Post on 05-Sep-2020
Quarterly Newsletter Page 8
If you or your company spend good money promoting
yourself (through advertising or using the internet or what-
ever) then it’s important that you make sure you stand out
from the crowd. It never ceases to amaze me how many
competing companies look just like each other when they
set out their stall.
I remember working for a well-respected legal practice
that had just been through a change of leadership. A new
managing partner had been appointed and, as advertising
advisors, we were asked to present some ideas to
promote the new regime. The approach we suggested
was mildly challenging and the individual who was
responsible for marketing the practice said he would like
to run our ideas past the partners. They were not happy.
They didn’t like to be challenged.
The ad that eventually announced the change took the
very predictable “Tombstone format” and simply pictured
the new managing partner with the caption “new
managing partner at xxxxxx”. This certainly made himself
and his family proud and elicited a good number of
congratulatory messages from many of his existing clients
and friends!
Unfortunately it missed the real opportunity which was to
identify what the regime change meant. The ad failed to
promote the revitalised practice to its many different
markets.
The trouble with advertising is that many people think it is
easy and that any fool can do it. Regrettably, a lot of
today’s advertising in the mass media lends credence to
this idea. But the truth of the matter is very different.
Good advertising is challenging, both to the people who
create it and to the company that pays for it. But good
advertising should deliver results that justify the challenge
and the cost. It should be accountable.
Francis Brennan is one of Ireland’s leading hoteliers. In an
interview recently he said he didn’t do advertising for his
famous hotel, the Park in Kenmare. He said what he did
was marketing.
No advertising can be effective if it is not part of an overall
marketing campaign. And communication is at the heart
of all marketing. Over the years Francis has created an
exceptional customer experience at the Park. He never
missed an opportunity to nobble the journalists to promote
his pride and joy. But he also had a web site, a suite of
brochures to promote the various and many activities
at the Park, regular mailings to his existing base of
customers and constant communication of developments
at the hotel through many different channels.
He doesn’t do advertising!!! I seem to remember the odd
ad on the back page of the Irish Times also. Being
different from your competitors is important. Being heard
by your customers and potential customers is also vital to
the success of your marketing. In the present straitened
times the media appear to be bending over backwards to
attract business. Be wary. There are deals to be done. But
there are deals that should be left undone.
In Ireland, we have to be at or near the bottom of the
current economic cycle. Invest in marketing at the present
time and you will get remarkable value in whatever
marketing tools you purchase because the market itself is
so competitive.
You will notice that I am talking about “marketing” and not
advertising. There is much work to be done in getting
your marketing geared up before you embark on any
communication programme. And that preparation is the
most important and most valuable work which, in all
probability, will be the least expensive part of what you
have to do to win against your competitors
My company is working with a number of clients preparing
the ground for action in the coming months. Together we
recognise that a unique opportunity is coming up as
the country emerges out of this deep recession. The
companies that take the initiative early will get a serious
head-start over their competitors who are awaiting the
dawn. Come and join us, if you dare.
Des O’Meara is Chairman of Rubicon Advertising. For
over 30 years he ran his own agency Des O’Meara &
Partners which was voted Agency of the Year in the
inaugural event organised by Marketing magazine.
He worked with a wide diversity of clients such
as Quinnsworth/Tesco, Renault, Golden Pages,
Nivea, Esat, Ulster Bank, Wyeth and many others. He is a
Fellow of the Institute of Advertising Practitioners in
Ireland and a member of the Marketing Institute. Rubicon
provides marketing and advertising services to Hughes
Blake. Find out more about Rubicon at their web site
www.rubicon.ie.
The Hughes Blake “Business to Business”
Enterprise Network
Whisper or shout… Make sure you stand out!
Quarterly Newsletter
Issue 9 December 2010
CHARTERED ACCOUNTANTS
Con ta c t De ta i l s
Clonhaston
Enniscorthy
Co. Wexford
Joyce House
22/23 Holles Street
Dublin 2
www.examinership.ie www.hughesblake.ie
T: + 353 1 669 9999 / + 353 53 92 33333
F: +353 1 669 9777 / + 353 53 92 34403
E: info@hughesblake.ie
Following the recent announcement of the measures to be included in Budget 2011, you may wish to consider some of the urgent action points set out below before the year end:
Availing of tax free ex-gratia termination payments in
excess of €200,000 where possible a cap of €200,000 applies as and from 1 January 2011.
Exercising employee share options. Significant
changes to share awards have been introduced, some effective as and from 1 January 2011.
Maximising your personal pension contributions prior
to 31 December 2010. An earnings cap of €115,000 will apply for contributions made on or after 1 January 2011.
