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Cost Management in Challenging Times : The Tax Aspects

Cost Management in Challenging Times : The Tax Aspects. 26 March 2009 The Tower Hotel, Waterford. Waterford City Enterprise Board. Overview: < > Avoid the Negative - Prevent Arrears => Sanctions - Don’t pay unnecessary tax costs < > Embrace the Positive

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Cost Management in Challenging Times : The Tax Aspects

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  1. Cost Management in Challenging Times: The Tax Aspects 26 March 2009 The Tower Hotel, Waterford Waterford City Enterprise Board

  2. Overview: <> Avoid the Negative - Prevent Arrears => Sanctions - Don’t pay unnecessary tax costs <> Embrace the Positive - Avail of Planning Opportunities - Maximum Tax Efficiency <> Questions & Answers

  3. Prevention

  4. Avoid Tax Problems: • Back to Basics • Keep Books & Records in Order • Financial Information = Resource (not a Cost) • Revenue not a Bank • Penalties 3% -> 100% • Annualised Interest 10% -> 12% • Statutory Fines - per offence • Other Consequences, e.g. no C2, no TCC, etc • Avail of advice and help

  5. Costs & Cash-Flow

  6. Costs & Cash-flow: • VAT • If Possible, Switch to Cash Receipts Basis • If Not - Payment Requests v Invoices • Monitor DD - Falling Sales / Permanent Refunds, etc • Switch back to Bi-Monthly if Refunds • W/O Bad Debts and seek Refund • Forfeited Deposits - Refund - Prior Years? • Monitor Supplier’s Invoices - Multiple v Composite • If Property Involved (e.g. lease) => Seek Advice

  7. Costs & Cash-flow continued… • Payroll / Staff • Flexible Remuneration Packages • Job insecurity, Childcare Costs, etc • => part-time, reduced hours, work from home, etc • 3-day week => DSW for remaining days? • Exploit Anomalies in Payroll System • e.g. < €352 no Income Levy, no PRSI, < €500pw = no 2% Levies, etc etc, for example switch 10 Employees from €505pw to €495pw • => No net loss for Employees, • => Employer Saves €5,600+

  8. Costs & Cash-flow continued… Payroll / Staff cont... • Tax Efficient Remuneration Packages • Medical Insurance • Share Schemes • Travel Passes / Car Parking • Implement Expense Scheme • Training Courses / Exams • Phone / Lap-top • Pool Vehicles v BIK(Car v Van) • Exploit ‘Small BIK Exemption’ - €250 • New BIK-Free Bike Scheme

  9. Costs & Cash-flow continued… Payroll / Staff cont... • Revenue Job Assist Scheme • New Employees only • May change in April Budget • Switch Bonuses from Turnover to Receipts • Temporary lay-off rather than Redundancy • If Redundancies - Get Advice and Do It Right • Employees can also provide funding - see below

  10. Costs & Cash-flow continued... • Owners - Directors • Director’s Loan v Repayment of Loan • Family Members • Must be Bona Fide • Use Tax Credits and/or SRCOP • Termination Payments • Mileage & Subsistence • Pension Position (payment without a plan)

  11. Costs & Cash-flow continued... • Various Other Considerations • Complete Structural Review • Sole-trade v Company etc • Adjusting Accounting Year End • Rental Income • Sub-letting of Office Space • Pre-Letting v Between Letting • VAT implications • Green Tax Incentives • e.g. Electric Car = Lower BIK = Increased Allowances, etc

  12. Cash Injection / Raising Funds

  13. Cash Injection: • Traditional • BES - Seed Capital - Grants etc • Owner - Directors • Loan Interest Deduction • Private Investors • Share Option Agreements - Complicated but possible • Private Loan Agreements - Standard-Rated Income etc • Exempt Patent Dividends

  14. Cash Injection cont... • Employees • S.479 - Once Off Investment • €6,350 per employee • Ord shares for minimum of 3 years • Loan Interest Deduction • Money to buy shares or to loan to employer company • Share Schemes - e.g. PSS in lieu of Bonus • BES - if Employer qualifies

  15. Tax Planning

  16. Tax Planning: • Restructuring • Expansion – Mergers – Rationalisation, etc • Tax Planning - Group – Trade Sale - etc • Retirement Planning • Fund Retirement • Facilitate Hand-over • Succession Planning • Family Company - Investment Assets – House • On-going financial assistance

  17. Tax Planning cont…: • Event / Transaction Planning • Purchase / Sale of Property or Assets • Purchase / Sale of Business – Whole or Part • Inheritance - Gift • MBO, Bonuses, Retirement, Termination etc • Routine / On-going Planning • Rental Income – S.23, Loan Interest, etc • Property Development • BES, Remuneration Packages etc

  18. Miscellaneous & Summary

  19. Sundry Other Considerations: • New Company Exemption • Restrictive Conditions, but... • R & D Credit • Complex but very valuable • Losses • Consider how best utilised • Cash Flow v Tax Efficiency • Patents - Significant Tax Breaks

  20. Sundry Considerations cont... • Class S v Class A • Take part-time role = PAYE Credit = Stamps • Rental Losses • Can they be utilised, e.g. Storage • Pre-Budget Planning • Income & Capital Taxes to Increase • Trigger Tax Charge pre-budget? • e.g. Director’s Bonus, CCS Dividends, Retirement Plan, Gifts to Children, Extracting Property, Liquidation

  21. SUMMARY: • Irish Tax system can help businesses • Raise Funds, Cut Costs, etc • Watch Budget Changes • Tax Planning requires Time and Information • Tax is only part of the picture but often a critical part • Get Advice Regularly

  22. Thank you for your attention. QUESTIONS? O’Connell Court, 64 O’Connell Street, Waterford. Tel:051 840800 / Fax: 051 - 874504 E-mail:brendantwohig@mkbrazil.com

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