Every Friday evening I get a news update from the Institute of Tax. At times it has very little that is relevant to our clients and other times it has lots of great information. Last Friday was one of those times where it had plenty to offer. Here’s what we’ll be covering in this Mid-Year Tax Update.
- Pre-budget shuffling
- Debt Warehousing
- Tax clearance and RCT rate reviews
- Banks exiting
All the talk is about bringing the budget forward. Once that’s out there the powers that be will have little choice but to do it. An upcoming opinion poll that shows increasing support for Sinn Fein will make it an easy choice. Leo Varadkar expressed his views on the need to increase disposable income. “we can continue to reduce the income tax burden on workers and middle income families by indexing tax credits and tax bands. And middle-income people getting pay increases should not lose 52% in Income Tax, USC and PRSI. They should be able to keep most of it”
Perhaps the last sentence is a reference to a new middle rate band. Fingers and toes crossed!
Prudent Paschal will be mindful of such talk knowing that there are plenty of hands out looking for a bit more. There is no doubt the tax take is huge with Income Tax and Corporation Tax the main drivers. There is talk of a rainy-day fund to put some of the excess Corporation tax into. Sure, is every day not a rainy day? Paschal will be mindful of paying down debt with increased borrowing costs on the horizon. He can pay down debt and set up rainy days funds all he wants. But putting more money in people’s pockets must be a priority. Many are struggling with the price increases, and they won’t forget if they don’t get help when they need it.
Employee Wage Subsidy Scheme – EWSS
This week, Revenue began issuing letters to employers who claimed subsidies from EWSS. The scheme cost about €8 billion, and it is Revenue’s job to get back as much as possible. They are the protectors of the public purse after all. The letters request employers to conduct a self-review of their EWSS claims.
We did a previous blog on this scheme. Revenue has included an eligibility review assessment tool on its website. You must complete your self-review by the end of September. We will look at this in greater detail in an upcoming blog in August or early September.
As a recap, businesses could warehouse tax debt, mainly Vat and PAYE, during the pandemic. For most businesses, the end of Period 1 was the 31st of December last. These businesses are now in Period 2 which has a 0% interest rate on the tax you have warehoused. Period 2 will end on the 31st of December 2022, and you will then enter Period 3. The interest rate for Period 3 will be 3%.
Revenue will be in contact early in quarter 4 of this year with each business. They are good like that when you owe them money. If you are not able to pay the tax in full, they will look for a down payment. You would then enter a Phased Payment Arrangement [PPA] for the balance from 2023 onwards.
Revenue has issued “Final Notices” to some taxpayers availing of the warehousing scheme. To be eligible for and continue in the scheme you promised that you would keep all your tax returns up to date. If you don’t do this, then you are no longer eligible and lose the benefits. This can be going from 0% and 3% to 10% plus losing tax clearance. And the tax debt becomes payable immediately. If you get a final notice, you have 10 days to sort it
Revenue confirmed that outstanding Vat RTD’s and 46G’s will not exclude you from the scheme.
Tax clearance and RCT rates
With all things Covid coming to an end and seeing it has now “gone away” things are cranking up down at Revenue land. This means that we are back to 2019 levels of scrutiny. Revenue recommenced periodic reviews of tax clearance status. So, it’s not a case of now that I have tax clearance I can relax a bit, head on the hols, and not file returns.
During the pandemic, that’s now over, they weren’t too bothered if you didn’t pay your tax. But they had a serious hump if you didn’t file your returns, so they knew how much you owed them. If you don’t do your bit and file your returns on time, then adios tax clearance. If you are looking for grants, subsidies, a loan, HAP, or a tax refund then you won’t get it.
For RCT Revenue used to do a twice-yearly bulk rate review. That is no longer going to happen. They will adopt a more targeted approach conducting monthly bulk rate reviews. The first monthly review will be in August. This will give businesses in this sector time to get returns up to date this month.
The above shows the value of having an efficient bookkeeping system in place. Returns must be right and in on time and this will save you money and time. Then again you might look forward to doing the books on a wet day or at 10 o clock at night when you finally get the kids to bed! Are you happy that your money is sitting in Revenue’s bank account?
Bye Bye KBC & Ulster
All business owners who have business accounts with the exiting banks must move. If you use these banks to pay taxes, then you will need to update Revenue with your new bank details. This is not only for payments but for refunds too. It’s hard enough to get money back from Revenue, so don’t make it even harder. Let’s put it this way. They won’t show the same enthusiasm to give you back your money as they will to get it from you.
Income Tax deadlines for Pay and File are fast approaching too. You don’t want this to be an issue with missing a payment deadline. Revenue will engage in a communications love in to keep you informed.
PAYE Modernisation [PMOD] Compliance
Revenue flagged that it would be conducting a significant project in 2022. This will be on compliance with PAYE Modernisation payroll requirements. Revenue has identified some employers who are not operating PMOD correctly. This is not to root out those that make the odd mistake. It will be more focused on those that don’t do things right on an ongoing basis.
There is an estimate of 50,000 employers on the hit list. This is to happen later this year and is something we can keep you posted on. More goodies to look forward to!
Need help to keep everything up to date? You can sit back, relax, and enjoy that more expensive coffee. If so, Start Here