Thursday, April 4, 2013

Are mortgage write downs and debt forgiveness subject to 33% tax?

At the end of last month, the Association of Chartered Certified Accountants (ACCA) warned that mortgage write-offs and debt forgiveness taking place under the Mortgage Arrears Resolution Process (MARP) could be treated as a taxable gift under Capital Acquisitions Tax (CAT) rules and therefore subject to 33% tax. In legislation the definition of a taxable gift includes “the release, forfeiture, surrender or abandonment of any debt”. The ACCA had particular concerns over this due to the fact that debt write offs which will take place under the new Personal Insolvency Act (as opposed to under MARP), have been specifically stated by government as not being subject to CAT. The ACCA asked Revenue to clarify the position regarding debt write offs which take place under MARP.

A Revenue spokeswoman responded shortly thereafter to advise that they would not deem mortgage write downs to be taxable provided that Revenue are assured of the “bona fides of particular arrangements”, i.e. that the debt forgiveness scheme is legitimate and undertaken purely for commercial reasons.    

Revenue have clarified their position in e-Brief No. 12/13 issued on Tuesday (2nd April), which reads:

Section 5 of the Capital Acquisitions Tax Consolidation Act 2003 provides that a person is deemed to take a gift where, under or in consequence of any disposition, that person becomes beneficially entitled in possession, otherwise than on a death, to any benefit otherwise than for full consideration in money or money’s worth paid by such person.

By virtue of the definition of "disposition" in section 2 (1) CATCA 2003 the release, forfeiture, surrender or abandonment of any debt or benefit, or the failure to exercise a right may be subject to CAT in certain situations.

Where for bona fide commercial reasons, a financial institution enters into a debt restructuring, forgiveness or write-off arrangement with a customer, Revenue’s approach, subject to being satisfied as to the bona fides of the arrangement (which may be subject to Revenue audit or enquiry) is that the financial institution is not intent on making a gift of any sort to the mortgagor/debtor – and accordingly the mortgagor/debtor would not be subject to a CAT charge in respect of any such debt restructuring, forgiveness or write-off arrangement.

This approach will only apply in the above-mentioned circumstances. In particular, should any debt restructuring, forgiveness or write-off arrangement be undertaken for the purposes of the avoidance of tax, the treatment outlined above would not apply.

In summary therefore, so long as Revenue are happy that the debt forgiveness is legitimate and a bona fide commercial transaction, no tax liability will arise.

Contact Details:


Monday, March 11, 2013

What Self-Employed people need to know about the Local Property Tax

Perhaps having learned some lessons from the high level of resistance to, and non-payment of, the Household Charge, Revenue have approached the issue of taxpayer compliance to the new Local Property Tax (LPT) differently and have made every effort to ensure this tax will be collected.

It is crucial for self-employed persons to be aware of how the provisions of the LPT may affect them. Hugely important to take note of is the fact that Revenue has linked the submission of a LPT return to the submission of annual income tax returns.

As you will probably be aware, a late filing surcharge applies if you are late in filing your income tax return. This surcharge is calculated as a percentage of your tax liability. A 5% surcharge applies where your income tax return is submitted no more than 2 months after the deadline. This increases to 10% where the return is more than 2 months late.

Revenue has now linked the late filing of a LPT return to the filing of an income tax return. This means that if you do not file your LPT return, your income tax return will be deemed to have been filed late, even if it was not. This will trigger a late filing surcharge to be raised on your income tax return.

No tax clearance certificates will be issued to individuals where there is an unpaid LPT. If you need a tax clearance certificate to be able to deal with certain customers (such as under a Public Sector contract), you will need to be very conscious of the impact that non-payment of the LPT could have on your business.

If you are due any other type of tax refund, unpaid LPT may be offset against your refund.

If you are in receipt of any kind of social welfare payment, the LPT may be deducted directly at source from the payment.

As will also be the case with PAYE workers and other individuals, the Revenue now also has the power to attach the amount of LPT due to your bank account. This means that they have the power to take unpaid tax amounts directly out of the bank accounts of people who do not pay the tax, by ordering a bank to hand over the money from the person’s bank account.

Finally, as will be the case with all property owners, PAYE or self-employed, unpaid LPT will be added as a charge to your property. This means that you will not be able to sell your property until you have paid all LPT outstanding on it, plus interest due and also penalties where appropriate.

It seems that the Revenue has put a lot of thought into ensuring compliance with the LPT. There are very few places for people to hide and costly consequences for those who may try.

Contact Details:


Wednesday, December 5, 2012

Review of Budget 2013 Announcements

So the speculation is over and the announcements have been made. For a round up of all the main announcements made in today’s Budget, read on….



