Cirrus9’s Top Ten Tax Tips 2017 for Business Owners
At the start of every year business owners are developing their business plans and goals for the year ahead. And so while planning is top of the agenda it makes perfect sense to actively look for tax planning opportunities at the same time. If your net profit percentage is 5% then every €1,000 of tax saved is worth the equivalent of an extra €20,000 in sales to your bottom line. I set out below my top ten tax tips for 2017.
Start Up Relief for Entrepreneurs Scheme
SURE is a tax refunds for startups incentive scheme for entrepreneurs investing and working full-time in a new business.The scheme offers a potential income tax refunds of up to 41% of the capital that is invested in a new business. Depending on how much you invest you may be entitled to tax refunds for the six years prior to the investment in the new business. For full details see my blog on this scheme.
Restricted Share Scheme
Many businesses struggle to retain talent and one strategy to counter this is to grant key staff share options in the business that vest after a number of years. The taxable value of the shares in the hands of the employee can be reduced by 60% if the vesting period is more than five years. The costs of setting up the employee share ownership trust are fully deductible for the employer and key staff are incentivised to commit to the business.
Employ Spouse and/or Children
In many small businesses, a spouse contributes significant services to the business and in these situations it is worth considering employing that spouse. A married couple with two incomes could earn an additional €24,800 at the lower 20% tax rate. If children also work in the business during holidays and at weekends then they would have tax credits which could be utilised if they were employed.
JobsPlus is a great incentive from the Department of Social Protection to encourage and reward employers who offer employment opportunities to the long term unemployed. Grants of €7,500 and €10,000 are available depending on how long the candidate has been unemployed. Full details on the scheme are available at www.jobsplus.ie .
Accelerated Capital Allowances
The Accelerated Capital Allowances scheme is a tax incentive for companies paying corporation tax and aims to encourage investment in energy efficient equipment. The ACA offers an attractive incentive whereby it allows companies to write off 100% of the purchase value of qualifying energy efficient equipment against their profit in the year of purchase. There are 10 different categories of equipment and 52 technologies listed on the schemes website www.seai.ie .
Small Benefit Exemption
Under a current Irish Tax concession known as the Small Benefits Scheme, employers can reward employees with a non-cash bonus of up to €500 in value completely tax free each year. Provided certain guidelines are followed neither the employer nor the employee will pay PAYE, PRSI or USI, potentially saving €653.65 in tax. For full details see my blog on this exemption.
Tax Free Subsistence and Mileage
A company director or employee can claim tax free subsistence and mileage expenses if they are required to perform business duties away from their normal place of work. The duties must be carried out more than 8km away to be eligible for the subsistence payments and the mileage rate is up to 59 cent per km depending on engine size.
Cash Basis for VAT
Cash flow management is constant challenge for businesses and the bi-monthly VAT bill is one payment that must be paid on time to avoid unwanted attention from the Revenue Commissioners. Because the sales vat liability is normally calculated on sales invoices issued during the period a cash outflow often occurs before the invoice has been paid. However if your turnover is less than €2m per annum you can opt to pay VAT on the cash basis meaning that the liability for VAT only occurs when the sales invoice is paid.
New Company Exemption from Corporation Tax
This relief reduces corporation tax on the profits of a new trade and gains on disposal of any assets used for the purposes of the new trade by the amount of PRSI paid for each employee, subject to a maximum of €5,000 per employee and an overall limit of €40,000 in the first 3 years of trading. This relief is not available for service companies at present.
10% CGT Rate for Entrepreneurs
This new relief was introduced by the government to encourage high potential startups to locate in Ireland but it also applies to home-grown startups. The revised relief is for entrepreneurs disposing of certain business assets. It provides that an effective 10% rate of CGT applies in respect of a chargeable gain or chargeable gains on a disposal or disposals of qualifying business assets on or after 1 January 2017 up to a lifetime limit of €1m. The assets must have been owned for not less than three years ending with the disposal. The relief does not apply to development land or investment assets.
I hope these have been helpful and if you would like to receive more tax tips I will be posting a new one every Thursday on our Linkedin page so please follow the page and to receive our quarterly tax tips newsletter please sign up at the bottom of our homepage. www.cirrus9.ie
Please contact Robert Kelly FCA at firstname.lastname@example.org or on 01-5175211 if you would like any further tax tips for 2017 or have any tax planning or compliance requirements. We are a firm of Chartered Accountants based in Sandyford, Dublin 18 specialising in helping SME’s with all their tax and accounting needs.
Don’t delay, contact us today.