Insight

Posted on by Anita Power

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Employment & Income Supports

The Department of Employment Affairs & Social Protection (DEASP), are introducing measures to limit and slow down the spread of COVID-19, to keep the number of affected people to a minimum and to reduce peak pressure on the health service. The main measures being introduced by the Government are as follows:

  • Waiver of the current 6 ‘waiting days’ for Illness Benefit in respect of medically certified cases of COVID-19 or medically required self-isolation in accordance with public health guidelines and bringing forward payment of benefits to cover the first week of any absence in respect of medically required cases of self-isolation or medically diagnosed cases of Covid-19,
  • Increasing the personal rate of Illness Benefit from €203 per week to €305 per week for a maximum period of 2 weeks of medically certified self-isolation, or for the duration of a person’s medically-certified absence from work due to COVID-19 diagnosis,
  • Removing the means test for Supplementary Welfare Allowance in respect of medically certified cases of self-isolation, and
  • Allowing self-employed people to receive either Illness Benefit or non-means tested Supplementary Welfare Allowance.

The Department of Employment Affairs and Social Protection has released a detailed guide for employers and employees and includes information on: 

  • Who the enhanced arrangements are intended to support
  • Workers who are diagnosed with COVID-19
  • Workers who are not diagnosed with COVID-19 but are required to self-isolate
  • Workers whose employers do not supplement/top-up the state Illness Benefit payment
  • Availability of the enhanced payment
  • Workers who are requested to stay at home by their employer
  • Workers who are laid off temporarily or put on to short time working
  • Workers who need to take-time off work to care for a person affected by COVID-19
  • People already in receipt of Social Welfare Payments
  • How to apply for Illness Benefit for COVID-19 absences

The Department of Employment Affairs and Social Protection have put an array of measures in place with regard to supports for both employees and employers which can be found here.

Temporary COVID-19 Wage Subsidy Scheme

On March 24, the Government announced the introduction of this temporary Scheme to provide financial support to both employees and employers adversely affected by the global pandemic.  The Scheme, which is expected to last 12 weeks from 26th March 2020, will enable employees to receive significant supports directly from their employer.  The Scheme will replace the previous Employer Covid-19 Refund Scheme announced which focused on assisting employers with employees who were laid off without pay.

This is a welcome announcement as many employers would wish to support their workers in this period of crisis, whether they be laid off or put on reduced working hours as a result of a downturn in business.

The main features of the Scheme:

  • Initially, the subsidy scheme will refund employers up to a maximum of €410 p/w per qualifying employee.
  • Employers should pay no more than the normal take home pay.
  • The subsidy scheme applies to employers who top up employee’s wages along with those who are not in a position to do so.
  • Employers make this special support payment to their employees through their normal payroll process which will be notified to Revenue.
  • The reimbursement will be made within two working days of the submission.
  • From April 2020, the scheme will move to a subsidy payment based on 70% of the weekly average take home pay, up to a maximum of €410 p/w.  Revenue will issue further guidance on the calculation in due course.
  • Income Tax and USC will not apply to the subsidy payment.
  • Employee PRSI will not apply to the subsidy or any top up by the employer.
  • Employers PRSI will not apply to the subsidy and will be reduced to 0.5% on the top up payment.

To qualify for the wage subsidy scheme, employers must:

  • Retain their employees on the payroll.
  • Be unable to pay normal wages and outgoings fully.
  • Be able to demonstrate, to Revenue’s satisfaction, a minimum of a 25% decline in turnover.
  • Be experiencing significant economic disruption due to Covid-19.

Further Revenue guidance is to be issue shortly which should outline the detailed workings of the scheme.

Guides & Forms for COVID-19 DEASP payments

COVID-19-Information-for-Employers-EmployeesDownload
COVID-UP-Form-2Download
Posted on by Anita Power

One year on from the introduction of Revenue’s new PAYE regime, employers need to ensure they are ready for the transition from 2019 to 2020.

Information recently released by Revenue shows that employers have made more than 6 million payroll submissions since the introduction of PAYE modernisation in January 2019. While most employers are getting to grips with the new system, the transition from 2019 to 2020 requires careful handling.

