R&D costs.
  • All R&D spending must be clearly documented as such and you must keep detailed records of all R&D activity.
  • Don’t forget that the scheme only covers incremental expenditure over the total of such spending in the 2003 base year, and is also subject to further limits based on historic Corporation Tax payments and payroll costs.
  • Remember that grant-aided expenditure is wholly excluded from the R&D credit scheme.

For more, see:

  • The Revenue Commissioners Guidelines for the Research & Development Tax Credit.
  • The Revenue.ie webpage for the R&D Credit.
  • Today’s Irish Times article.

If you have any queries or concerns on the R&D Tax Credit, you should seek quality professional advice.


OECD Director Threatens Irish Corporation Tax Reliefs

June 19, 2013

The head of tax at the OECD has today told Ireland that it must charge Corporation Tax at the full 12.5% rate, if we wish to retain our current Corporation Tax regime

The comments by Pascal Saint-Amans, a former French Ministry of Finance official, were made at a conference in Dublin and reported by RTE News.

Ireland must charge full corporation tax rate - OECD - RTE- 19-6-13

It’s worth bearing in mind that any move to enforce an effective Corporation Tax rate of 12.5% here would mean the abolition of

  • Capital Allowances
  • Research & Development Tax Credits
  • Group Relief

These reliefs are very important to both indigenous firms and multinationals based here, particularly in productive sectors that require large capital investment.

It would be a disaster for these firms if our government was to acquiesce in their removal.

Oddly enough, as a Frenchman, M. Saint Amans will be acutely aware that:

Maybe he should clean up his own backyard first.

 


Tonight’s Tax Return & Payment Deadlines

January 23, 2013

Don’t forget that midnight tonight (23 January) is the deadline for filing the following tax returns:

  • Employer PAYE/PRSI P30 monthly return for December 2012 & quarterly return for the period October – December 2012
  • VAT3 return for periods ending in December 2012
  • RCT December 2012 monthly return for December 2012 & quarterly return for the period October – December 2012.

You must file each return online using ROS, and each return must be accompanied by your corresponding tax payment.

Tax Deadlines

In addition, tonight is also the deadline for

  • payment of Preliminary Corporation Tax, if your 2012/13 company accounts year ends in February 2013; and
  • filing of your Corporation Tax Return and payment of any remaining tax owing, if your 2011/12 company accounts year ended in April 2012.

For a full list of all Revenue tax deadlines in 2013, see the Revenue Key Dates Calendar. Note the extended filing dates for returns filed electronically via ROS.


Budget 2013: The Key Points

December 5, 2012

The main points of Minister Noonan’s Budget 2013 Speech, announced this afternoon:

Noonan Dec 2012

Business

The Minister announced a new 10 Point Tax Reform Plan which “includes measures that will make a real difference to SMEs”.

These include:

  • Reforms to the 3 Year Corporation Tax Relief for Start Up Companies
  • Increasing the cash receipts basis threshold for VAT from €1 million to €1.25 million and changes to the Close Company Surcharge.
  • A doubling of the initial spend eligible for the R&D tax credit  from €100,000 to €200,000
  • Extensions to the Foreign Earnings Deduction for work related travel.

In addition, a diesel rebate is to apply for hauliers from 1 July 2013.

A new “PlusOne initiative” will encourage employers to hire long-term unemployed individuals. This will replace the existing Revenue Job Assist and Employer PRSI Incentive schemes.

Farming

The 25% & 100% Stock Relief incentives will continue until 31 December 2015.

A wider range of registered farm partnerships (eg beef production) can now avail of an enhanced 50% rate of Stock Relief.

A new Capital Gains Tax relief will apply on disposals of farm land for farm restructuring purposes. This once-off relief  will apply from  January 2013 to December 2015,  and is subject to EU approval.

Film Industry & Tourism

The Film Tax Relief Scheme is extended to 2020, and the scheme will move to a tax credit model in 2016. These changes are aimed to ensure that production companies and not ‘high earner’ investors, will now benefit from the tax relief.

The 9% VAT rate for the tourism industry will continue  in 2013.

Property

A three-year Local Property Tax exemption will apply to:

  • All new or previously unoccupied homes bought before the end of 2016.
  • Purchases of any homes in 2013 by first time buyers.
  • Residences in unfinished estates.

