• Ensure you claim all allowances available to you. Claim back refunds for last 4 years.
  • Involving Family members in Business

Maximise tax credit and bands between spouses.

Family members are often engaged in the family business (in an administrative and other roles), although not formally employed by the business. A formal employment should be put in place for the family member to utilise their 20% tax bands & tax credits

  • Maximise tax free Travel & subsistence Expenses

In order to minimise income tax and PRSI costs it is important to ensure that you are first maximising all your allowable tax free travel and subsistence payments before taxable salary payments are then made.

Travel is an allowable expense when the journey is necessarily incurred in the performance of the duties of the office or employment, you are entitled to reclaim travel and subsistence from the business tax-free using Civil Service rates – these also apply to company directors.

For rates and sample mileage/ subsistence sheets go to www.pamccormack.com

In the case of a sole trader or partner in a partnership, travel expenses are computed based on the actual expenses incurred on fuel, insurance, maintenance, motor tax and vehicle depreciation.

  • Pension Funding

Employees contributing to a personal pension plan receive tax relief at their top tax rate.   There are many types of pension plans available, including self-administered or managed, and careful consideration needs to be given to ensure the correct pension plan is chosen.Directors can pay pension contributions through the business via an Executive Pension Plan. Company pension plans provide a tax efficient mechanism whereby wealth can be extracted from the company in a tax efficient manner.

  •  The Home Carer’s tax credit of €1,000 is available to a spouse in a one-earner family who is caring in the home for a child who is eligible for Child Benefit, or an aged or disabled person. The home carer is allowed to have up to €7,200 income of their own.
  • An exemption of €3,000 is allowed on all taxable gifts taken by a donee from a disponer in any year from 1st January to 31st December. Parents can individually gift their children / grandchildren €3,000 per annum tax free, from each parent / grandparent. With the recent significant reductions in inheritance tax-free thresholds this can be a useful relief if planned correctly.
  • Dependant Relative Credit is claimable if you support a widowed mother or incapacitated relative whose income does not exceed the contributory OAP.
  • Claim cost of a carer for a family member up to €75,000 per annum.
  • Covenant income to an elderly or incapacitated personHelp family members using deeds of covenant to transfer income. A covenant is a promise to pay someone a certain sum of a definite period. Covenanted income is deducted from the payer’s taxable income and added to the person who receives the income. The receiving party could be tax exempt while the payer obtains tax relief at 40% on the payment.
  • Single Person Child Carer Credit applies to single or widowed person if you are the principal carer of a child aged under 18, over 18 in full-time education, or permanently incapacitated.
  • Certain expenses carry a 20% Tax Credit

Claim for Medical Expenses Credit – You can claim for GP visits, prescriptions, food for coeliacs/diabetics, travel expenses to hospital, some dental expenses (need Med2 form from dentist)paid    by you for yourself, your              spouse, children or dependant relatives

Claim tax credit on payments to Medical insurer paid on your behalf by employer

Tuition fees paid to colleges are tax reclaimable. However, the first €3,000 of each claim is disregarded.

Claim Employee flat rate expenses credit (for certain employments only)

  • Avail of Bike to work scheme – Under the scheme employers can pay for bicycles and bicycle equipment for their employees and the employee pays back through a salary sacrifice arrangement of up to 12 months. The salary sacrifice is made prior to Income Tax, PRSI and USC and as a result, the employee saves between 29.5% and 49.5% on the amount they have chosen to spend (between €100 – €1000).
  • Use the TaxSaver commuter scheme to purchase your bus or rail ticket, tax saving of up to 52%
  • Give €500 voucher (not cash) to employees during the year, tax free. The benefit to the employer is that they do not have to pay Employers PRSI.
  • Time Capital disposals to avail of your annual exemption to Capital Gains Tax of €1,270 per annum. This applies separately for spouses, transfer some shares into the name of your spouse so that when you sell them you will both get a CGT exemption of €1,270 each.
  • Rent a room in your home – rental income up to €12K is tax free
  • Home Renovation Incentive : An income tax credit of 13.5% applies to home renovations up to a maximum expenditure of €30,000 undertaken before December 2016 and will be refunded over the two years following the year in which the works are carried out. To qualify at least €5,000(inclusive of VAT) must be spent. Both homeowners and landlords can avail of this credit.
  • In certain cases it may be an advantage to change your business structure from being sole trader to a limited company to avail of corporation tax rate 12.5%
  • Seed Capital investment relief for unemployed/PAYE workers starting a new company – if you qualify for this scheme you can reclaim PAYE paid by you before you start your business. You can reclaim €100,000 per annum for 6 years.
  • Relief for Investment in Corporate TradesThe Employment and Investment Incentive Schemes (EIIS) offers investors up to 40% tax relief against their total income in return for investing in new ordinary shares in qualifying SMEs for a minimum 4 year period. Individuals can invest up to €150,000 in each year up to and including 2020.Investment can be made directly into qualifying individual companies or into a basket of companies through a Designated Investment Fund.
  • EIIS are revamped and reformed BES (Business Expansion Schemes) and provide an alternative source of finance for qualifying companies.
  • Maximise allowable Expenses – Be sure to keep records of expenses – documents, receipts etc. Use a credit card for small business expenses where possible to cut down on ‘lost’ cash expenses (and as a reminder of what journeys you undertook)
  • File tax returns on time to avoid surcharges & pay taxes on time to avoid interest.

 

The above notes are intended to be a brief introductory guide and any investment / re-structuring should not be carried out without detailed consideration and advice. No responsibility for loss or distress occasioned to any person acting or refraining from acting as a result of the above introductory notes can be accepted by P.A. McCormack & Co., Chartered Certified Accountants.