VAT and Other Taxes that Could Affect Your Business

July 9, 2024

Your business is probably registered for VAT but depending on how you operate, you could also be liable for various other taxes. In this article, GroForth’s Geraldine explains how to get to grips with:

• VAT, VIES, INTRASTAT and Mutual assistance

• Relevant Contracts Tax

• Professional Services Withholding Tax

VAT, VIES, INTRASTAT and Mutual assistance

VAT is a tax imposed on certain goods and services. Different VAT rates apply depending on the goods and services being provided. Depending on where and how you are doing business, there can be a lot of different VAT rules to get your head around, however as a general rule, businesses collect VAT from their customers and file VAT returns with Revenue.

Under tax law, you are required to register for VAT when your turnover exceeds (or is likely to exceed) the VAT threshold in any continuous 12-month period. The main thresholds are €37,500 if you are supplying services only, €75,000 if you are supplying goods, €10,000 if you are making mail order sales or engaged in distance selling of certain goods or services. You can find more information on VAT thresholds and who should register for VAT in the VAT registration section of the Revenue website.

Your VAT Return

You must file and pay your VAT by the 23rd day of the month if you file via ROS (otherwise you must file by the 19th day of the month) following the end of each taxable period. You must also complete a Return of Trading Details (RTD) each year. This form is used to list your total purchases and sales for the year, broken down by their VAT rate. The form must be filed by the 23rd of the month following the end of your accounting period. It is important your RTD matches the information filed in your VAT returns for the relevant period as discrepancies could trigger Revenue queries that can be time-consuming to resolve.

In our experience, historically Revenue did not always follow up on missing RTDs however we have recently noticed an uptick in the checking of these forms so it is important to ensure that you file your return on time. Late filing could delay any tax refunds that you might be due and/or could mean that you cannot obtain a tax clearance certificate.

Reclaiming VAT

An advantage of registering for VAT is that you can reclaim the VAT you pay when you purchase certain goods and services that for use in your business. You must retain proof of these purchases (invoices and receipts) to support your claim for repayment of VAT. You submit your claim through your VAT return. The time limit for submitting a claim is four years.

Note that you cannot claim VAT on all of the expenses you incur. Food, drink or other personal services, accommodation and entertainment are examples of expenses where VAT cannot be reclaimed. You can find more information about they types of VAT you can and cannot reclaim on the Revenue website.

EU customers

If you supply services to a customer in another EU country, your customer must account for the VAT that is due under the EU’s reverse charge rules. You must obtain the customer’s VAT number and include it on your invoice and your invoice must indicate that the reverse charge applies. You can find out more about reverse charge accounting on the Revenue website.

Doing business within the EU also means that you must comply with the EU’s VIES, Intrastat and Mutual Assistance requirements:

⁃VIES — VAT Information Exchange System: If you supply zero-rated goods or services to a VAT-registered trader in another EU Member State you must submit a VIES statement. Your VIES statement must be filed online via the Revenue Online Service (ROS)by the 23rd day of the month following the end of the reporting period. This means your January monthly statement must be filed by the 23rd of February, your February statement must be filed by the 23rd March and so on.

⁃INTRASTAT: The INTRASTAT system collects statistics on the movement of goods between EU member states. You must complete a detailed INTRASTAT return if your annual imports from EU member states exceed €500,000 or if your annual exports to EU member states exceed €635,000. If you are VAT-registered, you must complete boxes E1 (total goods and related costs to other EU Countries i.e. Dispatches/ Exports) and E2 (total goods and related costs from other EU Countries i.e. Arrivals/ Imports) on your VAT 3 return when each return is due.

⁃Mutual Assistance: This system enables you to verify the VAT numbers that your EU customers give you. See the VIES VAT Number Verification service on the European Commission website.

Customers outside the EU

While supplies of services to business and private customers outside the EU are generally not subject to VAT, it is very important to confirm the customer’s tax status and retain proof that they are established outside the EU. This is because if you do not charge VAT, and cannot prove that the customer is not established in the EU, you could have to pay the VAT yourself. You could also have to pay Revenue interest and penalties.