Withdrawing cash from your pension and availing of
higher tax free pension lump sums prior to 31 December 2010. With effect from 1 January 2011, the tax free lump sum that an individual can draw down in a lifetime is being reduced to €200,000.
Points to consider during 2011:
While Capital Gains Tax (CGT) and Capital
Acquisitions Tax (CAT) rates were not changed in Budget 2011, the National Recovery plan has indicated that the current single tax rate systems for these taxes will be replaced with systems of increasing rates in 2012.
In addition, reliefs and exemptions in relation to CGT
and CAT will be abolished or restricted. For example:
○ CGT Retirement Relief: Currently there is a full exemption from CGT where an individual, aged over 55 or more disposes of a business or farm to a child and certain conditions are satisfied. It has been indicated that this relief will be amended and restricted in 2012.
○ CAT Business Property Relief: Currently a partial relief from CAT (90% reduction in value of gift) can apply to gifts or inheritances of business assets. It has been indicated that this relief will be amended and restricted in 2012.
○ CAT Agricultural Relief: Currently relief from CAT applies to gifts or inheritances of a farm where certain conditions are met. It is likely that this relief will be amended and restricted in 2012.
In light of the above, you should consider your succession planning during 2011. Please also note that further changes to these capital taxes could be introduced in the Finance Bill and therefore we would recommend that for any transfers that you are planning, you should consider doing these early in the New Year.
Budget 2011 - Action Points
Summary of Headline Tax Changes
Introduced in Budget 2011 Alma O’Brien, Tax Director
Budget 2011 Special
Merry Christmas and best wishes for the New Year, from all at Hughes Blake
Quarterly Newsletter Page 2
We set out on the previous page a summary of the tax
changes introduced in the recent Budget. Some of the
other features of the Budget are set out below. Should
you require any specific advice in relation to how these
changes affect your personal tax situation, please do not
hesitate to contact us.
1. Property based tax reliefs to
be abolished Under the Budget provisions, many taxpayers who
invested in capital allowances schemes will lose some of
the benefits that they had been expecting. Often the
rental income is low and/ or borrowings high so there may
be little or no taxable income from such properties. The
ring fencing provisions as detailed below will therefore be
particularly onerous on such investors.
(a) Restriction of capital allowances on residential
accommodation (i.e. Section 23 type property relief)
From 1 January 2011, Section 23 type relief will only
be available for offset against income from the
property which gave rise to them i.e. against income
from the Section 23 property itself. Prior to this, the
relief was available against all rental income.
Any Section 23 type relief which is not used within the
10 year qualifying period will be automatically lost and
cannot be carried forward.
From 1 January 2011, the existing claw-back on sale
of such properties will continue to apply. However a
new owner will not be able to claim any of the relief on
purchase.
For Section 23 properties yet to be sold and for which
relief has yet to be claimed, the 10 year qualifying
period will start on 30 June 2011 regardless of the date
of the first qualifying lease. For example, this will
affect new unsold properties held by builders.
A guillotine provision will ensure that all unused/
unclaimed capital allowances are lost post 31
December 2014.
(b) Restriction of other capital allowances for on
property investments
From 1 January 2011, restricted allowances in respect
of a building used in a trade may only be offset against
the income of that trade.
Where the allowances arise in respect of a building
which has been let, the capital allowances will only be
available against income arising from the property to
which they relate i.e. ring fenced against that property
only.
The capital allowance period is to be curtailed as
follows:
- From Budget Day, any unused capital allownces
carried forward beyond the relevant 7 year or 10 year
period will be lost.
- If the accelerated capital allowance period is in
excess of 10 years, the allowance period will be
shortened to 7 years. If the period has already ended,
the reliefs will be lost. If the period has not yet ended
the remaining losses will be condensed into the
remaining period following a discount of 20%. Any
allowances unused beyond the 7 years will be lost.
2. Abolition of other allowances and reliefs A number of tax reliefs have been abolished or curtailed.
We set out below a summary of reliefs affected:
Approved Share Option schemes (from 24 November
2010)
Patent Royalty exemption (with effect from 24
November 2010)
Rent relief (on a phased basis)
Tax relief on loans to acquire interest in companies
Tax relief on trade union subscriptions
Tax relief on subscriptions to professional bodies
Benefit in Kind exemption on employer provided
childcare
Tax exemption for payments to National Co-operative
Farm Relief Services Ltd.
The accelerated allowance for capital expenditure on
farm buildings for pollution control.
Investment allowance for machinery and plan for
exploration expenditure.
Tax relief for new shares purchases by employees.
