The Companies Act 2014 is due to come into effect on 1 June 2015. It represents significant update of company law in Ireland, replacing existing legislation that stretches from 1963 to 2013.

The main areas of change relate to the private Limited Company with one of the objectives being to make the running of these companies easier.

All existing companies will need to choose the model under which they wish to operate. There will be two options available for current private Limited Companies:

• Companies Limited by Shares (‘LTD’)
• Designated Activity Company (‘DAC’)

Some of the main differences between the 2 company formats are listed below:

LTD

• Can have 1 Director
• Can dispense with AGM
• Will not require an objects clause
• No Authorised Share Capital requirement

DAC

• Minimum of 2 Directors
• Can only dispense with AGM if a single member company
• Must have an objects clause
• Authorised Share Capital requirement

The majority of Limited Company Contractors will elect to be a private limited company by shares (LTD) as it reduces the administrative burden. One of the main benefits is the sole director requirement, i.e. it will no longer be necessary to have two directors. 

The LTD will have a one document constitution (rather than the Memorandum & Articles of Association) and will not require an objects clause.

There will be an 18 month transition period where companies can decide whether to become a LTD or a DAC. Should no option be made and the documents filed in the Companies Registration Office, such companies will automatically become a LTD.

Please contact us if you have any questions or would like to convert your existing Limited Company to a 2015 Act Company.

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Our nominated charity for 2015 is Concern Worldwide. To help raise funds for a very worthwhile cause Paraic took part in his first ever marathon when he completed the London Marathon in April.  We would like to say a big thank you to everyone who sponsored him and helped raise over €2,600 for Concern.

For further details of the Concern’s essential work with the world’s poorest people please visit  www.concern.net

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From all the team at Prima we would like to wish you a very Happy Christmas and a healthy and prosperous New Year.

Our offices will close on Christmas Eve at 1pm and will re-open on 2nd January at 9am. There will however be some staff working over the christmas holiday period to deal with any urgent matters that arise.

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Take a moment to think of what is important to you – for most of us the answer is of course our loved ones and our health with financial status trailing in importance – after all material things are insignificant in the grand scheme of life.  However, we may not take the time to think about how secure our current financial status would be if we were unable to work due to accident, illness or a disability.  We asked Miceal Gunning of Invesco, an independent financial advisory company, about the merits of Income Protection insurance for contractors:-

As a self-employed contractor you may have no state illness benefit entitlement, so you are on your own when it comes to funding your lifestyle in times of ill-health – a sobering thought.  Have you worked out how long your personal savings would last if you were unable to work for six months or more?  Would you have to sell assets to survive financially?  What other sources of income would you have?

In general, we tend to be over optimistic when it comes to insuring the things that matter, after all, it won’t happen to me, and for many insuring your income may seem redundant, however, given that your income pays for just about everything – your mortgage, car loan, bills, children’s education, other insurances – perhaps it’s time we take the idea of insuring your income seriously.

So, how do you go about setting in place adequate protection?  Well, Income Protection, a form of disability insurance, is designed to provide you with a replacement income each month, meaning your typical outgoings are covered whilst you recover from your illness and look forward to returning to work, no matter how long that may take.  The amount of cover you receive is determined by your current salary and health status and this determines the monthly premium which you pay.  As there are no restrictions on the type of injury, illness or disability that can be covered, you have the peace of mind that whatever the eventuality you will be covered. What’s more, with income protection, you can choose a plan that suits your individual circumstances with a range of flexible cover types available and as your needs and circumstances change you can adapt your policy to match them.  In addition, as the premiums qualify for tax relief the net cost to you is less than you might expect.

For further information please feel free to contact Miceal Gunning at www.invesco.ie

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 Following on from the recent project which focussed on the tax compliance of contractor companies in the South-West of Ireland, the Revenue Commissioners are broadening the scope of their project to include the Border, Midlands & Western region.

In a recent meeting with the Institute of Taxation it was confirmed by Revenue that the scope of the project has also been broadened, it now includes a wide range of contractors including engineers, project managers and software consultants. In addition, it will not be restricted to contractor companies but will include self-employed contractors, limited companies and directors of companies.

The majority of audits will be in the form of desk audits i.e. letters will be issued requesting information rather than visiting the taxpayers home/premises. All taxes (VAT/Corporation Tax/ Income Tax/PAYE/PRSI) will be included for the four years from 2008 to 2011. The focus will continue to be on “exaggerated” expenses claims, wages understated, payments to family members, and other expenses claimed. The issue of travel expenses will also continue to be a focus, with Revenue repeating their view that expenses incurred in respect of travelling from home to work are generally not allowable, and will only be allowable in extremely exceptional cases. 

We would reiterate our previous advice to any contractor with doubts about the validity of previously claimed expenses – review them as a matter of priority and discuss them with your accountant. If tax has been underpaid it would be advisable to make a full disclosure to minimise the level of penalties applied

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We’re delighted to support the Hireland initiative by pledging a job. We have pledged to take on a new employee in a newly created Marketing Assistant role. The new Marketing Assistant role will be aimed at Marketing Graduates who will have the opportunity to gain invaluable experience in assisting with the implementation of a new Digital Marketing Strategy in a small growing company.

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The deadline for payment of the Local Property Tax (LPT) is approaching and self-employed contractors who fail to submit the return on time could face serious consequences in relation to their Income Tax.

