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.

105 S0Q3XzI5MTNfZC5qcGc=

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.

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.

Revenue’s Two Fingers to Road Safety Puts Lives At Risk

June 29, 2015

Today’s changes to Revenue subsistence expenses rules fly in the face of road safety messages – and common sense.

Revenue have today tightened the circumstances in which an employee or company director can claim tax-free reimbursement of subsistence costs incurred in the course of their work.

From Wednesday, 1 July, an employee or director can only claim an overnight allowance when they spend the overnight at least 100km away from both their home, and their normal place of work.

In addition, the standard a day allowance (which can be claimed for absences of 5 hours or more) can only be claimed when the employee is more than 8km away from both their home and their normal place of work.

Revenue's Two Fingers to Road Safety Puts Lives At Risk 1

The first change has rather peculiar, and worrying implications.

It means, for example, that an employee or director living and working in Portlaoise cannot claim an overnight allowance for a hotel stay at Dublin Airport, (100.88km away, according to AA Route Planner) even if they have a 7am flight!

According to Route Planner, it takes 1 hour 11 minutes to drive from Portlaoise to Dublin Airport – and Aer Lingus are now advising their customers to check-in at least 2.5 hours before Dublin departures.

So Revenue are obviously expecting employees and directors to drive from the early hours of the morning rather than incur expenses, which then can’t be reimbursed tax-free by their employer. And if they are reimbursed, they will be taxed on the privilege!

And this means that the poor worker in Portlaoise could be getting into her car as early as 3.30am, in order to have enough time to drive the journey, park her car, catch her shuttle bus and check in at the airport before finally sitting down for a well-earned coffee. All this before her flight, onward travel, and a day’s work at her destination.

The situation is actually worse still, for workers who work within, but live outside, the 100km range of their temporary work location.

It’s not inconceivable that many workers could be driving, say, 140km to a temporary work location, and needing to set off at an unearthly hour to beat the morning traffic rush.

Meanwhile the Road Safety Authority remind us that “one in every five crashes on Irish roads could be caused by driver fatigue”

This crazy move puts lives at risk and should be reversed.

The Revenue announcement is in this eBrief.  The updated Revenue Subsistence expense rules are here.

At Last! – Revenue Update Subsistence Expenses Rates

June 12, 2015

Revenue have today announced a limited and long-overdue increase in the maximum rates of subsistence expenses that  employees and directors can claim tax-free for time spent working away from their normal base.

From 1 July 2015, the following daily rates will apply:

Day Allowances From 1 July 2015  Up to 30 June 2015
10 hours+ €33.61 €33.61
 5-10 hours €14.01 €13.71

And the new overnight rates are as follows:

Overnight Allowances From 1 July 2015  Up to 30 June 2015
Normal Rate €125.00 €107.69-108.99
Reduced Rate €112.50 €92.11-€100.48
Detention Rate €62.50 €53.87-€54.48

This is the first increase in allowable Subsistence rates since the late Finance Minister Brian Lenihan slashed them by 25% during the 2009 financial crisis.

Subsistence Claims

It is telling that the maximum day rate of €33.61 (which remains unchanged since 2009, for some reason) is 13% lower than the corresponding rate of €38.57 that applied 10 years ago in 2005.

Can the shortfall be explained by lower food and other costs? I don’t think so…

There is no mention by Revenue of any changes to the allowable rates for motor expenses. Did the recent falls in global oil prices allow the government off the hook here?

An increase in the allowable motor expenses rates is long overdue. Like the subsistence rates, motor expense rates were dramatically cut by 25% in March 2009, and haven’t been restored since.

At that time, the price of a litre of motor diesel was below €1. Today, despite recent falls, it is still over 30% higher.

The updated Revenue guide to subsistence claims also outlines their notoriously complex terms and conditions.

if these are breached, some or all of the payments will attract a tax charge, and possibly interest & penalties.  So tread carefully…

Irish Tax Institute Query Home Office Tax Crackdown

August 16, 2013

The Irish Tax Institute have today published their formal response to the last month’s Revenue Tax Briefing which sought to restrict allowable travel expenses for contractors and small companies operating from home office environments.

In their Tax Briefing, Revenue effectively attacked the entitlement of company directors and employees to claim mileage and subsistence expenses in respect of travel to and from their home office – even if it is a company’s registered office or main place of business.

Revenue Attack Home Office Company ExpensesThe Irish Tax Institute (ITI) have responded by questioning the validity of this approach.

They point out the rather obvious reality that in the modern working environment, there are many cases in which a person’s home is their main place of work, and note that Government policy actively encourages home working and teleworking.

The ITI criticise the Revenue position as failing “to take account of genuine situations where an individual’s work operations are based at their home and the majority of their work takes place at home, rather than at any other premises.”

The Institute also point out the apparent contradictions between the new Revenue policy and a range of existing Revenue arrangements and concessions, including:

  • construction industry “country money”,
  • allowable subsistence for foreign travel and,
  • the Budget 2012 Special Assignee Relief Programme and Foreign Earnings Deduction schemes.
Clearly this debate is far from over.

For more, see The Irish Tax Institute statement , Revenue Tax Briefing No 03/13 & my recent Blog Post on this subject.

Revenue Attack Home Office Company Expenses

July 26, 2013

Revenue have today announced new rules for mileage and subsistence expense claims by individuals who provide services to third party customers via a limited company.

Revenue Attack Home Office Company ExpensesThe main purpose of the updated rules seems to be to prohibit an employee or company director from claiming expenses in respect of travel to and from a home office – even if this is a company’s registered office or administration location.

It appears that valid expense claims may be entertained for travel between client locations, but not in any circumstances between the person’s home and the third party customer’s premises.

The new rules are contained in a Revenue Tax Briefing issued today.

They are likely to have significant ramifications for small business owners.

I would be concerned that they will make it considerably harder for many businesses to make ends meet, and they may well render some jobs (and possibly entire businesses) unviable.

They also appear, at first glance, to discriminate against companies operating from a home office. A director of such a company operating in, say, Dublin will now be unable to claim motor or subsistence expenses for business trips to Donegal or Kerry.

On the other hand, if the company rents a non-home office premises 100 metres away from the directors’ home, the entire expenses will be allowable.

This appears neither sensible nor just.

The full implications (and legality) of the new rules will only become clear in due course.

If you are likely to be affected by the new rules, you should consider seeking professional advice on their effects in the near future.