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.


New VAT & RCT Guidance for School Boards

May 23, 2016

Revenue have issued new Guidance Notes for School Boards of Management on how Relevant Contracts Tax (RCT) and VAT affect school building projects and repairs & maintenance works.

Revenue Guidance Notes for Boards of Management on RCT and VAT.jpg

The RCT tax system applies to construction contracts where a principal contractor deducts tax from payments due to building contractors and tradesmen.

Since 2012, school Boards of Management have been counted as ‘Principal Contractors’ for RCT purposes.

Where a Board of Management undertakes construction works (including associated repairs or alterations to a building or structure), they  must operate RCT procedures on all payments to contractors.

In addition, they must file VAT returns, and make VAT payments in respect of VAT withheld under the Reverse Charge system.

There are serious penalties for failing to comply with these obligations, so school Boards should take special care to ensure that their VAT and RCT affairs are fully in order.

If you’re not fully certain of what exactly to do, avoid a potential nightmare by getting proper professional advice.

 


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.


Tax Audits: New Code of Practice – Same Old Story

November 27, 2015

Revenue have recently updated their Code of Practice for Revenue Audits.

The new update applies from 20 November 2015 and replaces the previous Code issued in August 2014.

The most striking change (in paragraph 1.10.5)  is the new Revenue policy of reporting an accountant or tax agent to their professional regulatory body where they consider that their work during a Revenue Audit “does not meet the standards of a professional body“.

Portrait of crying baby

Needless to say, there is no corresponding measure to shop a dodgy tax inspector to a third party regulator.

If you encounter an incompetent, unpleasant or aggressive inspector, you can only complain directly to Revenue.

When it comes to tax audits, sauce for the goose is rarely sauce for the gander.