Businesses providing Electronic Services – VAT Consequences

We have provided below a quick synopsis of the recent changes to VAT for telecommunications, broadcasting and electronically supplied services but you can obtain more detailed information on the Irish tax office website.


Since the 01 January 2015, supplies of telecommunications, broadcasting and electronically supplied services made by EU suppliers to private, non-taxable individuals and non-business customers will be liable to VAT in the customer’s Member State.


Suppliers of such services will need to determine where their customers are established or where they usually reside.  They will need to account for VAT at the rate applicable in that Member State.  This is a requirement regardless of the E.U. state in which the Supplier is established or is VAT registered.


Consequently, suppliers may need to register for VAT in every EU Member States in which they have customers. As there are no minimum thresholds for VAT registration, making supplies to a single customer in one Member State will require VAT registration in that Member state.


In order to avoid suppliers having to VAT register in each of those countries, the supplier can choose to use the “Mini One Stop Shop” (“MOSS”) simplification system. Some of key features about “MOSS” are:


  • Under Moss, the supplier would submit returns and pay the relevant VAT due to each member state through the electronic web portal of one member state e.g. ROS in Ireland.
  • The Member State in which the MOSS registration is made is known as the Member State of Identification or “MSI”. This means the supplier is designating the MSI to be its single contact point for VAT identification, submitting VAT returns and paying the VAT due in all Member States for the supply of services following under MOSS. A business opting to use the scheme will register for MOSS in the MSI and will submit a quarterly return and the related VAT payment to the MSI. The MSI will then distribute the VAT due to the various Member States in accordance with the information on the return.
  • As already outlined, the MOSS returns are filed on a quarterly basis. Where a business opts to use MOSS, the business must retain records for 10 years from the end of the year in which the B2C transaction was made, regardless of whether the business subsequently stops using the MOSS scheme.


The above is a general commentary on the modifications to VAT for telecommunications, broadcasting and electronically supplied services.  If you think the above might be relevant for you, specialist advice should be obtained. OMB, Chartered Accountants has considerable experience in this area and we would be happy to discuss the various issues with you.

Updated Revenue Guidelines in relation to the Research and Development Tax Credit

Revenue has published updated Guidelines in relation to the Research and Development (R&D) Tax Credit provided for in Sections 766, 766A and 766B of the Taxes Consolidation Act 1997.

The Research and Development Tax credit is given in respect of expenditure incurred by companies in the carrying on of qualifying R&D activities as defined in s.766. The credit is given at 25% of qualifying expenditure.

The pdfGuidelines (PDF, 1.07MB) have been updated and amended to take account of changes in the recent Finance Acts, to address certain areas of interpretation (in particular in relation to changes in group membership) and to provide more up-to-date examples of how to calculate the credit.

USC and Pension Contributions

Please find below a quick alert on USC treatment for pension contributions. More information can be obtained by contacting OMB, Chartered Accountants, who would be happy to discuss this article relevant to your situation.

The taxation of pension contributions is some of the most complex issues that payroll personnel and employers have to deal with.

Normally Income Tax relief is available at the marginal rate of tax for pension contributions paid by an individual to the following types of pension schemes namely:  

    Occupational pension schemes   

    Retirement annuity contracts   

    Personal retirement savings accounts   

    Small self-administered pension funds   

However the USC treatment differs depending on the type of contribution to a pension. For example in some pensions, where the employer make a contribution depending on the type of pension, this employers contributions can be subject to Universal Social Charge.

If the payroll is not set up correctly this contribution can be missed when calculating USC resulting in under-deducted and underpaid USC for employees.  

Revenue are continuously doing PAYE audits and it is important you ensure there are proper procedures put in place to safeguard the correct USC treatment on pension contributions.

Inheritance/Gift Tax nightmare coming down the line

There are two certainties in life, death and taxes. Ironically, in Ireland for the future the latter is relying on the former to increase the tax take under this tax head.

So now is the time for planning in relation to this.

The Problem

Revenue reported that, in 2012, €280 million was paid in Capital Acquisitions Tax; in excess of €933 million worth of assets are declaring and paying Gift and Inheritance Tax on.

The taxation double whammy:

Tax rate: The rate of Capital Acquisitions Tax, both for gifts and inheritances, increased from 20% in 2008 to 33% in 2013.

