07 Sep 2019 | 11.58 am
Interview: Matthew Dolan, Deloitte
Tax missteps when SME owners sell their business
07 Sep 2019 | 11.58 am
Tax partner Matthew Dolan joined Deloitte from university and has been with the firm for over ten years. He primarily advises clients in the financial services space with a focus on aviation finance and leasing. He also spent some time working in the New York office advising multinationals on their Irish expansion plans.
You have experience in M&A tax. What tax missteps do you come across when SME owners sell their business?
A pre-sale tax health check or vendor due diligence can greatly reduce time and effort for both buyer and seller during a sales process. It is important that SME owners understand the tax profile of their business and that positive tax attributes will continue to be available to a purchaser post-acquisition.
Identifying potential tax exposures and latent gains which may or may not be triggered on the sale of a business can be very important and is often overlooked.
A common issue is one whereby an SME owner may underestimate the time frame involved in undertaking any pre-sale restructuring that may be required; for example, where a particular asset or business line will be retained. This can be problematic when it occurs contemporaneously with a sales process.
Many SME businesses have an international presence in some form, such as overseas sales offices, but may not yet be at a scale whereby they have considered their non-Irish tax footprint in sufficient detail. This is certainly an area we note during the M&A process.
Similarly, a recent focus area has been on a target’s preparedness for and compliance with PAYE modernisation.
In your dealings with business clients affected by Brexit, what tax planning issues are of most concern to them at the moment?
I think it is fair to say most clients are considering the no-deal scenario a very real possibility and are framing their plans with that in mind. It remains the case the companies should hope for the best, but plan for the worst.
From a direct tax perspective, we will continue to have our double tax treaty with the UK and amendments have already been made or proposed to existing domestic legislation to expand certain reliefs to ensure. For example, there should be no inadvertent clawbacks or breakages in tax groups.
The significant impact will likely be in the areas of customs duties, VAT and employee mobility. Clients are considering how exposed they are from a supply continuity perspective in terms of goods travelling through the UK, tariff analysis and registration requirements.
The main tax considerations for those clients who have or will move operations from the UK to Ireland tend to be in the area of UK exit charges, transfers taxes and VAT implications. However it is important that due consideration is given to the ongoing tax implications of operating in Ireland.
The tax landscape may become considerably more complex. For Irish companies engaged in import and/or export with the UK, there could be significant administrative requirements in terms of VAT compliance, customs duties etc.
Practical issues such as reviewing contracts to determine obligations such as who would be the importer of record, obtaining an EU Economic Operator’s Registration and Identification system number, considering whether guarantee and deferred payment facilities should be put in place to help with potential cashflow issues, and appointing brokers where necessary should be considered now so as taxpayers are prepared insofar as they can be.
Tax services are a big part of the Deloitte business. What’s the firm’s tax USP?
Deloitte is the largest professional services firm in the world with a network of 268,000 professionals in over 150 countries. That scale gives us a unique position to provide seamless cross-border tax advice to our clients.
We utilise the expertise that exists right across our business in the areas of technology consulting, data analytics and robotics to provide clients with innovative tax offerings.
Locally we have a highly experienced tax team and widely recognised experts across all our tax service offerings. Initiatives such as our Best Managed Companies Awards, Fast 50 Awards and more recently our inaugural Financial Services Innovation Awards give us the opporuntity to work very closely with our clients, gaining valuable insight into their needs, issues and business operations.