- Should I operate as a sole trader or through a company?
There are many aspects to be considered here. Operating through a limited company can offer a veil of protection with limited liability whereas operating as a sole trader means that the individual is personally liable for all debts in the event of business failure. There are tax implications also and operating through a limited company can be efficient in cases where the business is generating profits in excess of that required by the owner. Operating through a limited company can afford better pension planning opportunities. The compliance costs of operating through a limited company are normally higher.
- Can I convert from a sole trader to a limited company?
Yes, and this is common. There is tax relief also on the deemed disposal of your business should it have a value. This process is cumbersome and requires considerable administrative changes but can be done without triggering any tax.
- Do I still need to file accounts if my company is dormant?
Probably yes. Unless you are just receiving rent in respect of letting one room in your Principal Private Residence (“PPR”) as this income may be exempt under rent-a-room relief. If you have (say) moved to Australia and are renting your Irish home, a return of income must be made to the Revenue Commissioners each year in respect of the rent received.
Individuals in receipt of rental income must register for income tax and Colleran Chartered Accountants can assist in this regard.
- I am making a loss on my rental property, must I still file a tax return?
Yes. You may be losing money (ie paying out more each year than you are receiving in rent) but you could still have a rental profit that would be subject to Irish tax. Say for example your rental income is €12,000 per annum and bank repayments are €11,000 (interest and capital) and other property expenses are €3,000, you are cash negative of €2,000 per annum but could be in a taxable profit position. You only get relief against your income for 75% of the bank interest (not necessarily the bank payment) and this can give rise to a tax liability.
- What’s the difference between NPPR / LPT and the Household charge?
The Non Principal Private Residence (“NPPR”) (www.nppr.ie) charge is payable in respect of properties in Ireland that are not the PPR of the owner. This charge is not tax deductable. The local authority is charged with the collection of this charge. The charge is payable for the years 2009 to 2013.
The Household charge was a once off charge in 2012 – likewise this charge is not tax deductable
The Local Property Tax (“LPT”) was introduced in 2013 and is payable in respect of all property in Ireland.
The Revenue commissioners are charged with the collection of LPT and the Household Charge.
- Does non-compliance with LPT affect my tax?
Yes, it can affect an ability of an individual or a company (where a director has not complied with LPT) to obtain a tax clearance certificate (“TCC”). Also the Revenue Commissioners can collect LPT by way of instructing employer to apply deduction at source out of net pay.
- What is PRTB, and can it affect my tax?
The Private Residential Tenancies Board (www.prtb.ie) requires that all residential tenancies must be registered with them. The tax legislation was amended in 2006 to disallow a deduction of any loan interest against rental income in cases where PRTB was not in place.
- If I sell my house, do I pay Capital Gains Tax (“CGT”)?
Possibly. There is relief from CGT where an individual disposes of his or her PPR that they have lived in as their sole residence for the entire duration of ownership. Where a property has both been a PPR and then rented as an investment property or vice versa, CGT may be payable on a portion of the gain, should there be a gain on the disposal.
- If I sell shares, do I pay CGT?
If you sell shares at a profit, you may be liable to pay CGT. There is an annual exemption which can be deducted from the gain so small gains may be covered by the annual exemption. Also an individual or a company may have capital losses forward, so even large capital gains may be covered by capital losses forward.
- What are the important tax payment dates?
For self assessed taxpayers, 31 October is the annual pay and file date (mid November for online filing). On this date, preliminary tax for the current year and the balance of tax for the previous year is payable.
31 October is now also the relevant payment date for Capital Acquisitions Tax (“CAT”) payable for any valuation dates in the 12 months ending on the preceding 31 August.
CGT is payable in mid December for chargeable gains for the first 11 months of the year with CGT payable for chargeable gains in December payable mid January.
- Do I have to pay tax if I exercise share options?
The taxation of shares acquired from employers can be complex. In certain cases the tax will be paid by the employer through the payroll (vested shares). However tax payable on the exercising of share options needs to be paid under self assessment. There may also be CGT implication on the disposal of shares that an individual acquired through their employment.
Please contact our office (email@example.com) where we can advise further based on your circumstances.
- Do I pay tax on dividends or deposit interest?