Self-employed workers who fail to pay the LPT on time will be deemed not to have filed their income tax returns on time. This could lead to penalties/surcharges being applied to their income tax return.

In addition, Revenue will not issue a tax clearance certificate where there is unpaid LPT. The individual will not therefore be able to tender for business where a tax clearance certificate is required.

Whilst it had been made clear that Revenue would do everything within their powers to ensure compliance with the new Property Tax, this is another example of the self-employed being treated unfairly by the tax and social welfare system;

• Self-employed contractors provide their services through Limited Companies, and pay tax under the PAYE system on salaries drawn from the company. As they are self-employed they do not however qualify for the PAYE tax credit.
• Proprietary Directors and Self-employed workers do not qualify for jobseekers benefits when they are out of work, despite paying both PRSI and USC on their income.  

The self-employed have a significant contribution to make to the future growth of Ireland’s economy. It’s time to give them the support they deserve and address the inequity within the tax and social welfare system.

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Revenue officials in Cork have confirmed that they are currently reviewing the tax affairs of contractor companies in the South West, and their directors, in relation to expense “deficiencies” that have resulted in the tax liabilities of the company directors being under declared.  As a result of their findings they say it will be an area of significant focus of regional enquiries throughout the year. 

In a letter to the Institute of Taxation the Revenue South-West Region advised that they have uncovered “deficiencies in accounting” for expenses which have resulted in “a significant understatement of tax liability to the benefit of the directors”. They go on to state that they regard the under-declarations of tax as stemming from deliberate behaviour and will therefore attract penalties ranging from 10% of the tax underpayment (for an unprompted disclosure) up to 100%  of the tax underpaid for those failing to make a disclosure or complete disclosure. Interest may also be payable so it could lead to contractors facing a liability of more than twice the amount of the initial tax saved. 

The issue of allowable expenses for self-employed contractors and company directors is not a new one, and in a routine Revenue audit it would always be the subject of scrutiny to identify any possible non-compliance. This investigation highlights the importance of contractors being given trustworthy and professional advice when it comes to declarations of expenses. Prima’s emphasis is always on ensuring that clients seek advice from our qualified accountants to clarify the tax treatment of their business expenses. Advice from friends/colleagues or anecdotal evidence regarding the validity of expenses from other contractors cannot be relied upon. Unfortunately, too often this “advice” comes from people who are not qualified to give an opinion on the matter, and relying on it could lead to tax penalties being incurred. But the financial cost is only part of the story. Any contractors who incur financial penalties as a result of this Revenue investigation may also suffer damage to their personal and business reputations. It’s a high price to pay in every respect, but it can all be avoided by investing in professional advice from the outset.  

At Prima we always encourage contractors who have doubts about the validity of their expenses to take advice and review their expense claims as a matter of priority. If tax has been underpaid they should make a full disclosure to minimise the level of penalties applied. It is the aim of Revenue to encourage disclosure, so if a full disclosure is made along with payment of any tax due, hefty penalties could be avoided. It could also help avoid a detailed audit of your tax affairs over the previous four years. 

It remains to be seen whether Revenue will extend their review beyond the south west of Ireland – the letter suggested it was “likely” to be initiated in other regions – but if they are of the opinion that the issue of overstating expenses is widespread throughout the industry it will undoubtedly become an area of focus for the foreseeable future.

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The deadline for filing your tax return in Ireland is fast approaching – if filing a paper tax return you have until October 31st to submit your tax return and pay any final tax liability for 2011, aswell as your preliminary tax for 2012.

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Last week brought good news from two Irish companies – Kerry Group and Paddy Power – and it’s great to see Irish companies expanding their operations inIrelandand creating over 1500 new jobs in the process.

However, the week also brought news of the demise of the meat processing company Olhausen, an Irish company that closed its doors after over 100 years of trading, resulting in the loss of 160 jobs. The employees of Olhausen who are waking up this morning with no job will get no comfort from the creation of jobs in Kerry Group and Paddy Power. In recent weeks we saw similarly conflicting news when EA announced a new operation inGalwaywith the creation of 400 jobs, and within days we heard of the closure of their Dublin-based subsidiary PopCap, with the loss of almost 100 jobs.

Announcements regarding job creation and company expansions get the headlines but established businesses are continuing to close in Ireland on a regular basis. Whilst the efforts of Enterprise Ireland are to be applauded for their success in attracting new companies to Ireland, is enough being done to ensure the survival of existing businesses? We continue to hear anecdotal evidence of companies struggling to obtain finance and it is not just affecting struggling businesses – I recently met with a client who has the potential to significantly grow their Irish business but cannot do so without investment, and they cannot get the required finance from their bank to fund the growth. The growth of indigenous Irish businesses has the ability to create jobs, but without investment, which in most cases means obtaining finance from the banks, these jobs will fail to materialise. The government recently launched their microfinance scheme for small businesses, only time will tell if it is a success, but it has its limitations – it is only open to small businesses and in order to qualify a request for credit must first have been declined by the banks. The question is, how many small businesses will run out of cash and fail before getting through the bureaucracy of the new scheme?

On a more positive note it was reported that in Q3 (July-September 2012) a total of 9,233 company and business start-ups were formed in Ireland. It’s encouraging to see that despite all the doom and gloom there are still entrepreneurs who continue to establish new ventures. Not all of these will succeed, but those that do will provide employment for years to come, and hopefully there’s a future Kerry Group or Paddy Power among them.

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