Tax-free thresholds: Thresholds have been dramatically reduced. For example, the group 1 threshold from parents to children reduced from €521,208 in 2008 to €225,000 in 2013.

Mr. & Mrs. Kelly are aged 55 and their estate, valued at €3,000,000, is to be divided equally between their three children. Their children’s inheritance tax bill will be €767,250 – i.e. 25% of the estate will be taken in tax.

If you have any queries, OMB, Chartered Accountants would be happy to discuss this article relevant to your situation.

Income Tax Filers – Beware of LPT

How not filing your LPT return can lead to a 10% income tax surcharge on your income tax return

As the Pay & File Deadline approaches, self-employed individuals and company directors could encounter a 10% Surcharge on their income tax return if they have not yet complied with their Local Property Tax (LPT) obligations.

It is possible to avoid this LPT Surcharge by doing the following:

  1. File your LPT return, and
  2. Pay, or enter into an arrangement to pay, any outstanding LPT before your income tax return is filed.

If these actions are taken before the income tax return is filed, no LPT Surcharge will apply (provided the income tax return itself is filed on time).  

In summary; you must ensure you are compliant with the Local Property Tax in order to avoid a LPT Surcharge.

If you have any queries, CAG Chartered Accountants would be happy to discuss this article relevant to your situation.

See below different scenarios and for more information read Revenue’s Guidelines

1. Client filing an income tax return but also has PAYE income

Take the situation where this taxpayer files his/her income tax return on time but has not filed his/her LPT return. Revenue advises us that this taxpayer will have had the LPT (based on the Revenue Estimate) compulsorily deducted from his/her wages. Notwithstanding this fact, an LPT Surcharge of 10% will also be applied to his/her income tax return, with:

  • no credit for LPT paid through the compulsory deduction at source, and
  • no capping of the LPT Surcharge until such time as he/she files their LPT Return.

2. Clients who have CGT as well as income tax liabilities in their returns

Where a client’s return has both an income tax liability and a CGT liability, Revenue has said that the 10% LPT Surcharge will be applied to both the income tax liability and the CGT liability.

The general rule is that where an LPT Surcharge arises on a return, that LPT Surcharge will be capped at the amount of the LPT liability once the taxpayer subsequently files their LPT return and pays their LPT liability.

However, where an LPT Surcharge arises on a return with both an income tax and a CGT liability, you need to look separately at the income tax element and the CGT element to determine what cap applies.

Revenue’s new Code of Practice for Revenue Audit and other Compliance Interventions

Revenue’s new Code of Practice for Revenue Audit and other Compliance Interventions (the new Code) came into effect from the 14th of August 2014. It significantly revises the previous 2010 Audit Code.

We have provided below a quick synopsis of the key changes which is consolidated under 5 broad headings and you can obtain more detailed information on the Irish tax office website

1. Focus of audits and compliance interventions

Paragraph 4.5 of the new Code notes that Revenue audits will generally focus on a year or period where a specific risk has been identified. Multi-year or period compliance interventions may be carried out where material risks, identified by a range of data sources, are identified for a number of years (or periods).

This approach also applies to non-audit interventions, as set out in paragraph 2.3 of the new Code.

The additional costs to a taxpayer of extending an audit has also been introduced as a factor that will be taken into account in deciding whether to open earlier or later years (paragraph 4.6).

2. The “no loss of revenue” provision

Paragraph 3.5 of the new Code recognises that there may be exceptional circumstances where “no loss of revenue” claims may be considered in relation to taxes other than VAT and RCT. The paragraph also contains information on how to make a claim.

3. Timeframe for concluding Revenue interventions and receiving refunds

Delays can arise in the conclusion of an audit or intervention, even though a taxpayer has answered all queries promptly. Paragraph 5.8 of the new Code notes that if there is no clear cause for the delay in finalising the audit/intervention a taxpayer’s entitlements to credits or tax refunds shall not be delayed or withheld.

4. Protocols for e-Audits

Paragraphs 1.9 and 1.9.1 include detailed information on what taxpayers can expect when undergoing an e-Audit and at the pre-audit meeting.