In addition, the Budget 2012 Capital Gains Tax incentive for properties bought before 31 December 2013 means that they will be exempt from Capital Gains Tax if held for at least seven years.

New “Real Estate Investment Trusts” will allow commercial property investors “to finance property investment in a risk diversified manner”.

Pensions

  • Tax relief on pension contributions will only apply to schemes delivering a pension income of up to €60,000 per annum. This will apply from 1 January 2014.
  • Tax relief on pension contributions will continue at the marginal rate of tax.
  • The 2012 Pension Levy will cease after 2014.
  • the reduced rate of USC for over-70s earning over €60,000 will cease from 1 January 2013.
  • Top Slicing relief will no longer be available on ex-gratia lump sum termination /severance payments, where the non-statutory payment is over €200,000.
  • Individuals with AVCs may in 2013 withdraw up to 30 per cent of their value. Withdrawals will be subject to marginal rate income tax. This will apply for 3 years after Finance Act 2013 is passed.

PRSI

The minimum annual self-employed annual contribution will rise from €253 to €500.

The weekly €100 PRSI-exempt allowance for employees is being abolished.

“Unearned” trade or profession income will be subject to PRSI in 2013

From 2014, PRSI will apply to rental income, investment income, dividends and deposit interest.

Local Property Tax

The Local Property Tax will commence from 1 July 2013. Its main features are as follows:

  • It will be collected by the Revenue Commissioners
  • Owners of residential properties, including rental properties, will be liable for payment.
  • The tax will be payable on the basis of the self-assessed market value of the property. The Revenue Commissioners “will provide valuation guidance”.  Alternatively, “a competent valuer” can be used.
  • The tax will be 0.18% of the market value up to €1m, and 0.25% on values over €1m.
  • Properties valued between €100,000 – €1m will be charged “at the mid-point of valuation band of €50,000 width” eg where the value is between €150,001 and €200,000, the tax will be calculated at 0.18 per cent of €175,000.
  • Properties below €100,000 will be charged at 0.18% of €50,000.
  • Properties valued over €1 million will be liable at 0.18% on the first €1m and at 0.25% on the balance.
  • Payment options  will include direct debit; credit & debit cards, cash (!!)  or “deduction at source” from salary,pension or “certain State payments”.
  • Exemptions largely correspond to exemptions from the Household Charge.
  • A “system of voluntary deferral arrangements” will apply to
    • individuals earning up to €15,000, & couples earning up to €25,000.
    •  individuals earning whose “gross income less 80 per cent of mortgage interest” is below €15,000, (€25,000 for a couple).  Marginal relief will apply where the income is up to €10,000 over the income limit
  • Interest will be charged on deferred amounts at 4% per annum. Deferred property taxes and interest will have to be discharged on the sale/transfer of the property.

The Household Charge is abolished  from 1 January 2013 and the NPPR Charge will end on 1 January 2014.

The Revenue Commissioners will “strictly enforce”  the Local Property Tax and collect any unpaid Household Charge for 2012.  Unpaid arrears will rise to €200 per property from 1 July 2013.

Income Tax 

The only Income Tax measure mentioned in the Budget Speech relates to Maternity Benefit, which will be treated as taxable income from 1 July 2013. Maternity Benefit will remain exempt from the USC.

Excise Duties

There is no increase on excise duty on diesel and petrol

Immediate rises from midnight tonight:

  • 10 cent on a pint of beer or cider & on a standard measure of spirits
  • €1 0n a  standard 75cl bottle of wine
  • 10 cent on a pack of 20 cigarettes
  • 50 cent on a 25g pack of “roll your own” tobacco

VRT and motor tax will rise from 1 January 2013.

Carbon tax will apply to solid fuels at a rate of €10 per tonne from 1 May 2013, and €20 per tonne from 1 May 2014.

Capital Taxes

DIRT on deposit interest rises from 30% to 33%

Capital Gains Tax (CGT) & Capital Acquisitions Tax (CAT) rates similarly go from 30% to 33%

Capital Acquisitions Tax (CAT) thresholds are cut by 10% from midnight tonight.

Corporation Tax

The Minister remains fully committed the Corporation Tax tax rate of 12.5%

The Minister has confirmed that Ireland has agreed a new Inter-Governmental Agreement with the United States in relation to the US Foreign Account Tax Compliance Act, commonly, (if unfortunately), known as FATCA.