30 Sep 2017 | 04.13 pm
Interview: Frank Greene, Mazars
‘Getting VAT wrong is a recipe for a business becoming unstuck’
30 Sep 2017 | 04.13 pm
Frank Greene is the Lead Tax Partner in Mazars Ireland. He has extensive experience in tax-based property developments, corporate finance and corporate restructuring, maximising shareholder wealth on purchases and sales of companies and also advising clients in relation to Revenue audits.
In your dealings with business clients, what tax planning or tax resolution issues are of most concern to them at the moment? What are their Brexit concerns?
Businesses are primarily concerned over the stability of their group tax structures and transfer pricing policies in light of BEPs along with the optimal location of group IP (‘Intellectual Property’).
Managing uncertainties including potential volatility of sterling and implications for their cost base while at the same time continuing with growth plans are among the key Brexit concerns for business.
Uncertainty also surrounds how future trade between the UK and the remaining EU Member States will be negotiated in terms of customs duties that might be imposed. A cash flow disadvantage will also arise in relation to VAT at the point of entry for goods coming from EU Member States into the UK and for goods coming from the UK into EU Member States. This is primarily of concern for groups where their UK business is currently in use as a gateway to Europe.
What are the main pitfalls clients encounter with the R&D tax credit, and how can your firm help?
The main difficulty that we have found with the R&D tax credit is having sufficient evidence to demonstrate that the claim is for qualifying R&D activity and that the costs incurred have been properly tracked and accounted for. Sometimes it can be difficult to demonstrate a clear distinction between product development and an R&D development activity, and between commercial advancements and scientific or technical advancements and uncertainties.
Mazars has a team of experienced individuals to assist clients with identifying eligible R&D activities and expenditures and submitting successful R&D tax credit claims to Revenue.
How common is it for businesses to come unstuck on VAT issues?
Getting it wrong or not seeking competent professional advice in this area is a recipe for a business becoming unstuck. Unless due care and attention is observed by businesses in meeting and understanding their VAT compliance obligations, they are very likely to encounter critical financial related risks in terms of doing business. For example, if the pricing of a sale of good or service does not correctly factor in VAT, the seller is held responsible for the VAT. The effect of such an error could be very costly and wipe out any profit margin on the sale.
The global nature of the supply chain of goods and services also introduces the active risk of VAT fraud being perpetrated. Relevant authorities are endeavouring to tackle this issue, but again businesses are ultimately made responsible. VAT legislation related to property transactions is particularly challenging, where getting the VAT treatment of such a transaction incorrect can leave a business with a considerable financial exposure.
A business owners five years out from projected retirement – what are the important tax issues to plan for?
This depends on whether the business owner will look to exit fully from the business with sale occurring or looking to pass the business on to the next generation. There are a number of key important tax reliefs available for a business owner looking to exit e.g. capital gains tax retirement relief and entrepreneurs’ relief which can greatly impact on the level of tax that a business owner should pay on the sale monies.
As with all tax reliefs there are a number of conditions that must be met to claim both retirement relief and entrepreneurs relief and careful planning is required to ensure if possible the availability of these reliefs. The time for planning is not when the business has been sold but one needs to plan a number of years in advance to ensure that all the conditions are complied with.
Also if the business owner wishes to pass the business to the next generation one also needs to stress that again all the various conditions are met to ensure that the business can pass to the next generation at minimal tax cost.
What tax reforms would you like to see to assist business in the upcoming Budget 2018/Finance Act 2017?
Alongside the commitment to maintain the 12.5% corporate tax rate Ireland should focus on reducing the personal tax burden, reforming tax relief for share based remuneration for the multi-national sector, extending reliefs for seconded employees and enhancing Ireland’s business start-up and entrepreneurial reliefs. These areas are critical for Ireland to increase its attractiveness as an FDI location and a magnet for skilled overseas talent to capitalise on Brexit.
We would welcome the introduction of a new share based incentive plan, which was signalled by the Minister for Finance in Budget 2017. The introduction of a share plan similar to the UK Enterprise Management Incentive (EMI) which allows for an income tax exemption on the grant or exercise of EMI share options and the employee only pays Capital Gains Tax (CGT) on the ultimate sale of shares acquired by way of a share option exercise would benefit and support business in Ireland. The scheme should be targeted at businesses to help them attract and retain key employees. In addition, the EIIS scheme, and in particular the EU qualifying conditions need to be reviewed, in order to facilitate companies in raising multiple rounds of funding.
We would also welcome commitment to planning for the implementation of customs controls between the UK and Ireland and the potential introduction of postponed accounting for VAT to manage the cash-flow cost facing traders who import goods from the UK post Brexit.