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Thousands of families face huge inheritance tax bills as home values rise

An article issued on independent.ie highlights the details contained in a recent survey completed by Coyne Research.

‘The survey shows 84pc of people in Ireland don’t know the current inheritance tax rate, which could seriously affect inheritance for their family. ‘ It also highlights there is a widespread lack of awareness of the levels of inheritance tax that may have to be paid by families in the coming years, with 2/3rds unaware of the current thresholds.

The advice is for families with assets to get professional legal, tax and financial advice to put a plan in place, including a will, to ensure an estate is taken care of in a tax-efficient way.

Read more of this article here

Should you require any inheritance guidance or advice, please contact us on 01 539 7999 or info@itasaccounting.ie

 

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Legal and Tax Implications of Directors’ loan

Companies and their directors are seen as two separate legal entities.

Therefore, when a director wishes to borrow money from their company for personal use even for a short period of time there are a number of legal restrictions and tax implications to be considered.

 

Directors’ loans and the Companies Act 2014

The Companies Act 2014 prohibits directors or connected parties to them been given loans greater than 10% of the company’s net assets except in certain circumstances.

  1. The loan is to another group company
  2. The relevant Summary Approval Procedure is followed allowing a company to provide a loan of greater than 10% of the company’s net assets to a director or connected parties to them. This is a declaration which set out the details of the transaction this must be delivered to the CRO with 21 days of the loan being made. The use of the SAP to legalise a director’s loan arrangement will expose all directors to unlimited personal liability for the debts of the company. Prior to utilising the SAP to legalise an activity, the directors should carefully consider the fact that they could be exposing themselves to unlimited liability.

If a company does provide a loan greater than 10% of the company’s net assets to a director outside of these exceptions, they are in breach of company law.  If this breach is brought to the attention of the Director of Corporate Enforcements, it may result in in them issue proceedings against the directors of the company.  This is particularly relevant to companies without audit exemption as auditors are legally obliged to report a breach of the directors’ loan legislation to the Office of the Director of Corporate Enforcements.

 

Tax Implications of Directors’ loans

There are a number of tax implications in relation to directors’ loans:

 Income Tax

  1. The first is Benefit in Kind chargeable to the director if they are receiving the loan interest-free or paying below the interest rates agreed by Revenue which is 4% for loans to purchase a principal private residence and 13.5% for all other loans.

Corporation Tax

  1. If a director does pay interest to the company on the directors’ loan this is treated as Interest Receivable for the company and taxed at the rate of 25%.
  2. Where a director does repay the loan within the twelve-month period the company is due to pay a surcharge when submitting their corporation tax return. The is surcharge is calculated on the basis that 20% income tax was deduced from the loan before the director received it and this must be paid to Revenue.  However, once the loan is repaid to the company the tax paid is refundable to the company.

ITAS Accounting are Registered Statutory Auditors experienced in dealing with the Financial Services industry in meeting their Revenue, CRO and Central Bank requirements.

If you or your client require any assistance, please do get in touch with us.

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Audit Exemption – Who Qualifies?

Any company who has had to go through an Audit will know that it is both extremely time consuming and costly.

Audits can only be undertaken by Registered Statutory Auditors.  In recent years, audits have become more complex and the audit process itself has become far more rigorous. Auditing standards apply equally to small owner-managed companies right up to the largest of organisations who have vast resources. The result of this equal status means that owners of small companies can find the annual audit to be very time-consuming and expensive.

Due to Central Bank regulation, most Financial Services Brokers are required to undertake a full Audit each year. However, not all Limited Companies are required to undergo an audit. Below is a list of conditions that must be met in order to avoid this additional cost to your client’s business.

 

Small Company Exemption

The qualifying conditions for a small company are satisfied by a company in relation to a financial year in which it fulfils two or more of the following requirements:

  • Turnover of the company does not exceed €8.8 million;
  • Total assets on the balance sheet does not exceed €4.4 million;
  • Average number of employees does not exceed 50

The company must have filed its annual return on time with the CRO for the current and preceding year.

A company only loses ‘Small Company’ status if it does not satisfy the qualifying conditions above in respect of two consecutive years.

 

Group Company Exemption

Audit exemption is not available to a company that at any time during the financial year was a group company unless the group qualifies as a small group.

The qualifying conditions for a small group are satisfied by a group in relation to a financial year in which it fulfills two or more of the following requirements:

  • Turnover of the holding company and member groups does not exceed €8.8 million;
  • Total assets on the balance sheet of the holding company and member groups does not exceed €4.4 million;
  • Average number of employees employed by the holding company and member groups does not exceed 50.

A group company only loses ‘Small Group’ status if it does not satisfy the qualifying conditions in respect of two consecutive years. All Irish companies in the group must have filed their annual return on time with the CRO for the current and preceding year.

 

Dormant Company Exemption

Dormant Company Exemption requires that the directors of the company are of the opinion that the company will satisfy the following conditions.

  1. It has no significant accounting transaction, i.e, a transaction that is required by to be entered in the company’s accounting records, and
  2. Its assets and liabilities comprise only permitted assets and liabilities. *

*Example of non “permitted assets” would be property, bank accounts, tax liabilities, other non-group liability or contingent asset or liability.

 

Companies Limited by Guarantee

Companies limited by guarantee may also avail of the audit exemption subject to similar criteria as private companies limited by shares (“LTDs”).

Examples of these would be Apartment Block Management Companies, Sports Clubs & Certain Not for Profit Organisations.

 

Rights of Shareholders and Members

Shareholders with more than 10% of the voting rights in a company have the right to inform the company that they do not want the company to avail of the audit exemption as long as that shareholder meets certain timing conditions.

Members of companies limited by guarantee have the right to inform the company that they do not wish the company to avail of the audit exemption, again as long as certain timing conditions are met.

Audit exemption is not available to the following types of company, irrespective of size:

  1. Public limited companies (“PLCs”)
  2. Public unlimited companies (“PUCs”)
  3. Public unlimited companies that have no share capital (“PULCs”)
  4. Investment companies
  5. Companies falling within any provision of Schedule 5
  6. Special purpose companies that manage and hold assets such as bonds, stocks, and commodities.

 

ITAS Accounting are Registered Statutory Auditors experienced in dealing with the Financial Services industry in meeting their Revenue, CRO and Central Bank requirements.

If you or your client require any assistance, please do get in touch with us.

 

Damian Wilson
Ph: 01 539 7999
Mobile: 087 2397782
Email: damian@itasaccounting.ie
Web: www.itasaccounting.ie

 

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Revenue investigating Airbnb homeowners

As reported in the Irish Times on Monday, 11th June 2018, Revenue are investigating the tax affairs of several homeowners who have let rooms through the Airbnb accommodation website.

The notice issued states that it is investigating all taxes and duties, including income from providing short-term accommodation, in the years 2014, 2015 and 2016. As stated in the Irish Times article, Revenue does not specifically mention Airbnb.

If income is found to be undeclared, there are significant penalties issued by Revenue.

Read this article in full here

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