MARK LONERGAN
Partner Sabios
Sabios is a boutique advisory firm led by partners Mark Lonergan, Colin Gaynor and Aidan García and who collectively draw from more than 50 years of commercial experience. Assessing its recent activity, the firm says recent tax changes have resulted in a considerable compliance burden on clients, particularly on the payroll side.
WAGE SUBSIDIES Employers should seek advice if the reduction in turnover is not as steep as anticipated or makes any type of material recovery. The revised EWSS scheme is stricter in terms of qualification criteria than the previous TWSS and firms that previously qualified for TWSS might not qualify for the EWSS scheme. The 30% reduction in turnover test may also prove difficult to satisfy outside the tourism/hospitality sector.
WAREHOUSING TAX DEBT We advise clients to ensure they keep up to date with the taxes not covered by the warehousing provisions, particularly Corporation Tax. We need to be cognisant of what a return to ‘normal’ will be — we need clear Revenue guidance on this. In the meantime, what is effectively an interest-free 3% loan is helpful with respect to PAYE and VAT. However, stockpiling of tax debts for future payment will be a growing concern for businesses as the warehousing provisions are extended further. The ongoing need for correct filing (regardless of whether payment can be made or not) can never be overlooked.
BUDGET 2021 One long overdue change would be to abolish the close company surcharge for professional services companies and generally. There should be no disincentives for professionals who wish to incorporate and companies should not be forced to deplete reserves by a draconian surcharge.
The hoped for reduction in VAT in the hospitality sector to 9% should be implemented immediately. The Capital Gains Tax rate should also be reduced to 25% to stimulate transactions and activity, while the stamp duty rate of 7.5% could be lowered, as the commercial property market is heading into choppy waters.
The R&D credit for micro companies should be put into law, as it is waiting on a ministerial order.
Head of Tax Smith & Williamson
WAREHOUSING TAX DEBT As part of the July Jobs Stimulus package, the 3% rate applies to tax debts that cannot be warehoused. Such tax debts would include older liabilities that were in existence for periods not covered by the warehousing scheme and for tax debts not related to Covid19. The 3% rate is a significant reduction on the standard rates of c.8% or 10%.
The reduced rate is available for all tax types (not just VAT/payroll taxes covered by the warehousing scheme) and can apply to existing agreements and to new agreements put in place on or before 30 September 2020. The reduced rate is also available to taxpayers with undeclared liabilities from tax periods that pre-date the Covid-19 phase, provided this liability is declared by September 30.
Businesses should be carefully checking their tax debts and categorising them into debts which may avail of the 3% rate, and those which may fall within the debt warehousing arrangements. To qualify for the 3% rate, the necessary agreements must be put in place with Revenue by September 30. Therefore businesses must act now, if they have not already done so.
Businesses should also note that Revenue tax clearance will not be denied in respect of Covid-19-related tax debts, which are warehoused; or non-Covid-19 liabilities, which are included in a phased payment arrangement. Such tax clearance is required for businesses to participate in the Employment Wage Subsidy Scheme, the Stay and Spend scheme, and the accelerated loss-relief schemes.
CORPORATION TAX LOSS RELIEF Accelerated Corporation Tax loss relief may be claimed where previously profitable companies incur trading losses in accounting periods affected by the Covid-19 pandemic. To qualify, the company in question must be tax compliant, and must have actually incurred or expects to incur, a trading loss in an accounting period which includes some or all of the period from 1 March 2020 to 31 December 2020. The maximum amount of the estimated loss, which is available for early carry-back against the taxable profits of the preceding period, is 50% of the estimated loss.
Revenue has recently highlighted the following in connection with the relief:
Before a claim can be made, the claimant company must first have filed a tax return for the preceding accounting period.
The claimant company must make a declaration that it has incurred, or it will reasonably expect to incur, an estimated relevant or non-relevant trading loss in the specified accounting period and provide details of the claim.
In this context, the claimant company is also required to maintain and have available for inspection upon request, any relevant documentation and records which demonstrate that the losses have been computed in a reasonable manner, and to the best of the company’s knowledge and belief.
‘Businesses should be carefully checking their tax debts’