-          Universal Social Charge (USC)

Currently reduced rates of USC apply to the over 70s and full medical card holders. From 1 January 2013 the standard USC rates will apply to both the over 70s and full medical card holders earning more than €60,000 per annum.

-          PRSI

The minimum annual PRSI contribution for the self-employed is increasing from €253 to €500.

The weekly PRSI allowance for PAYE employees is to be removed. Currently the first €127 of weekly pay for a PAYE employee earning more than €18,305 is exempt from PRSI. This relief is to be abolished in a move that will cost PAYE employees earning over €18,305 an extra €264 per annum.

PRSI to be payable on passive income e.g. rental and other investment income.

-          Maternity Benefit

Maternity Benefit is to become a taxable source of income with effect from 1 July 2013.

-          Top Slicing Relief

Top Slicing Relief will no longer be available, from 1 January 2013, on ex-gratia lump sums in respect of termination and severance payments where the non-statutory element is €200,000 or over.

-          Charitable Donations

A number of changes to the administrative regime of tax relief for donations to charities and approved bodies have been announced. One new blended tax rate for relief on charitable donations of 31% to be introduced.

-          Benefit in Kind

The specified interest rate used in calculating benefit in kind on preferential loans (other than home loans) is to increase from 12.5% to 13.5%. However the specified rate of 5% for home loans is to be reduced to 4%.

-          Film Relief

The current film relief scheme is to be extended to 2020. However the scheme will be removed and will move to a tax credit model from 2016.


-          3 Year Corporation Tax Exemption

An extension to the 3 year corporation tax exemption for new start-up companies is to occur. The relief is being extended to allow any unused relief arising from insufficient profits during the first 3 years trading to be carried forward for use in future years. However the maximum allowable relief cannot exceed the eligible amount of Employers PRSI in the year claimed.

-          R&D (Research and Development) Tax Credit

The amount of qualifying expenditure which can benefit from the tax credit without reference to the 2003 threshold is being increased from €100,000 to €200,000.

-          Close Company Surcharge

Close Companies are currently exempt from the surcharge where the amount of any undistributed investment income is less than €635. This threshold is being increased to €2,000. The majority of Irish companies are Close Companies. A Close Company is a company that is controlled by five or fewer participators or is controlled by any number of participators who are directors.


-          VAT rate for the tourism sector

The 9% VAT rate for the tourism (and certain other) industries is to be retained.

-          Threshold for accounting for VAT on a cash receipts basis

Businesses with an annual turnover of €1 million or less are currently eligible to account for VAT on a cash receipts basis. This threshold is to be increased to €1.25 million. Accounting for VAT on a cash receipts basis is a significant cash flow advantage for businesses.


-          Access to pension fund pre-retirement age

Individuals will be allowed a once-off option to withdraw up to 30% of the value of their AVCs prior to retirement. However any withdrawals will be liable to tax at the individual’s marginal rate. This option will remain in place for three years after the passing of Finance Bill 2013.

-          Changes to maximum tax relief on pension contributions

The government plans to introduce a cap on tax relief for pension contributions into pension funds which will provide annual pension income of more than €60,000.

-          Pension Levy

The annual Pension Levy of 0.6% of pension funds levied to fund the Jobs Initiative is set to end as planned in 2014.


The current rate of 30% is to be increased to 33% and will apply to disposals made after 5 December 2012.

Relief to capital gains tax will be available for farm restructuring. This will be available where the proceeds of the sale of a farm are reinvested for the same purpose.


The current rate of 30% is to be increased to 33% and will apply to gifts and inheritances received after 5 December 2012. The current group tax free thresholds are also being reduced by 10% with effect from the same date.


The rate of DIRT is to be increased from 30% to 33% for savings products which pay interest annually or more frequently. For products which pay interest less frequently than annually the applicable rate will be 36%. These increased rates will apply from 1 January 2013.


The new local property tax will take effect from 1 July 2013. A half-year payment will be charged in 2013.

The tax will be charged at a rate of 0.18% on properties valued at less than €1 million and at a rate of 0.25% will apply to any excess value over €1 million. Importantly these rates will be known as the “central rates” but from 2015 onwards, local authorities will be able to vary the rate of the tax by up to +/- 15%. Therefore different rates will apply depending on the local authority that you live under.

The Household Charge will cease with effect from 1 January 2013 as this local property tax is to replace it. In addition the NPPR (non principal private residence) charge will cease with effect from 1 January 2014. Any unpaid Household Charge or NPPR taxes will remain as a charge on the related property however.