Relevant Contracts Tax

If your business relies on subcontractors, it is important to understand whether Relevant Contracts Tax (RCT) applies. RCT is a withholding tax on various activities in the construction, forestry and meat processing industries. You can find a full list of relevant activities on the Revenue website. Note that RCT also applies to relevant activities carried out by non-resident subcontractors.

What is a withholding tax?

A withholding tax is a tax that is deducted by the recipient of a service. So, if you are using subcontractors for activities where RCT applies, you must deduct RCT from the payments you make to these subcontractors.

Subcontractor vs Employee

It is important to understand the difference between an employee and a subcontractor. If you are unsure, you can find guidance on how to check this in Revenue’s Code of Practice for Determining Employment Status.

Notifying Revenue about RCT contracts

Under RCT rules, you must notify Revenue about all relevant contracts and subcontractor payment details. You do this via contract and payment notifications which are filed via the Revenue Online Service (ROS). You must notify Revenue immediately after entering into a contract with a subcontractor and file your payment notifications before you pay your subcontractors. Revenue can apply a surcharge if your RCT filings are late.

Summary of RCT deductions

Shortly after the end of each return period, Revenue will compile a summary of your RCT deductions. It’s advisable to check this carefully each time to make sure that it is correct. Revenue can penalise you for any incorrect or unreported payments.

Notifying subcontractors

You must also notify your subcontractors about the RCT that you are withholding from their payments.

RCT rates

There are three different RCT rates—0%, 20% and 35%. The rate that applies, depends on each subcontractor’s compliance record with Revenue.

Note on VAT and Relevant Contracts Tax

While VAT is usually charged by the person supplying goods and services, under Relevant Contract Tax in the construction sector, the person receiving the goods or services is responsible for collecting the VAT and paying it over to Revenue. This means that if you are a Principal Contractor for RCT purposes, you have to apply Reverse Charge VAT (RCV) to the invoices you receive from your subcontractors.

Professional Services Withholding Tax

State and Semi-State bodies and their subsidiaries must deduct Professional Services Withholding Tax (PSWT) from the payments and expenses they pay to the providers of certain professional services. Organisations who receive funding from State or Semi-State bodies also fall under these rules.

A summary of services where PSWT applies is available on the Revenue website. These include:

• medical, dental, pharmaceutical, optical, aural or veterinary services

• architectural, engineering, quantity surveying or surveying nature, and related services

• accountancy, auditing or finance services

• financial, economic, marketing or advertising services

• legal services

• geological services.

How does PSWT work?

If you provide professional services to State or Semi-State companies, then PSWT will apply and will be deducted from the payments you receive. VAT should not be included when calculating PSWT however where interest is charged (eg on a late payment for professional services), PSWT is deducted from the interest also.

The State company or Semi-State that receives your professional services must submit a Payment Notification using the Revenue Online Service (ROS), deduct 20% PSWT from your payment, and pay this PSWT over to Revenue. You can claim the tax withheld as a credit against your Income Tax or Corporation Tax liability in the relevant tax year.

Exemptions

Certain types of payments and expenses are exempt from PSWT. These include certain inter-group payments, certain foreign branch payments, certain payments made abroad, payments to employees that are subject to PAYE, payments that are subject to Relevant Contracts Tax and payments to charities that are exempt from Income Tax.

If you are a GroForth client, our team can help you with your the various taxes covered in this short article. Contact us for details of our services.

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Can working from home improve productivity in accounting firms?