2020 Revenue Payroll Notifications

Employers who have not already done so should request RPNs for all employees before the first payroll run of 2020. If there is no RPN available for an employee, emergency tax must be applied.

Payments made in 2020

Payments paid on or after 1 January 2020 must be reported to Revenue when the payment is made, regardless of when the money was earned. Employers should use the tax credits and rate bands included on the 2020 RPN even if the payment refers to work carried out in 2019.

Payment dates

Payments must be reported to Revenue on or before the payment date and will be included in the monthly statement that Revenue issues summarising your payroll submission requests. Payment dates for 2019 and 2020 cannot be included in the same payroll submission.

Employment Detail Summary

Employers no longer need to provide P60s for their employees. Instead, employees can now access details of their pay and statutory deductions via the ‘myAccount’ service on the Revenue website.

Employees who have left

If you are making a payment in 2020 to an employee who ceased employment in 2019, you will need to submit a new RPN request and make a payroll submission for the post-cessation payment.

‘Week 53’

As 2020 is a leap year, this may create ‘Week 53’ payroll issues for some employers if it results in an additional pay day for employees (including pensioners) who are paid on a weekly, fortnightly or 4-weekly basis. Employees who are paid on a monthly basis are not affected. If you need information or assistance about the potential impact of ’Week 53’ on Income Tax and USC deductions, please contact a member of our team.

Fines and penalties

As in all matters involving Revenue, timeliness and accurate record-keeping is vital when processing PAYE. Bear in mind that your payroll submissions and corrections feed into Revenue’s risk analysis system and that if you are selected for a compliance visit, your PAYE processes will be checked. There is a fixed penalty of €4,000 for each breach of the PAYE rules. Further information is available on the Revenue website. If you have concerns or need assistance, please get in touch.

PAYE Employee – What to do now?

Employees will not receive a P60 from employers for 2019 or subsequent years.

Instead, from 1 January 2020, you will access your Employment Detail Summary on ROS.ie through ‘myAccount’.  This summary will contain your pay and statutory deductions for the year as reported by your employer or pension provider.  To claim additional tax credits, reliefs or expenses, PAYE customers must complete an Income Tax Return.  The quickest and easiest way to complete the Return is through PAYE services in ‘myAccount’.

Posted on by Anita Power

The financial affairs of charities and not for profit organisations has become a very topical issue in recent times.

There have been numerous high-profile cases of governance breaches in many charities and not for profits, and these have had a very damaging reputational impact on the entire sector. Regulation and legislation is starting to make headway though, explains Tim Quinlivan.  These organisations are a key component of our society and play a pivotal role in many of the essential services that are relied upon by thousands of people.

Public confidence is vital for these organisations as many are dependent on funding from a variety of public sources, these sources include charitable collections, benefactors and of course grant funding directly or indirectly from the exchequer. There have been many changes to legislation and financial reporting and these changes are helping to restore confidence in the sector.

Charities Act 2009 is a piece of legislation that was specifically drafted to reform the law around community and voluntary activity in Ireland. Although slow to be enacted, this piece of legislation has been a positive influence on the sector and has created a very clear definition as to what a charity actually is.

The Act also created a body known as the Charities Regulatory Authority (CRA). The CRA is an independent statutory agency. Its main objective is to secure compliance by charities with their legal obligations and to encourage better administration of charities.

The CRA is now very active in the sector and is having a very positive impact on compliance and accountability. It has carried out many investigations and imposed sanctions on a number of charities. In addition to enforcement, the CRA offers very useful guidance and information for charities and not for profit organisations.

The financial reporting requirements of charities and not for profit entities has remained largely consistent with companies however this will soon change with the mandatory imposition of SORP FRS 102 on qualifying Irish charities.

The Statement of Recommended Practice (SORP) is mandatory for UK charities but not yet in Ireland. The SORP is likely to come into effect in the coming years and this will lead to yet another transition to be negotiated through. The SORP brings with it more detailed reporting and disclosure requirements. Undoubtedly it will lead to more transparency from a reporting perspective but it will require additional resources and input from all stakeholders.

Certain funding agents will have particular disclosure or compliance requirements. For example, many of the bodies that give grant funding will require the recipient entity to have their financial statements audited while others will require certain disclosures be made in relation to management remuneration.

