Are You Leaving Yourself Exposed To Unnecessary Penalties?

Because taxation is a largely overlook aspect of business there are a range of areas where business make costly error in their accounts and procedures. Here are some of the common tax mistakes that you need to look closer at for your business.

VAT

• VAT on all sales is charged at the correct rate to customers;
• Intrastat forms (from 2010) must be correctly completed in respect of goods and/or services supplied/received cross-border;
• AT is only reclaimed on ‘allowable’ items and based on proper VAT invoices from suppliers;
• All relevant VAT reliefs have been availed of and cash- flow saving opportunities have not been missed.

PAYE

• Staff are rewarded in a tax-efficient way maximising the use of any relevant allowances and reliefs available.
• All payroll calculations are correct including PRSI, Pension Deductions and Universal Social Charge (USC);
• There are no individuals being paid gross (on receipt of an invoice) where payroll should be operated;
• There are no benefits whatsoever being provided to staff/directors which should be subject to PAYE, but are not being included in the calculations;
• Amounts reimbursed to staff for expenses incurred (e.g. mileage etc) are correctly calculated in accordance with Revenue rules.

VAT cannot generally be reclaimed on the following:

• Entertainment for clients, staff, personal use of assets;

• Food and Drink (unless acquired as stock-in-trade for resale);

• Accommodation (unless at a ‘qualifying’ event);

• Passenger cars (20% of VAT is recoverable on purchase, lease or hire of certain new passenger vehicles used for business purposes);

• Goods or expenses incurred that relate to a VAT exempt activity carried on by the business.

Valid invoices must be received in order to reclaim VAT. Invoices should always include:

• Date of issue and a sequential number;

• VAT number of supplier;

• Details of goods/services supplied;

• Full name and address of supplier and customer;

• Invoice amount, VAT rate and VAT amount; and

• VAT in question must be Irish VAT expressed in euros.

Errors in VAT frequently occur where properties are bought and sold or where leases are being granted or re-assigned. It is extremely important that VAT advice is taken prior to entering into any such transactions, particularly in light of the recent amendments in the legislation of this area.

When dealing with international transactions care must be taken when dealing with cross-border transactions. In many cases, VAT is not chargeable as the invoice will be zero-rated. However, this treatment generally requires that certain conditions are satisfied.

It is vital that invoices are not issued without VAT (in error) as the supplier remains liable for the VAT. It is equally important not to pay VAT to suppliers where it is not correctly chargeable as it will be very difficult to recover any such VAT.

Businesses who purchase services from abroad or purchase goods from suppliers in other EU Member States must account for Irish VAT on the value of services/goods through their Irish VAT return on a reverse charge basis. For businesses with an entitlement to 100% VAT recovery, they are entitled to a matching deduction for this VAT, resulting in no additional tax due to Revenue. For other businesses who are not entitled to reclaim all of the VAT incurred (including VAT-exempt businesses), the self-accounting for VAT represents a real VAT cost.

VAT Rates

Businesses need to ensure the correct rate of VAT is applied to all goods and services supplied. While the standard rate of VAT in Ireland is 21%, the reduced rates of 13.5%, 9% and 0% apply to many goods and services.

The penalties for a range of offences, including failing to submit VAT returns in a timely manner, have recently been substantially increased. It is therefore very important that businesses complete and submit returns on-time.

Some Examples of Why Proper Tax Strategies are Needed!

Case Study 1. VAT Case Study

Upon examination of a new clients activities we discovered a company with an unusually high amount of bad debts which was negatively impacting their business. The client was unaware that a VAT reclaim could be made in respect of most of these bad debts. We assisted the client to make a claim to Revenue and the client received a significant refund.

Case Study 2. Benefit In Kind – A company underwent a Revenue Audit and did not make a voluntary disclosure prior to commencement of the audit. During the course of the audit it was discovered that they were not operating benefit in kind in respect of three company cars. The Revenue imposed a 75% penalty on the basis that a higher duty of care arises on fiduciary taxes. By the time the case researched us the actions were irreversible in financial terms but we were able to negotiate non publication of the error and save negative PR for the new client.

Case Study 3. Benefit in Kind – A PAYE health check for a medium sized company. Upon investigation we discovered that they were failing to comply with the benefit in kind rules applying to company cars. The company made an unprompted voluntary disclosure of the issue to Revenue. The end result was a lower penalty being incurred than would otherwise have been payable. This saved the business many thousands of euros in fines and penalties.

Case Study 4. PAYE – By conducting a PAYE health check for a not-for-profit local organisation we discovered that they were not restricting mileage claims to: the shorter of their place of work to temporary place of work or their home to temporary place of work. We made an unprompted voluntary disclosure and avoided a large fine and negative press for the client.

Contact Avid Partners to help get the right financial procedures in place to save you money! Call us on 0818 303087 or email us at advice@avidpartners.ie.

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