For full details on the local property tax, see our separate blog article at:


-          VRT

Vehicle Registration Tax (VRT) rates are to be increased with effect from 1 January 2013. VRT reliefs currently in place for electric vehicles and certain hybrid vehicles are to be retained until the end of 2013.

-          Motor Tax

Motor tax rates will increase from 1 January 2013 across all categories although the rate for electric cars is being reduced to €120.

A full list of current and the new revised motor tax and VRT rates is available from page 2 onwards at:


-          Alcohol

Excise duty on a pint of beer and cider, and on a standard measure of spirits, is being increased by 10 cent. The excise duty on a 75cl bottle of wine is to be increased by 1 euro. Pro-rata increases take effect on other products. These increases take effect from midnight 5th December 2012.

-          Tobacco

Excise duty on a packet of cigarettes is to be increased by 10 cent with a pro-rata increase on other products. Excise duty on roll-your-own tobacco will increase by 50 cent per 25g pouch with effect from midnight 5th December 2012.


-          Statutory Redundancy Payments

The partial refund of statutory redundancy payments to employers, which was substantially reduced last year, is to be abolished completely.

-          Health

The prescription charge for medical card holders to be increased from 50c to €1.50 per item and the monthly cap for a family is being increased from €10 to €19.50.

Drug Payment Scheme threshold is being increased from €132 to €144 per month.

Medical cards to be replaced by GP only cards for persons aged over 70 with a weekly income of €600-€700 for single persons and €1,200-€1,400 for a couple.

-          Social Welfare Changes

No change to core weekly payment rates.

Child Benefit to be reduced by €10 per month.

The length of time which an individual can claim Jobseeker’s Benefit will be reduced by 3 months, from 12 months to 9 months. After 9 months a means test will be required.

Telephone and electricity allowances which are currently available under the Household Benefits package are to be reduced.

-          Education

For third level students, the student contribution to fees will be increased by €250 for the years 2013 to 2015.

Disclaimer: The above list is not an exhaustive list of proposed changes. In addition, the above notes are based on the budget speech and not on draft legislation, which will not be available until the Finance Bill is published. Fenero accepts no responsibility for any action which any individual or business may take or not take based on their reading of this article. Professional advice should be taken before any action is taken.

Contact Details:

Budget 2013 | Dublin Accountants | Dublin Tax Advisors | Fenero

Overview of the New Local Property Tax

Overview of the Local Property Tax

The new local property tax will tax effect from 1 July 2013. The property owner will be liable to the tax (and not tenants where the property is rented). Co-owners will be jointly and severally liable for the tax. A half-year payment will be charged in 2013 and a full year payment will be due from 2014 onwards.

The tax will be charged at a rate of 0.18% on properties valued at less than €1 million and at a rate of 0.25% will apply to any excess value over €1 million. Importantly these rates will be known as the “central rates” but from 2015 onwards, local authorities will be able to vary the rate of these “central rates” by up to +/- 15%. Therefore different rates will apply depending on the local authority that you live under.

The amount of tax paid will be determined on a self-assessment basis. i.e. the property owner must establish the market value and calculate the applicable tax amount to be paid. The property tax will be collected by the Revenue Commissioners.

The Revenue will be setting up a dedicated Lo-Call number to deal with enquiries about the tax from 7th January 2013.

How much tax do I have to pay?

The tax rate will be applied to the market value of your property to arrive at the amount of tax payable. However for the purposes of calculating the tax, property values will be organised into bands.

The first band is €0 - €100,000. Subsequent bands will be organised in values of €50,000 width up to €1 million i.e. the second band is €100,001 to €150,000; the third band is €150,001 to €200,000 etc. The tax liability will be calculated by applying the tax rate to the mid-point of the band. For example, if your property is valued at €130,000 it will fall into the €100,001 to €150,000 band. The mid-point of this band is €125,000. Therefore you will pay 0.18% on €125,000 (and not 0.18% on €130,000). An online calculator is available on the Revenue website to help you work this out at:

How do I value my property?

In March 2013 the Revenue Commissioners will be sending out an explanatory booklet on the operation of the local property tax including procedures for arriving at the property’s market value. Property owners will also be free to use the services of an independent property valuer if they choose. The new Property Prices Register is also intended to assist people in valuing their property.

You will be required to determine the market value of your property as at 1 May 2013. This valuation will then remain valid for the purpose of your Local Property Tax Return for three years up to and including 2016. This will useful in that you will not need to repeat this exercise each year and also if you improve or renovate the property which may increase the property value before 2016.

However it is not clear from information currently available whether you can choose to revalue your property and resubmit details again before 2016 if you wish to – this would be important in the context of falling property prices.

