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Newsletter December 2016 December 2016 Issue

Wishing you and very

Merry Christmas and

a Prosperous New

Year!

Paul O’ Donovan & Associates,

Chartered Accountants & Registered Auditors,

Monahan House,

Celtic Business Park,

Monahan Road,

Cork.

Tel: 00353 21 4321799

Fax: 00353 21 4322486

E Mail: info@paulodonovan.ie

Web: www.paulodonovan.ie

Contents Page no

Stuck in the Middle with EU 2

Trumponomics 5

Important Tax Dates for your Diary

Year Tax Planning & 2017 Aspirations

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Stuck in the Middle with

EU Paul O’Donovan & Associates Dec 2016

The Potential Tax Effects of Brexit on Investors and Taxpayers in

Ireland

The U.K.’s decision to leave the EU (“Brexit”) will inevitably cause a period of `great uncertainty

for businesses and individuals.

Although the Irish economy is not dependent on the U.K., the U.K. remains one of Ireland’s

closest economic partners. Given that much of the economic activity between EU members is

governed by EU rules, any change in the relationship between the U.K. and the EU is also likely

to impact on the relationship between the U.K. and Ireland.

This period of economic uncertainty will have an impact for businesses, including potential

regulatory and legal implications, together with tax, financing, supply chain and foreign

exchange implications. This article focuses on the potential tax implications for investors and

taxpayers in Ireland, particularly for those where there is a close business relationship with the

UK.

Potential Tax Effects

One of the difficulties of determining the implications of leaving the EU is that there are a

number of alternatives to full EU membership and much will hinge on the nature of the Brexit

negotiations. These negotiations are likely to take at least two years from the date Article 50 of the

Lisbon Treaty is invoked, so there will be no immediate change as EU laws and treaty obligations

continue to have effect during this secession process. From a tax perspective, the vote in favor of

leaving the EU will have little, if any, immediate impact on either indirect or direct taxes. As the

U.K. will remain an EU Member State for two years after Article 50 is invoked (or longer if there

is unanimous agreement of the other 27 Member States to extend the period of negotiation), few

tax changes are likely to occur in the short term. The scope of any future tax changes will

ultimately be determined by the outcome of these negotiations. However, as most indirect taxes

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(e.g. VAT, Customs Duty, and Excise Duty) are EU-based taxes, it is likely that these will be

impacted more by Brexit than direct taxes.

II. Indirect Taxes

A. Customs Duty

At present, Customs Duty is almost entirely governed by EU Directives and Regulations.

Following Brexit (and assuming that a model is not chosen which would allow the U.K. to remain

in the EU/EEA customs union), control of Customs Duty would revert to the U.K. Therefore, the

U.K. would need to introduce domestic law to replace the EU Directives, Regulations and

Council Decisions that currently govern Customs Duty. It is likely that the most significant

change to Customs Duty following Brexit will be that all trade between the U.K. and the EU

(including Ireland) will be recognized as imports and exports. Unless a free-trade agreement with

no or low customs can be negotiated, duty will become payable on imports and exports between

Ireland and the U.K...

As a result, compliance formalities will arise on both entry and exit of the goods i.e. both at the

Irish side and at the U.K. side. As can be appreciated, this may result in some impediment to

trade as well as extra compliance costs. The practical implementation of any such changes would

obviously be of importance.

B. Excise Duty

Since Excise Duty is not a fully harmonized tax, we would not expect Brexit to result in any

material changes to excise rates in the U.K. market. However, as with Customs Duty, movements

of excise goods within the EU will no longer be treated as “intra-EU” but instead will be

recognized as imports and exports. This could potentially result in extra compliance costs as a

result of new procedures.

C. VAT

With respect to the day-to-day VAT matters for businesses, the practicalities of cross-border

transactions will change following Brexit. Invoicing and reporting protocols, including processes

and systems, will be revised in respect of cross-border supplies and intra-EU transactions with

the U.K. will become “imports” and “exports”. Although, we would not expect there to be any

change in the ultimate VAT costs of imported goods, an import VAT charge may become payable

up-front at the point of importation. This would result in a cash flow cost and also increased

administration/compliance costs for Irish companies trading with the U.K.

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III. Direct Taxes

Unlike indirect taxes, direct taxes are not expressly dealt with by the EU treaties. Direct taxes are

solely an area of national competency, which only must be exercised in accordance with the EU

treaties. Therefore, direct taxes are less likely to be directly affected by Brexit.

This article first appeared in the August edition of the European Tax Service.

