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 www.welfare.ie).

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

www.fenero.ie

info@fenero.ie

01-6877400

Corporation Tax Exemption for Start Up Companies

One of the welcomed elements of the recently passed Finance Act was the retention of the 3 year exemption from corporation tax for start up companies. However with the addition of one extra criterion, the availability and benefit of this relief has become greatly restricted for many small businesses.

In short, the recent Finance Act confirmed that the relief available is now linked to the amount of Employer’s PRSI paid by a company in an accounting period. This means that companies will only be eligible for partial or full exemption based on the amount of Employer’s PRSI which they pay on their employees salaries.

For many small owner managed limited companies, the amount of Employers PRSI which they pay may be nil where they have no employees other than the company directors. This is because companies do not pay Employers PRSI on salaries paid to proprietary directors (i.e. directors who also own greater than 15% of the company’s shares). This would mean that you have no Employers PRSI costs to offset against your corporation tax liability.

However if you have set up, or are thinking of setting up, a company in 2011 which would meet this new criteria and qualify for the corporation tax exemption, the relief will work as follows;

A company will be eligible for corporation tax relief in the amount of Employers PRSI paid. For example, if the company paid €1,000 in Employers PRSI, it would be eligible for €1,000 reduction in its corporation tax bill.

The relief is subject to two upper limits:

(i) €5,000 per employee e.g. if you paid Employers PRSI of €10,000 in relation to one employee in 2011, then you can only claim a maximum of €5,000 of corporation tax relief

(ii) €40,000 total reduction of corporation tax per accounting period

If your company is made up solely of employees who are proprietary directors, you might find it useful to read our blog article on company directors and the interaction of Employers PRSI and the PAYE tax credit. It is possible to structure the company so that owner managers are not set up as proprietary directors and therefore Employers PRSI would be payable on their salaries. Naturally you would need to examine the specifics of your own company and expected tax savings under each scenario to determine whether it would be worthwhile to be set up as non-proprietary directors. http://smallbusinessadviceireland.blogspot.com/2010/10/company-directors-paye-tax-credit.html

As a recap, the other criteria which apply to companies in order to be eligible for this relief are as follows:

1. The company must be a qualifying trading company (service companies or trades involved in dealing or developing in land and extraction of natural resources are examples of non-qualifying trading companies);

2. The new company must not be taking over an existing trade (for example, a sole trader who decides to incorporate their business);

3. The company must both incorporate and also commence to trade in 2011.

If you have any questions or comments about this article, please feel free to contact us.

Are you a start up business looking for a grant?

An online campaign to assist one Irish entrepeneur is offering a gift of €5,000 to an Irish business start up.

The campaign is known as Outvesting.org. According to the founders, "Outvesting.org was founded in September 2009 as an online campaign to raise funding for entrepeneurs and start-up companies. The idea was generated in response to the general dissatisfaction amongst entrepeneurs with the lack of appropriate angel funding and state supports in Ireland".

There is no restriction on the type of businesses that can apply. All are welcome to enter.

Applications can be submitted to the Outvesting.org website until November 21st and the winner will be announced on December 7th. Those who donated to the prize fund will review applications and vote on the start-up with the greatest potential.

According to the founders, 35 applications have been received to date.

For more information and to enter the competition to win the €5,000 gift see www.outvesting.org

Thinking of Starting A Business? Tax relief available until 31 December 2009

In the last budget, in an attempt to encourage new companies and provide some stimulus for the economy, the government introduced a scheme exempting certain companies commencing to trade during 2009 from corporation tax for a period of three years.

This scheme has the potential to offer significant tax savings for many companies.

The terms of the scheme allow a full exemption from corporation where the total amount of corporation tax does not exceed €40,000. At the current rate of 12.5% corporation tax, this means that a company can earn profits of up to €320,000 per year without being required to pay corporation tax.

