03 Oct 2017 | 09.45 am
Interview: David Shanahan, Tax Partner, Deloitte
Good idea - tapered CGT rate
03 Oct 2017 | 09.45 am
Deloitte Tax Partner David Shanahan spent two years in the firm’s New York office and he now advises multinationals as well as Irish companies on their growth strategies and overseas expansion plans.
What tax reforms would you like to see to assist business in the upcoming Budget 2018/Finance Act 2017?
An ongoing area of concern is the early exit of entrepreneurs once their business reaches a certain value. It would be interesting to see the introduction of a tapered Capital Gains Tax rate – the tax rate on a gain would reduce the longer the shares in the company are held. This should encourage entrepreneurs who have built successful businesses to continue building and expanding their businesses for longer.
There have also been repeated calls to bring the Irish relief in line with the more beneficial UK equivalent regime. Any improvement in the Irish relief in the Budget would be welcome but it is unlikely we will see significant improvements this year – I would expect it will take a few years before we are on a par with the UK’s offering.
A business owners five years out from projected retirement – what are the important tax issues to plan for?
With five years to go to retirement a business owner needs to consider the likely income tax, capital gains tax and capital acquisitions tax implications of his exit from the business. From an income tax perspective, maximising pension funding and tax free termination payments could be considered. Where the business holds excess cash or investments, extraction or segregation of these assets in advance may maximise the various available tax reliefs. A business exit can be an opportune time to provide for family members so consideration could also be given as to how this could be achieved in an efficient manner.
How common is it for businesses to come unstuck on VAT issues?
It is very common for businesses to get at least some aspects of their VAT return wrong. The areas that typically cause problems for even the most straightforward business is where they do not correctly self-account for VAT on the reverse charge basis in respect of the receipt of services from non-Irish suppliers, the acquisition of goods cross-border, failure to file intrastat/VIES/ARTD returns, incorrect deduction of VAT on specifically disallowed items and, of course, VAT on property transactions. It is important to establish what the VAT obligations are for your business and be fully aware of deadlines well in advance.
What are the main pitfalls you encounter with clients availing of the R&D Tax Credit, and how can your firm help?
The R&D function within a business when assessed as a cost/profit centre does not usually neatly fit with the R&D tax credit definition of qualifying R&D activities and, as a result, work is needed to identify the associated qualifying expenditures. Understanding the qualifying criteria is perhaps the single biggest area that businesses struggle with and there is still uncertainly around how Revenue will interpret particular claims.
In our experience, defining a project hypothesis at the outset showing that R&D is required is beneficial. As the project progresses, records of project planning, the R&D activities undertaken, the scientific or technological uncertainties they are resolving, and by whom, all assist in supporting that the work is systematic. That is to say, the activities undertaken are planned measured and documented as they happen.
The R&D team at Deloitte is the largest global team of R&D and government incentives specialists and is made up primarily of scientists and engineers from a range of differing backgrounds working exclusively on helping companies to make R&D tax credit claims.