Circular 13/2014 – Management of and Accountability of Grants from Exchequer Funds is another compliance requirement of bodies that receive grant aid from the exchequer. It sets out the principles to be abided by in terms of managing and accounting for grant funding along with stipulating certain disclosure requirements such as the name of the grantor, the amount of the grant taken into income and any grant income deferred at year end.

There are many different aspects to the financial affairs and the corporate governance requirement of charities.
Contact the team at Sheil Kinnear to discuss your requirements.

Posted on by Timmy Breen

A PAYE modernisation project currently under way has implications for all employers. The changes, set out in Finance Act 2017, come into operation on 1 January 2019.  David O’Connor explains what you need to do to prepare for the new regime.

Revenue’s PAYE Modernisation project will introduce ‘real time’ payroll reporting from 1 January 2019. Under this new regime, employers must calculate employees’ pay and deductions and submit this information to Revenue as (or before) each payment is made. To prepare for the new system, employers will need to review their processes and ensure that correct PAYE procedures are being followed. Any changes that may be needed to comply with PAYE modernisation requirements should be implemented before the new regime commences.

What is changing?

Under the new system, a Revenue Payroll Notification (RPN) will replace the current Tax Deduction Card (P2C). From 1 January 2019, employers will have to request the most up to date RPN from Revenue before making payments to employees. Employers must notify Revenue of employee payments in real-time, submitting details of the amount being paid, the payment date, and the PAYE, USC, PRSI and LPT being deducted. Revenue will issue a month-end statement summarising the employer’s submissions made during the month. If no amendments are required, this Revenue statement will be deemed to be the employer’s monthly return. However, if the Revenue statement is incorrect, the employer will need to correct the payroll data and make another submission. Finally, on or before the due date of an income tax month, the employer must pay the Collector General the income tax due to be deducted in respect of that month.

Return and payment due dates

 While all employers will have to provide payroll information to Revenue on a monthly basis, some smaller employers using the ROS system may be able to make payments on a quarterly basis. Return and payment due dates are as follows:

 

Remitter Type Return Filing Frequency Return Due Date Payment Frequency Payment Due Date
Monthly Monthly 14 days after the end of the month Monthly 14 days after the end of the month (23 days for ROS users who file and pay online
Quarterly Monthly 14 days after the end of the month Quarterly 14 days after the end of each quarter (23 days for ROS users who file and pay online)

[Table source: https://www.revenue.ie/en/employing-people/paye-modernisation/changes-from-1-January-2019.aspx|

What to do now

In June of this year (2018), Revenue will ask employers to submit a list of current employees. The immediate priority, therefore, is to check that you have registered all your employees and received a tax deduction card (P2C) for each of them. Check also that you have Personal Public Service Numbers (PPSNs) and up-to-date addresses for all employees. If you rely on payroll software and/or an agent to manage payroll on your behalf, make sure that they are ready for the PAYE Modernisation regime. Weaknesses in your PAYE procedures are likely to be highlighted by real time reporting so now is the time to ensure you are operating the correct procedures.  For further information and advice, please contact a member of our team.

Posted on by David O Connor

Succession planning is not just a matter of securing the future of your business. It’s also about protecting your personal financial security, explains David O’Connor.

Business owners tend to delay planning for what will happen when the time comes to exit the business. Unfortunately, this can be an expensive mistake because failing to develop a succession plan may result in lost opportunities and higher tax bills with an adverse impact on the business and on the owner’s personal financial situation.

Succession planning is not just a matter of identifying and developing a person or team to take over your business. It is also about developing a plan that will provide you with adequate retirement income.

Your plan should include a strategy to cope with unexpected events which might cause you to exit  sooner than you otherwise intended.

Examples of such events include:

  • Accidents or illness,
  • Changes in family circumstances,
  • Unexpected offer to purchase the business,
  • Loss of key customers or markets,
  • New competitors.

Deciding on an exit strategy

Your exit strategy will depend on many different factors. For an SME, it could involve planning for a future management buyout. For a family business, it might be identifying and developing a suitable successor from within the family or bringing in someone from outside to take over in due course. For a sole trader, it might involve partnership or incorporation. For farm businesses, it could be setting up a succession partnership. Some owners may choose to sell up or even wind up the business.