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TRUMPONOMICS -WHAT PRESIDENT TRUMP MEANS FOR IRISH

BUSINESSES AND THE ECONOMY

The Donald is pledging to slash US corporate tax, which is likely to be bad news for Ireland.

Much like Brexit, it’s a move that has stunned large sections of the political and business worlds,

which are clearly finding it hard to correctly call tight votes this year.

And again like Brexit, it’s an outcome that many economists and experts have issued dire

warnings about, hammering home the message that a Trump presidency will likely have a

negative effect on the global economy. But what does it mean for Irish business? While nothing is

ever set in stone – the election result itself being the clearest illustration of that tidbit of wisdom –

here are some ways that it could have an effect on industry here.

CORPORATE TAX

One of the most visible of Trump’s policies is his pledge to cut the US corporate tax rate from its

current level of 35% to 15%. Although there are other drawcards that bring foreign firms to

Ireland, such as its location within the EU, the ease of doing business, and so on, the 12.5%

company tax rate is unquestionably one of the reasons why the country has been so successful at

attracting foreign investment.

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To date, Ireland has benefited hugely from the US’s high corporate tax rate, and US companies

employ about 140,000 people in the country. However, a US rate of 15% would significantly

reduce this advantage.US companies would likely be much less bothered about a 2.5% difference

in tax compared to a 22.5% one. Add in the costs of relocating, and Ireland suddenly becomes a

lot less attractive. As previously analysed by Fora, US companies that are here already are

unlikely to flock abroad overnight. However, it does mean that less could come here in the

future. Managing partner of Deloitte Ireland Brendan Jennings has already said that in the wake

of the US election result, Ireland should look for “a more flexible application of EU fiscal rules

which currently limit capital investment in infrastructure”.

“We must also focus on non-tax factors such as political and economic stability, our regulatory

regime, labour availability, operating costs and market access in order to retain our FDI (foreign

direct investment) companies,” he said.

CURRENCY

As with Brexit, the financial markets were wide of the mark in their predictions and were wrong-

footed by Trump’s win. Markets around the world dropped, with the FTSE 100 in London

opening 2% down, although the Irish markets were largely unchanged. What will be of more

relevance to Irish companies is the currency fluctuations.

The US dollar dropped pretty sharply against the euro once a Trump victory started looking

certain, although it has since recovered somewhat. A weaker dollar over the longer term would

make it more expensive for US tourists to come to Ireland, hitting one of the key sources of

revenue for a major domestic business sector.

TRADE

Trump’s pledge to ‘bring back jobs’ is one of his best known and is a good snapshot of his

worldview on the campaign trail. The logical follow on from his rhetoric would be if he were to

take some sort of protectionist stance on foreign trade, making it more difficult for other

countries to buy and sell with the US. The billionaire has already stated his opposition to

the Trans-Pacific Partnership, a trade agreement between 12 major countries including the US,

China and Japan. Although he hasn’t been as bombastic on trade with the EU, progress on

the Transatlantic Trade and Investment Partnership (TTIP), a trade agreement between the US

and the EU, was already stuttering under Obama. Trump is unlikely to breath new life into it any

time soon.

Any move by the US against free trade is likely to hit Irish companies, many of which rely on

being able to easily sell their goods in the huge and wealthy country.

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IMPORTANT TAX DATES FOR YOUR DIARY

INCOME TAX REFUND CLAIMS DEADLINE

You are reminded that there is a four-year time limit for claiming income tax refunds.

Your Tax Repayment Claim for 2012 must be received by Revenue no later than 31 December

2016

CGT DEADLINE

It's time to pay your Capital Gains Tax

If you sold, gifted or transferred an asset between 1st December and 31st December 2016, or if

you received capital payments from such assets, you must pay any Capital Gains Tax due by 31st

January 2017.

For disposals between 1st January and 30th November 2016, payment is due online by 23rd

December 2016.

These arrangements apply to all taxpayers, including PAYE and self-employed.

From a Capital Gains Tax perspective, each individual can generate a gain of €1,270 annually or

in the case of a couple jointly assessed, €2,540 without Capital Gains Tax arising thereon.

Consequently, if one has shares with gains, one might consider selling the shares, to utilise the

annual exemption and possibly repurchase the shares again, thereby increasing the base cost.

This minimises Capital Gains Tax on a later disposal. This is commonly referred to as “bed and

breakfast”.

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In relation to Capital Gains Tax, there are valuable Tax reliefs, particularly in relation to

Retirement Relief on disposal of businesses and also Entrepreneur Relief with a potential 10% Tax

rate. Qualifying conditions for these reliefs should be examined carefully to maximise the

benefits available.