In order to qualify, the company must meet the following criteria:

- the company must have been incorporated on or after 14th October 2008

- the company must commence to trade during 2009

- the trade must be a new trade and must not have been carried on previously by another person in Ireland

- the company's business activity must not be dealin in land or petroleum and
mineral activities

- the company must not be a professional service company

This scheme is subject to EU approval through the granting of a Ministerial Commencement Order.

If you have been thinking of starting of business, doing so before the end of 2009 could offer you significant tax savings.

Fenero provides company incorporation services for €205 plus VAT. If you are interested in forming a company, contact us now on 01-8851735 or enter your details online at Fenero Online Company Formations.

Guide for Non-Residents setting up an Irish Company

Ireland’s Low Taxation Environment

Ireland has long been a leading choice as a base for many international businesses. Small and medium sized businesses can benefit from an Irish base as much as the large multi-nationals. The most popular and well known reason for setting up in Ireland is its low corporation tax environment. Ireland has one of the lowest corporate tax rates in both the EU and the world, at only 12.5% on trading activities.

In addition, a new incentive exists for new companies which commence trading in 2009. This is an exemption from corporation tax for the first THREE years of trading, an effective 0% rate of corporation tax. There is currently no information as to whether this incentive will be made available again for new companies in 2010. This makes 2009 one of the best times to set up a company in Ireland.

Other Reasons for Setting Up in Ireland

Of course there are a great range of other reasons to set up a base for your business in Ireland. These include:

• Extensive Double Taxation Treaty network with countries all around the world;
• No withholding tax on branch profits;
• No withholding tax on dividends to EU or treaty countries;
• Tax credits available for research and development expenditure;
• Young and well-educated workforce;
• Established and stable business environment with advanced infrastructure.
  

How Can A Non-Resident Set Up A Company In Ireland?

Forming a company in Ireland is a straight forward process. Company formation agents, including Fenero, can assist you with the necessary paperwork which enables your company to be set up and ready to use in 3-5 days.

All Irish companies are required to have a minimum of 2 directors.

At least one director is required to be Irish resident. The company can exempt itself from the requirement to have an Irish resident director by holding a bond, in the prescribed form, in force to the value of €25,394.76. The bond must have a minimum validity period of 2 years. A valid bond must be in place for as long as there is no Irish resident director in place.

What Is An Irish Resident Director Service?

If you are unable to provide an Irish resident director, you can avail of a Irish Resident Director service whereby an Irish resident director is provided to the company at a fee.

Should I Choose A Bond or An Irish Resident Director Service?

As with everything, there are cost considerations. The cost of putting a bond in place is normally cheaper than availing of an Irish resident director service.

However, if any of your reasons for setting up a company in Ireland are to avail of the low corporate tax rates, then it is crucial to be fully aware of the impliations of your choice between selecting a bond or an Irish resident director.

In order for a company to be eligible for the 12.5% corporation tax rate, it must be considered to be Irish resident. The term 'residence' was not until recently defined in law. The general rule was that companies whose 'central management and control' was exercised in the State, were treated as resident here. This rule or test emerged as a result of judicial decisions set down in case law.

Factors to be taken into account in establishing where the company's central management and control lie include:

• Where meetings of the Board of Directors are held;
• Where the majority of directors reside;
• Where the company's head office is located.

Due to the above, it is highly recommended than Irish resident director and an Irish registered office be provided to any company wishing to avail of the 12.5% corporation tax rate.

Further information regarding the rules for determining whether a company is eligible for the 12.5% corporation tax rate can be found on the Irish Revenue website by clicking here.

Why Choose Fenero?

We are members of the Association of Chartered Certified Accountants (ACCA), the global body for professional accountants. Fenero is a Dublin based professional services practice offering a full range of company formation, accounting, tax and financial services. We offer a fully comprehensive menu of all services that you may require, both to ensure that your company is compliant with all legal and tax issues, and also to ensure that you take advantage of all incentives available to you in order to financially make the absolute most of basing your business in Ireland.

