1. Tax Planning in Difficult Times

When times are hard and businesses are looking to cut costs, consultancy fees are one of the first expenses to be reviewed. However, it is important at all times that the best tax advice is obtained, not just in terms of unusual or once-off transactions but also in the day-to-day business.

Cutting the budget for consultancy fees may result in the business not taking advantage of tax incentives/ reliefs which would be costly; or could leave the business open to challenge by Revenue where plans are not implemented correctly.

2. Problems in Paying Tax

For most taxpayers, tax is charged on profits earned rather on cash received. In these testing times for obtaining credit, a number of taxpayers are having difficulty finding the cash to pay their taxes. If this is the case, then it is crucial that taxpayers should contact their local Revenue Office to discuss those difficulties. Otherwise the Revenue may refer the collection of the taxes to the Revenue Sheriff, which will result in additional costs for the taxpayer.

3. Redundancy

A number of businesses are in the process of cutting costs. One of the first costs to be cut is in respect of the number of employees.

The Revenue Commissioner's Information Leaflet on Lump Sum Payments (Redundancy/Retirement) [IT21] deals with the tax treatment of payments received following termination of employment.

Useful Links: The Revenue Leaflet is available at http://www.revenue.ie/en/tax/it/leaflets/it21.html.

4. Start-Ups

When a person has been made redundant, they may consider using their redundancy payment to set up their own business.

Useful Links: An information leaflet, Starting in Business (IT48), is available from the Revenue website at http://www.revenue.ie/en/tax/it/leaflets/it48.pdf.

5. Liquidations

When a company commences to be wound up, it ceases to be the beneficial owner of its assets and the custody and control of those assets pass to the liquidator.

A company is chargeable to corporation tax on profits arising in the winding up of the company. During the course of the winding up the liquidator has the responsibility of accounting for corporation tax on income received and on capital gains arising on disposal of chargeable assets. Therefore the liquidator must pay the corporation tax by the due date(s) and submit any corporation tax returns.

One key issue to be aware is the effect on accounting periods for the company. When a company commences to be wound up, an accounting period ends and a new one begins; thereafter an accounting period may not end otherwise than on the expiration of twelve months from its beginning or by the completion of the winding up. The commencement of a winding up could affect the following:

• the due date for corporation tax;
• the date the company's corporation tax return must be submitted;
• the extent to which losses may be offset against the total profits of the immediately preceding accounting period, or against fellow group member's total profits on a claim to group relief.

6. How can a company manage its tax cheaply yet effectively?

The key way to manage tax cheaply yet effectively is to pay the correct amount of tax on time. The following are some administrative practices that the company should consider:

• With effect from 1 January 2009, where returns and payments (corporation tax, VAT and Relevant Contracts Tax (RCT)) are made electronically, the return and payment deadlines are being extended to the 23^rd day of the month. So the corporation tax deadline is being extended by 2 days, the VAT by 4 days and RCT by 9 days. A similar extension to the PAYE/PRSI deadline to the 23rd day has also be made. This will result in extra days credit for the company. However, where the filing and payment requirements are not made by the extended deadline, interest will run from the normal deadline and not the extension.
• The company may be able to avail of less frequent filing of VAT returns and P30s where the VAT or PAYE liabilities are below the necessary thresholds. This means that the company could use those funds (however minimal) for other purposes until required for the VAT or PAYE submission.
• Most taxes are based on income accrued rather than moneys received. However, VAT can be accounted for on a cash receipts basis where the annual turnover (exclusive of VAT) does not exceed €1 million. While VAT returns should still be made bimonthly, the VAT is paid on the monies received and not on the invoices sent out.

7. Are there tax incentives/relief that businesses should take advantage of in order to save money?

The following are new reliefs/incentives which could result in saving money for the business:

• If the business is a new start-up company which commences to trade in 2009 it should be exempt from corporation tax, including capital gains, in each of the first three years to the extent that their tax liability in the year does not exceed €40,000.
• If a company is engaged in research & development (R&D) activities, then the rate of tax credit is increased from 20% to 25%, i.e. 25% of the qualifying R&D expenditure can be used to reduce corporation tax of the current year and the preceding year. Where there is insufficient corporation tax in the current or preceding year, the R&D credit may be claimed in the form of a refund. Care must be taken as a new time limit is imposed – claims must be made within 12 months from the end of the accounting period in which the expenditure on R&D giving rise to the tax credit was incurred.
• Where a business incurs expense in respect of purchase or hiring of a motor vehicle; 20% of the VAT charged may be deductible in calculating the amount of VAT payable to Revenue in that VAT period. The car must have been first registered after 1 January 2009 and meet specific emissions standards. The car must be used primarily for business purposes, i.e. at least 60% of the use.