Summary of Headline Tax Changes
Introduced in Budget 2011 (continued)
Cunningham, Managing Director of Bank of Ireland Business Banking. Research carried out by Hughes Blake among members of the association in advance of the confer-ence featured widely in the national media. 63% of delegates who attended believe the world economy is on the road to recovery, and a majority of delegates feel that the recovery would really take hold by late 2011. Of more importance to Ireland, 71.6% of delegates indicated that they would be happy to recommend Ireland as a location for their clients to invest. The most important factor for these global advisors in recommending Ireland
was a commitment to a low and stable tax system, followed by ease of doing business, driving competitive-ness and an educated workforce.
Commenting on the results of the
Hughes Blake survey, IDA Ireland
CEO Barry O’Leary said “I welcome
the findings of this survey as they
closely align with what IDA Ireland
and its clients have being saying in
recent times. In 2010 to date we have
made over s ixty investment
announcements from both new and
existing client companies. Ireland’s
improving competitiveness coupled
with the positive elements of talent,
technology, tax regime and our
excellent track record in attracting
foreign owned companies all bode
well for securing further investments
into Ireland. The findings of this
report are very encouraging in that
regard.”
Page 7 Issue 9
Tax Free Lump Sum Reduction From January 1st 2011 the maximum tax free lump sum that can be drawn from a pension fund at retirement will be
capped at €200,000. Anyone entitled to a tax free lump sum in excess of this should seriously consider
2010 Income in excess of €150,000
Age < 30 30-39 40-49 50-54 55-59 60 +
Payment made before December 31st 2010
Maximum Contribution 22,500 30,000 37,500 45,000 52,500 60,000
Tax Saved 9,225 12,300 15,375 18,450 21,525 24,600
Payment made after January 1st 2010
Maximum Contribution 17,250 23,000 28,750 34,500 40,250 46,000
Tax Saved 7,073 9,430 11,788 14,145 16,503 18,860
Additional tax saving by making
contribution before December 31st 2,153 2,870 3,588 4,305 5,023 5,740
Taxation changes in relation to Pensions – Act before December 31
st
Relevant Earnings Reduction From January 1st 2011 the maximum earnings on which employees and self employed people can claim tax relief for
pension contributions will reduce to €115,000 (currently €150,000). This change will also apply to pension contributions
made in 2011 in respect of 2010 income. Therefore clients with income in excess of €115,000 in 2010 who would
normally make their maximum pension contribution in October 2011 should seriously consider making their
contribution before December 31st 2010. The following examples illustrate the benefit of doing so:
Yes
No
Would you consider recommending
Ireland as a location for your clients to
invest?
exercising their retirement options before December 31st. This would include self-employed people and company
directors aged 50+ with pension funds in excess of €800,000 who can currently draw down 25% of their fund tax free.
Please contact Hughes Blake on (01) 669 999 with any queries in relation to pension planning.
C Hughes, Director, Private Client Wealth Management
Over 200 delegates from around the world returned home recently following the hugely successful Integra International global conference in Dublin. Hughes Blake are the Republic of I r e l a n d m e m b e r o f I n t e g r a International, the global association of accounting and consulting firms. Hughes Blake were awarded the hosting of the conference in 2008. With 105 members in 140 cities world-wide, Integra is one of the fastest growing accounting associations worldwide having recently added member firms in Morocco, Cincinnati, Girona and Ramallah. Following an opening reception at the Gravity Bar in the Guinness Brewery sponsored by Bank of Ireland and business sessions in the Shelbourne
Hotel, the conference culminated in a gala reception and dinner in the Convention Centre Dublin.
The social events included a Ryder Cup style tournament at the K Club between Europe and North America which perhaps somewhat predictably,
the Americans won in some style. A night at the Jameson Distillery “Irish Night” was also deemed to be hugely enjoyable by the international attendees. Commenting on the event Neil Hughes said: “We were delighted that so many people came together for what was the biggest global conference Integra has ever hosted. Taking into account the difficulties the economy is facing currently, we felt it was a tremendous opportunity to drive new business for Ireland.” Sponsored by Sage, the theme of the conference was “Driving Enterprise and Trade in a Larger Association” and speakers included the CEO of IDA Ireland Barry O’Leary, Anthuan Xavier who spoke about growing a firm from 2 to 500 people, and Mark
Integra International World Conference 2010 - “A Huge Success”
Quarterly Newsletter Page 6
The Business session at the Shelbourne Hotel, Dublin
Mark Saunders, Global Chairman Denis Bergin, Bank of Ireland,
Mark Saunders and Neil Hughes
Barry O’Leary, IDA
Neil Hughes, Hughes Blake
Chartered Accountants
Christian Gebhardt and Anise Brokstein
being taught how to pull the perfect pint of
Guinness by a staff member
Page 3 Issue 9
3. Income Tax/ PRSI/ DIRT Income tax credits and bands reduced:
The employee tax credit is being decreased from
€1,830 to €1,650. The personal tax credit is being
reduced from €1,830 to €1,650 for single persons and
from €3,660 to €3,300 for married persons.