Writing a Business Plan

WRITING A BUSINESS PLAN

A business plan is, in essence, a map of your route to success. Not every business will immediately see the need to write a business plan but there are many good reasons for taking some time out for this task. It is rarely ever a wasted or non-value adding effort.

Business plans:

• Make you think through your plans for the start of a new, or development of an existing, business in a logical and objective manner;

• Help you identify and focus on key areas required for the success of the business;

• Help you to identify specific problems that may arise and also to identify their solution;

• Help you to identify opportunities and how to capitalise on them;

• Assist in securing funding from banks, venture capitalists, government bodies etc.

A good business plan will contain a discussion of each of the following:

• A description of your business and why you believe it will succeed;
• Details of the Market that you have identified for the goods or services you will offer;
• Your sales and marketing strategy for accessing your target Market;
• Details of how your business will be organised and managed;
• A summary of the skills and experience of the key individuals involved in the business;
• Past and projected financial statements, including cash-flow analysis, Profit & Loss Account, Balance Sheet and details of key assumptions used in forecasts.

Using Template Business Plans

Sample business plans can be found from a wide variety of sources, including your local enterprise board, your accountant, your bank and of course the internet. There is no “one size fits all” business plan. Some are much more detailed than others and some place a greater emphasis on different aspects of the plan. This is simply because no business is the same and, as every business is unique, every business plan will be unique. If you are finding the process a little overwhelming at first, the best place to start is with a discussion of the six areas listed above and to flesh out your plan as necessary from there.

I have seen many people get bogged down and frustrated in writing a business plan when they are trying to adhere too strictly to a template that they have found. Remember that a template is only a guide and you should feel free to leave out details that may appear in a template which are not relevant to your business and to expand on, or even create new, sub-headings which will better explain the objectives and methodology of your own particular business.

How long should a business plan be?

Business plans can vary in size from a one page summary to any number of pages. Your plan should be as long as it needs to be in order to explain all the important points in a concise manner. It is important to avoid repetition and needless detail or padding. Due to the nature of the business, some plans will need to be longer and more complex than others, but all good business plans should be as brief and to the point as possible.

The users of the business plan should be able to navigate the plan quickly so they find the sections that are most relevant to them quickly. The use of appendices to the plan is advised for more in-depth information that you may wish to include e.g. financial projections, lists of existing sales orders, CVs of the promoters, detailed findings of market research etc.

For many small owner-managed businesses, a business plan of no more than 3 pages (excluding appendices) is very often sufficient for the purpose for which the plan is being written.

Who are you writing the plan for?

The intended user of the business plan should influence the final version of your business plan. For example, if you are writing a business plan for a bank in order to secure a business loan, it is important to focus on the issues which are likely to be important to the bank e.g. the basis of your financial assumptions, details of the income sources for the business, details of profitability and cash flows. If you have already identified potential customers, or agreed contracts, it is very useful to include these in an appendix in order to demonstrate the financial viability of the business to the bank.

If you are writing a business plan in order to gain advice or assistance from a mentor, you may be likely to include more details of the operational processes of the business than would be necessary to show to a bank e.g. day to day management information, marketing and sales strategies.

In summary:

• What do I want to achieve from writing a business plan?
• Who will read my business plan and what I am seeking from this reader?

Keeping these two questions at the forefront of your mind will help you to retain your focus and a clear structure as you write your business plan.

A sample business plan is available on request from Fenero. Our advisors are happy to provide assistance in preparing your business plan or to offer feedback and advice on your existing business plans. Contact us now; we look forward to hearing from you.


Fenro Contact Details:

Fenero Tax & Accounting
Fenero Financial Services

Telephone: +353 (0)1 9023979
Post: Unit 10, Block B, Tyrellstown Town Centre, Dublin 15.
e-mail: info@fenero.ie Website: http://www.fenero.ie