You will be required to submit a Local Property Tax Return to Revenue stating your valuation either online or using a paper return (however if you own more than one property you cannot avail of the paper return option). Paper returns will be required to submitted by 7th May 2013. If you are filing online you will have until 28th May 2013.

Michael Noonan has advised that a number of methods will be used to identify valuations which are far below market value in an attempt to curb any tax evasion which might arise though the intentional undervaluing of a property. This includes a “heat map” showing the average market value of properties in a particular area. The idea is that if one property owner values their property substantially lower than their neighbours, it should be quickly flagged by the Revenue for further investigation.

The government have said they expect that 85% to 90% of properties will be valued at below €300,000.

Are there any exemptions to the Local Property Tax?

The exemptions to the tax will be broadly in line with those applied to the Household Charge. Additional exemptions will also apply to First Time Buyers and to new or previously unused properties.

Second hand properties purchased by a first time buyer in 2013 will be exempt until the end of 2016.

New and previously unused properties which are purchased from a builder or developer between 1 January 2013 and the end of 2016, will be exempt until the end of 2016.

How and when do I pay the tax?

The tax will be operated and collected by the Revenue Commissioners. You can choose to make one single payment or instead to spread out the payments in equal instalments between 1 July and 31 December 2013. If you are opting for one single payment by a single debit instruction, this will be taken from your bank account on 21 July 2013.

There will be a range of payment options including credit/debit card, direct debit and cash payment through certain providers. You can also opt for voluntary deductions at source meaning payment can be deducted from your salary or certain social welfare payments. If you do not elect for a particular payment method, the Revenue will automatically collect the tax at source.

Interest charges will apply to late payment of tax.

What if I cannot afford to pay?

For owner occupiers with a gross income of up to €15,000 (single) and €25,000 (couples), the tax can be deferred in full until financial circumstances improve or until the property is sold. For owner occupiers with a gross income of up to €25,000 (single) and €35,000 (couples), 50% of the tax can be deferred in full until financial circumstances improve or until the property is sold. However interest at 4% per annum will apply to all deferred amounts.

What about the existing Household Charge? And the NPPR tax on second properties?

The Household Charge will cease with effect from 1 January 2013 as this local property tax is to replace it. In addition the NPPR (non principal private residence) charge on second homes will cease with effect from 1 January 2014. Any unpaid Household Charge or NPPR taxes will remain as a charge on the related property however.

Disclaimer: Please note that the information provide above is based on detail announced in the Budget on 5th December 2012 and is subject to enactment of the Finance Bill 2013.

Contact Details:


Fenero Tax & Accounting | Dublin Accountants | Dublin Tax Advisors

Sunday, December 2, 2012

The Self-Employed and Jobseeker's Benefit/Allowance

One issue that we are commonly asked about is that of social welfare entitlements for the self-employed, in particular JobSeekers Benefit. If you are self-employed, what social welfare safety nets are there should your business fail or not provide you with sufficient income?

Qualifying for Jobseeker’s Benefit

Most self-employed people cannot qualify for Jobseeker’s Benefit due to the fact that it is only given to people who have paid PSRI at Class A. However, if you have previously worked and paid Class A PRSI as an employee before becoming self-employed you may be entitled to Jobseeker’s Benefit.
To qualify for Jobseeker’s Benefit you need:

·         At least 104 Class A PRSI contributions paid since you first started work

·         And have 39 Class A PRSI contributions paid or credited in the relevant tax year (a minimum of 13 weeks must be paid contributions*) or

·         Have 26 Class A PRSI contributions paid in the relevant tax year and 26 weeks Class A PRSI paid in the tax year immediately before the relevant tax year.

The relevant tax year is the second last complete tax year before the year in which your claim is made. So, for claims made in 2012, the relevant tax year is 2010.

If you are unsure as to how many Class A PRSI contributions that you have, you can check your PRSI record directly with the Department of Social Protection (contact details available at

I do not qualify for Jobseeker’s Benefit. What happens next?

If you do not qualify for Jobseeker’s Benefit you may instead qualify for Jobseeker’s Allowance which is a means-tested social welfare payment. If you have applied for Jobseeker’s Benefit and did not qualify, you should be automatically assessed for Jobseeker’s Allowance. In fact, you cannot actually apply for Jobseeker’s Allowance until you have first applied for Jobseeker’s Benefit (even if you know that you will not qualify for Jobseeker’s Benefit).

Jobseekers Allowance – Means Test

If you do not earn enough from self-employment and you do not qualify for Jobseeker’s Benefit, you may be able to get Jobseeker’s Allowance if you pass a means test. To qualify, you must also be:

·         Over 18 and under 66

·         Unemployed and available for, capable of and genuinely seeking work

·         Habitually resident in Ireland

How can I be available for work if I am self-employed?