March 11, 2025

Lessons learned during the Covid-19 lockdown could lead to lasting changes in some accounting firms, says Sarah Daly. For the last few months, accounting firms across Ireland have been forced to work from home due to Covid-19 social distancing requirements. While firms that already use technologies like cloud accounting have managed the transition reasonably smoothly, others have had to adapt their processes and procedures rapidly in order to cope. How technology helps improve productivity in accounting firms: As an early adopter of technology ourselves, GroForth understands the benefits that IT can deliver. So, it came as no surprise to us that cloud-based applications were a key enabler of working from home for our accounting firm clients in recent months. Software products like Xero and SortmyBooks are real time-savers in busy accountancy practices at the best of times, but their 24/7, ‘work anywhere’ functionality really came into its own when the pandemic forced firms and their clients to work from home. Likewise, accountants are finding that applications like Zoom, Skype for Business, Microsoft Teams and Slack enable them to support their customers online while teams can communicate and collaborate effectively in real time. Admittedly, with more people than ever working from home, there have been challenges when it comes to ensuring staff have access to suitable equipment and controlling and securing remote set-ups, but accounting firms are not the only ones facing these challenges. Generally, firms are willing to seek out solutions and adapt rapidly and, when it comes to workers, a recent study by the Whitaker Institute found that more than three-quarters (78%) would like to continue to work remotely after the crisis is over. How working from home boosts productivity: Another interesting lesson from the Covid-19 working from home experience is that remote working appears to boost productivity for some employees. There are several reasons why this is the case. Less time spent commuting: Various studies have shown that long commutes are stressful for employees, so it is not surprising that eliminating commuting is one of the factors that helps boost productivity. Less time spent commuting also means that workers have more time to enjoy leisure activities so there can be a strong personal incentive to complete work faster. More time spent working: When employees work from home, they may take fewer breaks, or shorter breaks. This, combined with less commuting time, means employees often log longer hours when working from home. Improved concentration: While not all workers have a suitable home environment, those that do find it quieter than working in a busy office. This helps improve concentration and focus which, in turn, enhances productivity. Better work/life balance: Simple things like being able to exercise during the day, do the shopping or put on a load of washing at lunchtime, can contribute to a better work/life balance. This can help employees feel less stressed out by conflict between their home and work responsibilities. Reduced absenteeism: Firms also say that their employees appear to have fewer sick days when working from home. Of course, not everyone is more productive. For some workers, their home environment is simply too small. Others dislike the isolation and miss the social aspect of being in the office. Variables like having young children can limit productivity as employees may be tired or stressed from having to work before children get up or after they go to bed. But, for the most part, GroForth clients find that the benefits of working from home outweigh the disadvantages. What’ s more, accounting firms are telling us that their employees appear more positive and productive because they feel their work/life balance has improved. Strategies to improve productivity: On a personal note, one practical tip that helps me improve my own productivity is exercising early in the day. I find this is energising and helps me stay positive. If you are lucky enough to have more time on your hands than usual at present, another practical tip is to use this time to benefit your business. I recently shared some ideas on how to do this in an this article on using time wisely when working from home. As well as working to improve your personal productivity, there are practical steps you can take to help your employees be more productive while working from home. These include: Recognising that employees may be experiencing conflict between work and home life if they have young children at home or are looking after older relatives. If you are willing to be flexible—for example, by allowing employees to work outside of normal office hours—this can help improve their productivity. Ensuring teams have adequate equipment and support Encouraging team members to set up a dedicated work space in their home Encouraging team members to schedule their work time, take regular breaks, and set boundaries so that work does not encroach on personal time Organise regular check-ins with team members Set clear goals, monitor performance and provide feedback While working from home is likely to continue indefinitely for many workers, some employees will need to return to the office. My colleague, Nikki Johns recently discussed this in article on the Government’s Return to Work protocol. Finally, remember to be kind to your employees and yourself. Don’t beat yourself up if you find it difficult to get time to work on your business development and strategy at present. Time constraints are a huge challenge for partners and managers in many firms. Indeed, research recently conducted for GroForth found that this is the single biggest problem accountancy practices face. Outsourcing can be one way to free up time and enhance productivity. As a provider of specialist services for accounting firms, GroForth has seen increased demand for our services since the Covid-19 pandemic began. If you’d like information about these services or would like to know more about how GroForth is helping firms like yours, please get in touch.

Why Are You Ignoring Your Pipeline?