Whatever the circumstances, timing and tax, need to be carefully considered as different strategies can have very different financial outcomes.

To take Capital Gains Tax as an example, depending on your circumstances, you may be able to avail of Retirement Relief or Entrepreneur Relief which could significantly reduce, or even eliminate, your CGT exposure subject to meeting certain conditions when disposing of your business.

Finance Act 2017

Where your succession plan involves a management buyout or selling shares in the business, it is important to check whether your plans will be affected by new measures introduced in Finance Act 2017. The changes aim to counter tax avoidance where certain companies sought to extract value from a company as capital rather than income, in order to avail of the lower CGT rates. The new measures restrict the amount of a consideration which may be treated as a ‘new consideration’ when derived from share capital or securities of a close company, and provide that a payment to a member of a close company, on a disposal of shares or securities in the company, will be treated as a distribution, in circumstances where the consideration for the acquisition of the shares or securities is funded, or to be funded, directly or indirectly out of the assets of the company.

Reviewing your Succession Plan

Succession planning is not a once-off activity. Circumstances change and plans need to be updated accordingly. A key focus should be to optimise your business now so as to maximise your future financial security. For more information and to find out how Sheil Kinnear can help, please contact a member of our team.

 

Posted on by Marese Stafford

As your business develops, there can be advantages to restructuring as a limited company. However, incorporation is not for everyone, explains David O’Connor.

For sole traders, restructuring your business as a limited company can be an attractive option, particularly if you are in the higher income tax bracket or if you need to raise funds to grow your business. However, it is important to take professional advice as incorporation may not necessarily be the best, or the only option, to consider.

Advantages of Incorporation

Tax is usually cited as the main advantage when forming a limited liability company. This is because companies pay 12.5 percent corporation tax on their trading profits whereas a sole trader’s profits are taxed at the marginal income tax rate plus USC and PRSI. While the directors and shareholders of the company must still pay income tax, they can limit their earnings so that they are taxed at the lower income tax rate, leaving any remaining profits in the company to fund future development or be extracted at a later date.

Other advantages of incorporation include:

  • A company is a separate legal entity. This means that, with some exceptions, where the company incurs a liability, the liability rests with the limited liability company rather than with the directors and shareholders.
  • The liability of company shareholders (with the exception of unlimited companies) is limited to the amount they paid for the shares whereas for sole traders there is no limit on their personal liability for the debts of the business.
  • Company pension contributions enjoy greater tax advantages than self-employed pension plans.
  • Companies have greater flexibility to when it comes to remuneration. For example, they can reward directors and shareholders by way of salary, directors’ fees and dividends.
  • Companies can pay business expenses to employees and directors at civil service rates whereas sole traders can only claim for the actual expenses incurred.
  • Companies have the ability to raise finance by issuing shares and are more attractive to investors because of their limited liability.

Disadvantages of Incorporation

 

A disadvantage of incorporation is that companies have additional reporting and filing obligations and directors can be prosecuted for failing to comply with company law.

Loss of confidentiality can be a concern for some businesses as certain company information is publicly available through the Companies Registration Office.

Another issue is that incorporation can sometimes have an adverse tax impact, especially for businesses with trading profits below a certain threshold. Therefore, unless there are other compelling reasons, incorporation is generally not advisable for these businesses.

There are also anti-avoidance measures in place to counter situations where the main motive behind a transaction is avoidance of tax.

For certain businesses, alternatives to incorporation may be worth considering. Farm businesses, for example, should weigh the advantages of partnership and/or succession partnership before deciding to incorporate.

Practical considerations

Having considered the options and taken appropriate professional advice, if you decide to proceed with forming a limited company, there will be a number of practical issues to address. These include transferring assets, property, insurance, utilities and contracts to the company, setting up new bank accounts, advising creditors and debtors of the change, revising employee contracts, notifying Revenue and registering the directors as employees, updating licences, and ordering new stationery.

Conclusion

Changing your structure is a major business decision and professional advice should always be obtained. It is important to consider not just immediate needs, but also your long term plans, including your succession plan. While forming a limited company can be the right choice for many businesses, it is not for everyone.

For further information and to find out how Sheil Kinnear can help, please contact a member of our team.