You will no doubt have noticed that one of the qualifying criteria is that you must be available for and seeking work. For the self-employed, you can remain so and can even be engaged in self-employment every day and still be entitled to receive Jobseeker’s Allowance, provided your overall income stays below a certain amount. The number of days you are engaged in self-employment is not relevant.

In order to satisfy the criteria of being capable of, available for, and genuinely seeking work, you must be able to show evidence of this to the Department of Social Protection.

Available for work

Essentially the Department of Social Protection considers that you are available for employment if you are prepared to accept any offers of suitable employment immediately. It is important to be aware that you can be regarded as not being available for work and therefore not entitled to Jobseeker's Allowance if you put unreasonable restrictions on the following:

·         The nature of the employment

·         The hours of work

·         The rate of pay

·         The duration of the employment

·         The location of the employment

Genuinely looking for work

You must be able to show that you are making genuine efforts to secure employment. You need to provide examples of such steps. Steps which would indicate that you are considered to be genuinely seeking work may include:

·         Making oral or written applications for work

·         Looking for information on the availability of employment from employers, advertisements and employment agencies

·         Taking up reasonable training opportunities

·         Acting on the advice given by a Job Facilitator, a FÁS adviser or other placement agency such as the Local Employment Service (LES)

·         Taking positive, well advised steps towards establishing yourself in self-employment such as researching possible areas of self-employment,

·         Preparing business plans for a self-employment project

·         Attending relevant "start your own business" courses or seeking information, advice or guidance in relation to any of these steps

How is the Means Test Carried Out?

For information on how the means test is carried out, watch out for a future blog post coming soon.

Other Benefits

If you qualify for Jobseeker's Allowance you may also be eligible to apply for secondary benefits such as a medical card, rent supplement, mortgage interest supplement, fuel allowance, assistance with school costs etc.

Contact Details

Monday, October 15, 2012

Single parents – Earn an extra €8,250 free of income tax with the one-parent family tax credit

If you are a single parent, you are entitled to claim an extra tax credit known as the One-Parent Family Tax Credit. The one-parent family tax credit is worth €1,650 in 2012. This will allow you to earn an extra €8,250 free of income tax. (Unfortunately it will not reduce the amount of PRSI or USC that you pay as all tax credits only impact on your income tax liability).

Who qualifies for the one-parent family tax credit?

The one-parent family tax credit can be claimed if you are a single parent and you have a child, under the age of 18, who is dependent on you and resides with you for at least one night in the year.

In addition to children aged 18 or under, you can also receive this for a child over the age of 18 who is in full time education or undergoing a full time training course for a trade or profession for a minimum of two years.

You can also receive this tax credit if you are a single parent to a child who is permanently physically or mentally incapacitated and has become so before reaching 21 years of age, or has become permanently incapacitated after reaching 21 but whilst in full time education.

You do not qualify for one-parent family tax credit if:

•    You are a person qualifying for the married person's tax credit or
•    You are a person living together with another person as man and wife

Note that if you are claiming this tax credit and at a later date move in with a partner, you are no longer entitled to this credit and must inform Revenue.

And the tax savings get better....

If you claim the one-parent family tax credit, you will also receive an increase in your standard rate band. This means that the amount you are allowed to earn at the 20% tax rate will increase. As a single person you are entitled to earn up to €32,800 at 20%. When you claim the one-parent family tax credit, as well as receiving the tax credit your 20% tax band will increase from €32,800 to €36,800. This means you can earn an extra €4,000 which is only taxed at 20% instead of 41%. This is a tax saving of €840. (Please note that this information is based on the 2012 tax rates).

Social Welfare payments to single parents

Claiming the one-parent family tax credit will not affect your entitlement to the One Parent Family Payment from the Department of Social and Protection if you are in receipt of same. However don’t forget that the One Parent Family Payment is a taxable source of income and the tax due on this payment is collected by means of an adjustment to your tax credit certificate. It is advisable to make sure that Revenue is aware that you are in receipt of this payment in order that they can adjust your tax credits accordingly. If you do not, you may find yourself with an unexpected tax bill at a later stage when or if Revenue contacts you about this.

How to claim this tax credit
You can claim this tax credit by sending in Form OP1 to Revenue. You will find a link to this form below.

Alternatively you can claim using PAYE Anytime. If you are not registered for PAYE Anytime, you can do so here:

If you have any questions or need advice, don’t hesitate to contact Fenero on or 01-6877400.