December 12, 2024

Feedback from potential clients can provide valuable information for improving your products and services as well as highlighting opportunities to boost your revenue. Yet many businesses fail to manage their pipeline effectively and miss out on these opportunities as a result. Your sales pipeline is an important source of information for planning and budgeting. So, when working out your budgets and forecasts for the new year, it is important to make time to review your pipeline and see if you can identify ways to improve it. Key questions to ask include: What do you expect to sell next year? To whom? When? At what price? What volume? You also need to look at your input costs. To what extent will these be affected by inflation? Do you have sufficient people/resources to deliver your products/services or will you need find additional capacity? If so, how will you fund this? Impact of uncertainty on your sales pipeline Uncertainty is a huge factor at the moment because of the upheaval business experienced over the last 18 months. Have any of your prospects disappeared due to the impact of the Covid-19 pandemic, Brexit, or other external factors? Have any new prospects emerged? Are you still targeting the right customers? Do you have any new competitors? These are all questions to think about when you are working on this year’s budget and plans. Realistic forecasts It’s important to be realistic when forecasting. Your forecast should be based on the sales that you are confident you can secure in a given time period. Remember to assign responsibilities, monitor progress, and keep a keen focus on controlling your input costs. Accounts and payroll information While your sales pipeline is an important source of information for planning and budgeting, accurate bookkeeping and payroll information is also crucial. It’s important to ensure that there is a good flow of communication between your bookkeeper and accountant. This is because while your accountant is usually the one person who really understands your business, they rely to a great extent on the information you provide to them. So, if this information is incomplete, inaccurate or out of date, it will affect your accountant’s ability to help you. If you need support or advice on how to improve your bookkeeping and payroll processes, contact GroForth for assistance. Finally, remember neglecting your pipeline is a missed opportunity. So the lesson is, stop ignoring your pipeline!

Checklist for Changing Your Payroll Service Provider

December 12, 2024

If you intend to change your payroll service provider, there are some practical steps that will help you achieve a smooth transition, says Michelle Collins The end of the year/beginning of a new year is probably the best time to change your payroll provider. But before deciding to make a change, it’s important to establish if your existing supplier knows that they are not meeting your requirements. Have your spoken to your existing payroll provider about the problems you are experiencing? If your existing payroll company has been providing support for a period of time, it’s likely that they have a reasonably good understanding of your business. So, if they are not delivering the services that you require, it could be that they don’t realise their offering doesn’t match your expectations. It is worth having a conversation with them to find out if they can up their game. However, if they don’t have the skills or capacity that you require then you probably need to switch to another company. Timing the switch correctly Usually, the end of the year is the best time to make the change as the initial set up will be less time consuming for the new provider. Getting the timing right is very important. (See our previous blog on choosing the right time to change your payroll provider). Checklist for switching your payroll provider Once you make up your mind to switch, there are a number of practical steps to take in order to achieve a smooth transition. Here is a checklist of seven key points to cover: Check the contract with your existing provider. What is the notice period? Are there any exit fees or penalties? Are there any other conditions you need to comply with? Research potential providers. Check that they are properly qualified to deliver the services that you require. Questions to ask include: Can they provide all the services that you need? Do they have adequate staffing and resources to cope during busy periods or when a staff member is absent or ill? What payroll software do they use? Is it compatible with your software and systems? Do they have adequate data security measures in place? Will they provide a dedicated contact for your business? How will they cope if your business requirements increase or change in the future? (This can be very important if your business is growing and your payroll is likely to expand). How will they liaise with you and your team? Will they liaise with Revenue on your behalf? Make a list of any software or apps that you use which integrate with your payroll process. You may need to allow time to make changes to these in order to keep things running smoothly. Once you have a shortlist of potential future providers, check how their services compare with your existing provider. This will help you to confirm that their offering is a better fit for your business requirements. When you select your new provider, you will need to find out what information they require from your existing provider. Collect all relevant information before switching as this will help avoid problems down the line. Choose the right time to notify your current provider that you are switching. When everything is in place, you then need to notify your employees so that they know that they will be receiving email and/or other communication from the new provider. Your employees may also require training on the new system depending on how it interacts with your existing systems for things like recording annual leave, overtime, commissions, sick absences, etc. Payroll problems can be very time consuming when systems do not run smoothly so it is worth taking the time to choose the best possible provider. Changing to a new payroll company is a good opportunity to resolve existing problems and get a service that fully meets your needs. For information on the payroll supports that GroForth provides, please check our Payroll Services page or contact me to request a quote.