The standard rate income tax band is being decreased
from €36,400 to €32,800 for single persons, from
€45,400 to €41,800 for married persons with one
income and from €72,800 to €65,600 for married
persons with two incomes. The one parent/widowed
standard rate income tax band is being decreased
from €40,400 to €36,800.
The value of all other tax bands and tax credits will be
reduced by 10%. These changes are effective from
1 January 2011.
A new tax incentive scheme is to be introduced to
encourage taxpayers to invest in works that will
improve the energy efficiency of their homes. Relief
will be available at the standard tax rate for
expenditure up to a maximum of €10,000 on a list of
approved works. The tax relief will be available in the
year following the expenditure.
PRSI/ levies
The income levy and the health levy will be replaced
with a Universal Charge. This charge will apply as
follows:
○ 0% < €4,004
○ 2% €0 to €10,036
○ 4% €10,037 to €16,016
○ 7% > €16,016
The rate of PRSI for Class S (self employed) persons
is being increased from 3% to 4%. Modified PRSI
rates (relevant to certain public servants) will be
increased to 4% on income in excess of €75,036. A
PRSI charge of 4% is being introduced for certain
office holders. These changes will have effect from
1 January 2011.
The employee PRSI ceiling of €75,036 is being
abolished.
From 1 January 2011, employee contributions to
occupational pension schemes and other pension
arrangements will be subject to employee PRSI and
the Universal Social Charge.
The current employer PRSI exemption for employee
pension contributions to occupational pension
schemes and other pension arrangements will be
reduced by 50% from 1 January 2011.
DIRT DIRT rate to be increased from 25% to 27% on ordinary
deposit accounts, and from 28% to 30% on longer term
deposit accounts.
4. Business Taxation
It has been confirmed by the Minister of Finance that
there will be no change to the 12.5% Corporation Tax
rate.
The accelerated capital allowance scheme for Energy
Efficient Equipment will be extended for a further three
years.
The Business Expansion Scheme will be revamped
and renamed as the Employment and Investment
Incentive. Under the new incentive, the limit that can
be raised by companies will be increased from
€2 million to €10 million and the amount that can be
raised in any 12 month period will be increased from
€1.5 million to €2.5 million. In addition the certification
requirements will be simplified. The new scheme will
expire on 31 December 2013.
The three year exemption for start-up companies
is being extended to include start-up companies
commencing a new trade in 2011. The scheme is
being modified so that the value of the relief will be
linked to the amount of employers’ PRSI paid by a
company in an accounting period subject to a
maximum of €5,000 per employee. If the amount of
qualifying employers’ PRSI is lower than the reduction
in corporation tax liability otherwise applicable, relief
will be based on the lower amount.
The rate of Relevant Contract Tax (RCT) applied to
payments to subcontractors not holding a C2 etc is
being reduced to 20% where the subcontractor is reg-
istered for tax and has an established compliance
record. The rate for non registered subcontractors
remains at 35%.
The Employer Job (PRSI) Incentive Scheme will be
extended to the end of 2011.
Quarterly Newsletter Page 4
5. Capital Taxes The Capital Acquisitions Tax (CAT) free threshold on gifts
and inheritances has been reduced by 20%. This
reduction applies in respect of gifts and inheritances
taken from midnight on 07 December 2010. The new
thresholds are as follows:
6. Stamp Duty The Budget brought good news for any new house
buyers (including investors) as it reduced the rate of
stamp duty on residential property as follows:
However, all stamp duty reliefs and exemptions on
residential properties have been abolished in respect of
transfers on or after 8 December 2010.
The reliefs which have been abolished are:
First time buyer relief
Exemptions for new houses under 125 sq metre in size
Relief for new houses over 125 sq metre in size
The 50% relief for transfer of residential property
between relatives (Consanguinity relief)
Exemption for residential property transfers valued
over €127,000
Site to child relief
7. Indirect Taxes
The VRT relief for series production hybrid and flexible
fuel vehicles is being extended for 2 years until the end
of 2012. The rate of relief provided will be up to
€1,500. The VRT relief for plug in hybrid electric
vehicles will continue at up to €2,500 until 31
December 2012.