In relation to Capital Gains Tax losses, if contemplating an asset disposal strategy, careful

consideration should be given to the timing of the disposals. Usually it is preferable where

possible, to dispose of the loss making assets in priority to transactions which will trigger gains.

Also be careful with transactions between “connected persons”, as such transactions are deemed

to take place at market value and any losses arising are “ring fenced”.

If you're unsure about whether you are liable, please feel free to contact us.

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LOCAL PROPERTY TAX - IMPORTANT!

The deadline for paying your 2017 LPT charge in full is 11th January 2017.

If you paid your LPT for 2016 by lump sum or cash payment and have not yet made

arrangements to pay the 2017 charge, you need to do so as soon as possible. For further advice on

what you need to do for 2017, please contact us.

Revenue is writing to those who paid their 2016 LPT by deduction at source or by direct debit if

there is a local authority rate change for 2017. These payment methods will automatically roll

over into 2017 so no action is required.

Who is liable to pay LPT for 2017?

If you are the liable person for the residential property on 1 November 2016 you have to pay LPT

for 2017. If you (as an owner) sell your residential property after 1 November 2016 you will be

liable to pay LPT on the property for 2017, even if it is sold before the end of 2016.

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How much is due for 2017?

The amount of LPT due for 2017 depends on the value declared for the property on 1 May 2013

and the LPT rate applying to your property for 2017. Some local authorities have adjusted the

LPT rate for 2017. The LPT charge for 2017 on properties located within the local authority’s

administrative area has been automatically adjusted to take account of the change notified by the

local authority to Revenue.

You can confirm how much LPT is due for 2017 on your property by accessing your LPT record

online using your PPSN, Property ID and PIN.

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YEAR END TAX PLANNING & 2017 ASPIRATIONS

Now that the Tax year end is approaching very quickly, we summarise a few planning points

and Tax issues for consideration;

If you are a member of a Company pension scheme, the Company should consider

making pension contributions before Company’s year-end. Self-employed individuals

can claim Tax relief for 2016, in respect of qualifying pension contributions made up to

31st October 2017.

We would also remind you that Employers can give gift vouchers to each staff

member, up to the value of €500 in each calendar year without Income Tax arising

thereon. This is a useful mechanism for rewarding staff members Tax efficiently

(Christmas Bonus!!!).

It is important to review certificates of Tax Credit for 2017 to ensure that PAYE being

deducted at source is correct. This is particularly important, if one has multiple

employments, has untaxed income including Social Welfare pensions and/or has

changed jobs recently.

An EIIS (formerly BES) Investment is quite an attractive investment from a Tax

planning perspective, on the basis that one can qualify for Tax relief on investments of

up to €150,000 per annum. This is one of the few Tax shelters still available and there

are a number of products available, which could be worth contemplating to reduce

one’s overall Tax bill. These investments can generate an excellent return (mainly due

to Tax relief), bearing in mind that it is extremely difficult to get a reasonable return on

cash invested.

From a succession planning perspective, it is imperative to have a Will executed. Asset

and investment ownership should be reviewed, as there may be benefits in having

certain assets in joint names. The benefits of Enduring Powers of Attorney should be

considered, particularly for elderly persons. There is an annual €3,000 gift exemption

for Capital Acquisitions Tax, which should be fully utilised. Unfortunately Dwelling

House Relief, which was a valuable Inheritance Tax relief will only be available in very

limited circumstances, as a result in changes in the 2016 Finance Act.

If you incurred expenditure on qualifying home renovations for your Principal Private

Residence or rental properties, it is possible to get Tax relief on qualifying renovations.

The relief is generally claimed independently of the Tax return. One has to access the

HRI portal on the Revenue website. It will be necessary to register for the “My

Account” (online facility). The Home Renovation Incentive Scheme section does

require specific information in relation to work undertaken, builder/provider details

and other aspects of the claim.

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We would emphasise that these are some basic Tax planning points for consideration,

but it is imperative to take advice before implementing any action plan. Please contact

us on 021 432 1799.

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And Finally!

All of us here at Paul O’Donovan and Associates would like to wish you a Very Merry Christmas

and Best Wishes for 2017!!

Thank you for your business this year. It has been a pleasure helping you reach your goals, and

we look forward to contributing to your success in 2017. We wish you a prosperous and happy

new year!

Wishing you and your family the very best this holiday season!

If you have any queries or should you require any advice just give our team a call at Paul O’Donovan &

Associates on 021 432 1799.

The information contained in this newsletter is intended as a general guide and for information purposes only. Whilst every effort has been made to ensure

accuracy, no liability can be taken for any omissions or errors. Professional advice should be sought prior to any transaction giving rise to tax consequences.