5. The interaction of the “late” surcharge with tax-geared penalties

Revenue has clarified in paragraph 5.4.1 that the Section 1084 “late” surcharge that can be sought for the timely filing of an incorrect return will not be sought where a tax-geared penalty applies in a settlement.

If you have any queries regarding the above, OMB, Chartered Accountants would be happy to discuss this article relevant to your situation.

Business Startup Relief for Long Term Unemployed

Who can avail of the Business Start Up Relief for individuals?

In Budget 2014 the Minister for Finance announced a new relief targeted at encouraging long term unemployed to set up new businesses. We have provided below a quick synopsis of how the scheme works but you can obtain more detailed information on the Irish tax office website.

What is the relief?

This is a relief aimed at individuals who have been out of work for at least 12 months, and will allow them to earn €40,000 in profits p.a. in the first two years of trading without paying Income Tax (USC and PRSI will be payable). The relief will apply by way of a deduction from trading profits.

Who can apply?

The relief applies to an individual who commences a new business between 25 October 2013 and end of December 2016 and who has been continuously unemployed for a period of 12 months immediately preceding the commencement of the business and during that period you were in receipt of any of the following

  • crediting contributions
  • jobseeker’s allowance
  • jobseeker’s benefit
  • the one-parent family payment
  • partial capacity payment

How do I apply?

There is no pre-approval required here and you just complete a section in the tax return. Self Employed people are required to complete their tax return every October for the previous calendar year.

If you have any queries regarding the above, OMB, Chartered Accountants would be happy to discuss this article relevant to your situation.

Payroll – Treatment of Taxable Illness Benefit

Revenue issued a notice for employers operating payroll advising that from 1 January 2012 all employees’ taxable illness benefit should be included with earnings. However, where employers have decreased tax credits and tax cut-off points rather than including the benefit as part of taxable pay, this approach can be continued for 2012 only.  Revenue has now issued eBrief No. 37/12 which covers the treatment of taxable Illness Benefit paid to PAYE employees by the Department of Social Protection (DSP).

For more details on this please contact OMB, Chartered Accountants

Voluntary Sector – Boards of Management and RCT & VAT

Boards of Management must now operate as a principal contractor from 2012 onwards. Typically this will meanoperating RCT each time a contractor is engaged to do work in relation to the school building, e.g. plumbers, builders etc. In addition to operating RCT, Boards of Management must also register for VAT because the Reverse Charge regime applies to RCT contractors.

Boards of Management should not ignore this new requirement and if any further details are required please contact OMB, Chartered Accountants.

Implications for Overdrawn Directors Loan/Current Account

This article addresses the position where the director’s loan is overdrawn i.e. the director owes this money back to the company. There are many issues which the director and the company must comply with and we have drawn attention to the most pertinent ones below.

Income Tax charge under S438 for the company

If a balance remains outstanding on the director’s loan account at the company’s year end, this can lead to an income tax charge of 20% for the company. For example if there is a loan balance of €60,000 the total benefit is regrossed and treated as €60,000/80% = €75,000.  The company must then pay €15,000 to the Revenue as an income tax charge.

If the Director repays this loan, the company can request a refund of this income tax payment from Revenue provided it is done within 4 years from the end of the year of assessment in which the loan is repaid.

Benefit in Kind for the director

An overdrawn director’s loan account can trigger a benefit in kind for the director. An overdrawn director’s loan account is effectively an interest-free loan and any benefit will be treated as Benefit In Kind and the company must operate PAYE / PRSI / USC on this benefit.

Tax implications if the loan is forgiven by the company

If the loan is forgiven by the company, the Director will be liable to income tax on the full amount of the loan.  The company is not entitled to any tax deduction for the forgiveness of this loan.

Company law implications of an overdrawn Director’s loan

It is illegal for a company to loan more than 10% of its net assets to their Directors and if this restriction is violated, the Directors can be prosecuted by the Office of the Director of Corporate Enforcement (ODCE).

Record Keeping and Disclosure

Proper record keeping for each of the directors is necessary as poor records could result in the incorrect allocation of expenses/payments resulting in the precise taxes not being paid.

Furthermore, good records are important because disclosure of the balance on each overdrawn director’s loan account must be made in the company’s accounts.

If you are experiencing difficulties with director’s loan account, OMB, Chartered Accountants would be happy to discuss this article relevant to your situation.