5 TIPS TO GET 2025 OFF TO A GREAT START

December 2, 2024

Those quiet days at the end of the year can be a great opportunity to do a bit of administrative housekeeping. It might seem boring but you’ll thank yourself when you’re doing your tax return next year! Here are five suggestions to get started: Run an eye over your 2024 purchases to check everything is recorded and correctly coded. Now is the time to chase any missing documentation, fix errors and get everything ship shape for your accountant. Review what you spent in 2024 and use this information to help you budget more accurately for 2025. Check what you are owed and work out where you need to follow up on late payments. If you hate chasing customers, consider letting our credit control team do the chasing for you. Look for opportunities to streamline processes. Consider outsourcing non-core functions like payroll and accounts if this could free up staff time for higher value activities. Evaluate the information that you get from your existing systems. Is it helping you to manage your business or is it taking up too much time and just generating administrative headaches? Many GroForth clients say their profitability improves when we prepare monthly management reports and data analytics for them. If you’re not already availing of this service, contact us for details. We always say that the time you invest in reviewing your business is never wasted. Indeed, it often highlights opportunities to save money and improve profitability. If you are interested in finding out more, drop us an email and we’ll be happy to explain how our team can help you streamline administration and boost efficiency in 2025

Budget 2025 – What Businesses Need to Know

October 2, 2024

Yesterday marked the 1st of October, the official starting point for Q4 and budget day 2025. During the course of yesterday afternoon, Minister for Finance, Jack Chambers and Minister for Public Expenditure, Paschal Donohue announced a series of measures directed at “putting the country on a firm footing for the future”. Below is a summary of the key announcements related to business operations that you should take note of: Income Tax: The Universal Social Charge (USC) will be reduced from 4% to 3% on incomes of €25,000 to €70,000. Entry threshold to 3% rate increased by €1,622 to €27,382 The national minimum wage will increase by 80 cent to €13.50 per hour from the 1st of January 2025 The main tax credits - Personal, Employee and Earned Income Credits - will increase by €125 The Standard Rate Cut Off Point will increase by €2,000 to €44,000, with proportionate increases for married couples and civil partners For Capital Gains Tax (CGT) Retirement Relief, the higher age limit will stay, but if you sell assets worth over €10 million, there will be a clawback period of 12 years. After this period, CGT will no longer apply. The Capital Gains Tax relief for investors in innovative start-ups will be improved. The lifetime limit on gains eligible for relief will increase from €3 million to €10 million. For Research & Development (R&D), the tax credit’s first-year payment threshold will increase from €50,000 to €75,000. This will help smaller companies or those using the credit for the first time. Small Benefit Exemption: Employers can now give workers non-cash benefits or rewards worth up to €1,500 (increased from €1,000) without having to pay income tax, PRSI, or USC on it. Company Cars: The €10,000 universal relief for company cars will be extended for another year. Employees with an electric company car will get a total benefit-in-kind (BIK) relief of €45,000 in 2025. This includes €35,000 for electric vehicles and the extra €10,000 temporary relief. Additionally, there will be a BIK exemption for installing electric vehicle chargers at the homes of employees or directors. Other Supports: The Employment Investment Incentive, Start-Up Relief for Entrepreneurs, and Start-Up Capital Incentive will be extended until the end of 2026. The maximum amount an investor can claim under the Employment Investment Incentive will double from €500,000 to €1 million. The relief available under the Start-Up Relief for Entrepreneurs will increase from €700,000 to €980,000. VAT Registration: The VAT registration thresholds are being increased. For the sale of goods, the threshold will go up from €80,000 to €85,000, and for services, it will rise from €40,000 to €42,500. Stock Exchange: A new relief is being introduced to cover expenses for companies listing on an Irish or European stock exchange for the first time, with a limit of €1 million. Need help? We understand that getting a handle on budgetary changes can be daunting particularly when it comes to managing your payroll obligations. If you have questions or need help setting up or running your payroll processes, GroForth can provide practical support. Contact us for details of our payroll services. Sources: https://www.rte.ie/news/budget-2025/2024/1001/1472970-budget-2025-summary/ https://www.irishexaminer.com/business/economy/arid-41487173.html