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Tax Issues – Solicitors
Conor Kennedy
May 2010Barrister-at-law
Click to edit Master subtitle style
Law Library
Four Courts
Dublin 7.
Web: www.conorkennedy.ie
16/09/10
Irish Taxation System


Direct Taxes

Income, Corporation & Capital Gains

Penal Statutes- Strict Interpretation

Common Law

Guidance Notes – Legitimate Expectation
EU Treaty
16/09/10
Capital Acquisitions Tax

Discretionary Trust

Gift Splitting

Dwelling Relief

Finance Act 2010

Reporting Requirements

Same event
16/09/10
Capital Acquisitions Tax

Discretionary Trust

property is held on trust to accumulate the income
or part of the income of the property,

6% initial charge

1% annual

20% income tax charge
16/09/10
Capital Acquisitions Tax

Gift Splitting

3 yr restriction

Prevents transfers to avail of higher thresholds

Grandfather

Son

Grandson
16/09/10
Capital Acquisitions Tax

Dwelling Exemption

Dwelling House

Beneficiary occupies – 3 yrs before gift/inheritance

If gift - disponer cannot be still in property

No entitlement to any other dwelling at that time

To avoid clawback – reside for 6 yrs

16/09/10
Form of rollover relief
Capital Acquisitions Tax

Finance Act 2010

Secondary accountability abolished

Pay & File procedures


Val date - Jan-Aug – pay by 31st Oct in same yr.

Val date Sept – Dec – pay by 31st Oct in following yr.
Grant of probate

No need to procure Inland Revenue Affidavit in advance
16/09/10
 CAT charge on property unless Revenue certifies is
Capital Acquisitions Tax

Same event

Happening of same event



Parent gifts shares to child

CGT for parent

CAT for child
Retention period of 2 yrs
Reporting requirements
16/09/10
 80% of relevant threshold exceeded
Capital Gains Tax

What is a disposal

Section 613 Exemptions

Interaction with CAT


Assets passing on death

Valuation date
Credit relief

16/09/10
Happening of same event
VAT

Sale of a business

Licence Agreements

VAT on Property

Invoice in accordance with Regs
16/09/10
VAT on Property

Everything is taxable unless specifically
exempt

Is the property exempt?

The property must not have been developed

If already completed, must not be further developed
within 5 yrs prior to the current supply

If sold to an unconnected party & thereafter occupied in
aggregate for a continuous 24 mths
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
5 yr old building which has had no significant
VAT on Property
Capital Good Scheme (CGS)

CGS - mechanism for regulating deductibility over
the “VAT-life” of a capital good.

VAT life

20yrs for new buildings

10yrs for refurbishment
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Sale of “old” property
Example

Ms Fit Retires & sells building- 1st July 2019

Acquired building 1st May 2009 for €1 million

Reclaimed VAT - €675,000 (13.5% x €1 million)

No significant development work

Firm of accountants offer €10 million
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Capital Goods Scheme

VAT life
= 20yrs

Held for
= 10yrs

Therefore partial clawback of initial VAT
deducted

Formula
BxN
T
Where
B = Total Reviewed Deductible Amt
16/09/10 N = No. of full yrs remaining + 1
CGS - Example
B = Tot Revd Deductible Amt
= €675,000
N = No. of full yrs remaining + 1 = 9 + 1
T = Total of intervals in adj period
€675,000 x (9 + 1) =
€337,500
20
Clawback
16/09/10
=
€337,500
= 20
Example – Avoid Clawback
Avoid clawback
•Joint option to tax sale
•Vat charged on €10 million = €1,350,000
•Accountant self accounts for VAT
•Reverse charge
•Accountant’s initial interval = 1st July 2019
•
16/09/10
Ongoing Business

Steps to be taken – Continuing entitlement



Review entitlement to VAT after 1st 12mths
If the proportion of taxable use in 1st 12 mths
(‘initial interval’) differs from the proportion of the
VAT claimed - adjustment is required.
Too much has been deducted, the taxpayer must
pay back the excess.
16/09/10
Ongoing Business
 Accountants
 Acquired building for €10 million on 1st July 2019
 Price - €10 million plus VAT of €1,375,000
 Use 70% of property for accountancy services
 Use 30% for exempt financial services business
 Year end is 31 December 2019.
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Ongoing Business
1st 12 mths
Total tax incurred
=
€1,375,000
Total revd ded amt (70%)
=
€ 962,500
Refund to Revenue
=
€ 412,500
Total tax incurred
=
€1,375,000
Base tax amt (€1,375K/20)
=
€
2nd & Subseq intervals
16/09/10Ref ded (€962,500/20)
=
€
68,750
48,125
VAT on Property - CGS

Steps to be taken – Continuing entitlement



Too little initially deducted, claim the deficiency as an input
credit.
Quantified VAT entitlement for the first twelve months is
the benchmark figure
Annual review of the vatable use of the property
Any change in the proportional tax use compared with the
16/09/10
use during the initial 12 mths - an adjustment required

Transitional Properties

Property in existence prior to July 2008

Sale – possibly exempt

CGS

Legacy leases

Assignment or surrender

Taxable if entitled to recover VAT
16/09/10
Corporation Tax

Surcharge – Professional Firms


15% tax on 50% of undistributed profits
Start up Companies – exemption

Tax less than €40,000

Period of 3 years
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Income Tax


Section 811

Permits Revenue to recharacterise a transaction

McGrath v McDermott

O’Flynn Construction
Section 806

Transfer of Assets abroad

Foreign Property – Rented holiday home
16/09/10
Miscellaneous

Legitimate expectation


Keogh v CAB
Appeal Commissioners

Menolly Homes

Importance of setting out facts

Internal review

Statutory Interpretation
16/09/10
Take nothing for granted

Limited partnerships & land losses

CGT loss relief not against dev gains
16/09/10