A review will be undertaken of the excise duty payable
for licenses for on-trade and off-licence sales of
alcohol products during 2011
The rate of excise is being increased by 4 cents per
litre of petrol.
The rate of excise is being increased by 2 cents per
litre of diesel.
These changes are inclusive of VAT applied from
midnight on 7th December 2010.
7. Pension/Life assurance
The overall life-time limit on the amount of tax-free
retirement lump sums that an individual can draw
down is being reduced to €200,000. The excess of this
amount will be taxed at the standard income tax rate of
20% up to an amount of €575,000 (equal to 25% of the
new Standard Fund Threshold). The excess of
retirement lump sums over that amount will be taxed at
the tax payer’s marginal rate of income tax.
The annual earnings limit which determines the maxi-
mum tax-relievable contributions for pension purposes
is being reduced from €150,000 to €115,000 (subject
to the usual age-related percentage limits). As set out
further below (under pensions), contributions made in
2010 in respect of 2010 will be able to avail of the
higher cap whereas contributions made in 2011 in
respect of 2010 will be subject to the reduced limit of
€115,000.
The maximum allowable pension fund on retirement
for tax purposes (known as the Standard Fund
Threshold) is to be set a €2.3 million with effect from 7
December 2010. Certain transitional measures apply
which may permit a higher limit.
The effective tax rate on Approved Retirement Funds
will be increased by raising the deemed annual
distribution of assets in those Funds from 3% of end of
year assets to 5% per annum with that distribution
subject to full income tax each year.
Exit tax rates that apply to life assurance policies and
investment funds are to increase by 2% in each case
and will now be 27% for payments made annually or
more frequently and 30% for payments made less
frequently than annually.
8. Other measures – non tax
Working-age rates of social welfare payment will be
reduced by about 4%
The car scrappage scheme is being extended for a
further 6 months to 30 June 2011. VRT relief of up to
€1,250 will be provided where a car of 10 years or
older is scrapped in accordance with certain criteria
and a new car of emissions band A or B is purchased.
Child benefit is being reduced by €10 per child for the
first, second, fourth and subsequent children. A cut of
€20 will apply to benefit for the third child.
Pre Budget
Post 8
December
2010
Group A
(parent to child) €414,799 €331,839
Group B
(siblings, aunt, uncle etc) €41,481 €33,185
Group C
(non related people) €20,740 €16,592
Value of House Rate from 8 December 2010
0 - €1M 1%
Excess over €1M 2%
Page 5 Issue 9
PRSI Rates 2010 2011
Employer
Standard rate 10.75% 10.75%
Lower rate 8.50% 8.50%
Weekly lower rate limit €356 €356
Self-employed
PRSI 3% 4%
Minimum contribution €253 €253
Employee PRSI 4% 4%
Employee annual PRSI ceiling €75,036 Abolished
Pensions 2010 2011
Annual earnings cap €150,000 €115,000
Tax free lump sum limit n/a €200,000
Capital Acquisitions Tax 2010 2011
Thresholds
Class A €414,799 €331,839
Class B €41,481 €33,185
Class C €20,740 €16,592
Rates
Standard rates 25% 25%
Capital Gains Tax 2010 2011
Standard rates 25% 25%
Annual exemption €1,270 €1,270
Corporation Tax Rates 2010 2011
Standard rate 12.50% 12.50% Higher rate on passive income 25% 25%
VAT Rates 2010 2011
Standard rate 21% 21%
Reduced rate 13.50% 13.50%
Farmers flat rate 5.20% 5.20%
Budget 2011 - Tax Rates and Credits
Personal Income Tax Rates 2010 2011
Standard tax rate 20% 20%
Single Person €36,400 €32,800
Married couple (one earner) €45,400 €41,800
Married couple (two earners) €72,800 €65,600
One parent / widowed parent €40,400 €36,800
Higher tax rate 41% 41% Above standard tax rate
threshold Balance Balance
Exemption Limits 2010 2011 Age exemption limits
(65 years plus)
Single / Widowed €20,000 €18,000
Married €40,000 €36,000
Income Tax Credits 2010 2011
Single €1,830 €1,650
Married €3,660 €3,300
Widowed €1,830 €1,650
PAYE €1,830 €1,650
Age credit single / widowed €325 €245
Age credit married €650 €490
Carers credit €900 €810
Trade Union Subscriptions €70 Nil
Universal Social Charge 2010 2011
Income < €4,004 n/a 0%
Income €0 to €10,036 n/a 2%
Income €10,037 to €16,016 n/a 4%
Income > €16,016 n/a 4%
Income > €16,016 n/a 7%
DIRT Rates 2010 2011
Deposit accounts 25% 27%
Investment Funds 28% 30%