11 Sep 2017 | 11.58 am
Interview: Fiona Murphy, Tax Partner, RBK
Improvements to Entrepreneur Relief are needed
11 Sep 2017 | 11.58 am
Russell Brennan Keane Tax Partner Fiona Murphy has over 17 years’ experience as a tax adviser, dealing with all aspects of tax compliance, income tax, corporation tax and capital taxes. She also has experience with succession planning and tax-efficient company reorganisation.
In your dealings with business clients, what tax planning or tax resolution issues are of most concern to them?
Depending on the stage of our Business clients, they have different concerns – a business client in a start up position wants to ensure that their business has been structured correctly and that they have sufficient knowledge to ensure that they are tax compliant and are in a position to submit their tax returns in a timely manner.
As their business develops, a business client is interested in minimising their tax liabilities, ensuring that the business is structured to facilitate growth. They also become conscious of planning for their own future; maximising pension contributions, cashflow permitting and planning for exit via passing to the next generation or onward sale to a third party.
What are the main pitfalls your clients encounter with the R&D tax credit, and how can your firm help?
Many of our clients have claimed the R&D Tax credit over the years and in reviewing same, some of the common pitfalls include:
- Remembering the deadline – once the 12 month window has passed there is no scope to make a claim.
- Documentation – it is vitally important that the company maintains contemporaneous documentation.
- Understand the science – It is important that R&D personnel understand the tax technical requirements.
- Understanding when the R&D activity commenced and ceased.
- Claiming ineligible costs – Revenue have updated their technical R&D guidelines on numerous occasions, particularly between 2011 and 2015.
We provide a comprehensive review of the R&D Tax credit to include liaising with the R&D Technical team, review of the reports to ensure that it meet with Revenue requirements and a thorough review of the expenditure being claimed.
VAT has been described as a ‘high risk tax’. How can businesses reduce that risk?
To ensure that your VAT compliance record meets Revenue scrutiny, we would recommend the following:
- Keep a compliance calendar which sets out the due dates for the VAT returns.
- Invoicing – invoices should be prepared in accordance with the VAT regulations.
- Non-deductible VAT – a business is only entitled to reclaim VAT on its expenses incurred wholly for business purposes. Common disallowable VAT inputs include entertainment expenses, VAT on motor vehicles and petrol.
- International trade is a particular tricky area of VAT.
- Six month rule/supplier invoices – where a supplier invoice remains unpaid for 6 months, it triggers a clawback of the VAT reclaimed.
- Revenue verification checks on VAT refunds – it gives Revenue an opportunity to understand the business’s VATable activities.
A business owner five years out from projected retirement – what are the important tax issues to plan for?
There are a number of key issues for a business owner to consider in planning their retirement. Will the business be sold to a third party or passed to the next generation within the family.
There may be a requirement to structure the business affairs to ensure that any reliefs available on the disposal of the business are maximised e.g. CGT retirement relief/CGT entrepreneur relief and Capital Acquisitions Tax, Business Property Relief.
Has the business owner sufficient pension cover to provide for their needs for the future; again consideration should be given to reviewing their pension position; look at what income levels they will require for their retirement and whether their existing pensions can meet their needs.
What tax reforms would you like to see to assist business in the upcoming Budget 2018/Finance Act 2017?
• Increased improvements to the revised entrepreneur relief introduced in Finance Act 2015 to include an increase in the lifetime limit and removal of a number of restrictions in claiming the relief.
• Improvements to Employment and Incentive Investment Scheme (EII) to increase the current limit of €150k investment and ability to claim all of the relief in year 1.
•Business owners would like to see some improvements to taxation of personal income e.g. reduction in the marginal rate of tax or USC bands.
•A reduction in the Capital Tax rates i.e. CGT and CAT.