In respect of deposit interest, tax is deducted at source (DIRT) and paid by the financial institution to the Revenue Commissioners. However, USC and PRSI may be payable by both self assessed and PAYE employees. This may be done by the filing of a form 12 to Revenue. As regards dividends, there may be additional income tax also as well as the USC & PRSI payable. If the recipient pays tax at the marginal rate of tax, there will be a top up of tax as tax only at the standard rate would have deducted at source under DWT rules.
- Can a company have one director?
No, at the minute, all Irish companies must have at least two directors. The Companies Bill 2012 (www.clrg.org) has within it provision whereby a company can only have one director, but this not passed into law at present.
A company can have one shareholder – as in one individual or one company can own 100% of the issued share capital of a company. Queries in relation to shareholders or directors can be made to Melanie at firstname.lastname@example.org
- Do I pay tax if I inherit money or a business?
This will depend on the amount received and the relationship between the person giving the gift or inheritance and the recipient. The rules around CAT can be complex and each case must be considered given the circumstances of the case in hand. It is possible that a €200,000 gift may not have any CAT implications, whereas a €10,000 gift may have CAT payable.
There are also significant reliefs available where family businesses and agricultural property are transferred between generations.
- Do I have to register for VAT?
In Ireland, you must register for VAT if you are carrying on a ‘vat-able’ activity and your turnover is over the threshold for mandatory registration. If you are under the relevant Threshold amount, you may elect to be a taxable person, again on the basis that you are carrying on a ‘vat-able’ activity.
- What is a Revenue Audit?
The Revenue Commissioners (www.revenue.ie) can carry out an audit on any individual or entity and has broad ranging powers to compel taxpayers to supply information to them. In general, Revenue are entitled to examine any documentation that forms part of a business or an individual’s books and records.
If you are in receipt of a letter notifying you of a Revenue audit and require assistance in dealing with the process David Colleran (email@example.com) can meet you and discuss what is involved and best advise on the way forward.
- What is a business name?
- Is it easy to set up a company?
Yes, it is reasonably straight forward. An application is made to the CRO and the process can take up to 5 days. We can undertake to set up companies and assist with the tax registration of these companies with the Revenue Commissioners.
- Is tax relief still available for pension payments?
Yes, tax relief is available for payments into private pensions. There are various different types of pensions (private pensions / PRSAs / executive plans / SSAPs) but in general terms, and subject to limitation in certain circumstances tax relief at the marginal rate is available for pension payments.
- Is tax relief still available for trade union subs or local authority charges?
No, not any more, payments of trade union subscriptions or payments for waste collection are no longer relevant to tax.
- Are maintenance payments taxable?
The taxation of marital breakdown is complex. In broad terms the payment of maintenance payments for the benefit of ex-spouse (as opposed to for children) are tax deductable for the person making the payments and are taxed as income on the recipient. Maintenance payments for children are disregarded for tax purposes. If you are going through a marital breakdown and require assistance from a tax perspective contact firstname.lastname@example.org.
- Can I still get tax relief for rent paid?
Yes, but this is being phased out. Currently you can get relief from income tax if you pay rent but you must have been paying rent under a tenancy on the 7th December 2010.
- Can I get tax relief on medical expenses?
Yes, but mostly only at the standard rate of tax. It is possible that tax relief can be claimed for services of a doctor or consultant / prescribed medication / physiotherapy / cost of treatment in a hospital and diagnostic procedure amongst other things.
- If I rent out a property do I lose the tax relief at source?
Yes, if you are renting out your property, you must inform the Revenue Commissioners (email@example.com) to cease the application of tax relief at source as the loan interest no longer qualifies for tax relief.
- Do I pay BIK on a company car?
Yes, you do. Since 2003, the BIK is applied through payroll and is accounted for to Revenue by your employer. The BIK on company cars is much greater than the BIK on commercial vehicles.
- Does a property management company require an audit?
These companies are usually set up as company limited by guarantee and not having a share capital and as such require a statutory audit on an annual basis. These companies should not be confused with property management agents which may be engaged by management companies to fulfill the date to date activities of the management company.
- What happens if my management company gets struck off?
If accounts are not filed, the CRO will eventually strike the company off the register. This will mean that it is not possible to sell your property until the company is reinstated as the entity that holds the title to the land no longer exists. It is very costly to reinstate companies as a number of years of audited accounts and a number of years of late CRO fees need to be paid.