Since 1 January 2016, the Earned Income Tax Credit also known as the “Self Employed Tax Credit” which is worth a maximum of €550 can be claimed by self-employed individuals, entrepreneurs and company directors who own more than 15% of the company. The introduction of the earned income tax credit will be of some consolation to self-employed tax payers who until now received no tax credit on their earned income while their PAYE counterparts receive a PAYE tax credit €1650. Although the introduction of the self-employed tax credit attempts to equalise the treatment self-employed and employees, self-employed tax payers still pay a USC surcharge of 3% on income over €100,000, a surcharge which does not apply to PAYE individuals on the exact same income. The fact that a self-employed taxpayer earning over €100,000 is not trading through a limited company raises its own questions from a tax planning perspective, the rationale for a 3% surcharge on the basis that an individual is self – employed is not yet understood.
STRENGTH IN NUMBERS BLOG
Brady & Associates are delighted to announce the new-look website of Blue Star Accountants, our sister tax services provider aimed specifically at contractors working in Ireland.
Blue Star’s clients include IT contractors, medical locums and contractors working in Ireland’s booming pharma industry.
Independent.ie has launched a new series targeting small business owners and entrepreneurs, titled The ReadyBusiness Hub.
Produced in collaboration with Vodafone, the ReadyBusiness Hub features a weekly podcast focusing on interview with business leaders from Ireland and beyond.
Jobs, Enterprise & Innovation Minister Richard Bruton has earmarked €3m for startup-focused accelerator programmes in regions outside of Dublin, in an attempt to reduce the economic imbalance between the capital and rural areas.
At the announcement earlier this month, Mr Bruton said: “Jobs are growing in every region right across the country, but they are growing faster in some regions than in others… Start-ups create two thirds of all new jobs, and if we can support more businesses to start-up and more businesses to survive, this will make a major impact on the level of job-creation in each region.”
While the next Government – whichever parties it comprises – will have scope to reverse some of the tax hikes and spending cuts that were introduced in recent years, the International Monetary Fund (IMF) has warned that the USC should be left off the table.
Pre-election noise over tax cuts and spending promises is growing in volume across the political spectrum, with Fine Gael recently pledging to abolish it altogether, Labour hoping to spare anyone earning less than €72k from the despised charge, and opposition entities from Fianna Fail to Sinn Fein engaged in cacophonous calls for change.
However, in its quarterly review this month, the IMF said that the maintaining the USC charge was crucial to Ireland’s “fiscal discipline”, and said that it had raised the matter with officials after the changes in Budget 2016.
In last year’s Budget, Finance Minister Michael Noonan reduced the three USC rates and also moved the brackets for low and middle earners, thereby freeing tens of thousands of workers from the charge.
“These changes aim to lessen the tax burden and encourage labour market participation for low wage earners and women. While supporting in principle the reduction in distortionary taxes, staff noted that the impact of USC changes appears regressive, with half of the benefit accruing to households with incomes above €70,000,” the IMF said in its report.
“While it is appropriate to share some fruits of the recovery after years of difficult adjustment, fiscal discipline must be maintained to rebuild room for policy manoeuvre,” the IMF added.
Election fever is starting to build, with the incumbent coalition of Fine Gael and Labour hoping to defy the pollsters and earn another five-year term in power from a deeply divided electorate. Many voters are experiencing tangible improvements in their lives as a result of new jobs, promotions or even pay rises, as well as reduced USC levels and the resulting capacity to spend. But large numbers say they have experienced no change in their circumstances since the widely trumpeted recovery began, or are in fact worse off.
There it is, 2015 came and went. Another year passed and another year you slogged away, working for someone else. Some people look forward to going back to work just because they love their jobs but for many the Sunday night fear at the thoughts of the first day back in work is in full swing.
Think about your current work situation. Do you have a boss that will take credit for all of your ideas and hard work? It hardly seems fair that they get credit for your effort and get paid more than you do. Why should someone with half your talent get all of the credit? If this sounds like you, your sanity will thank you for starting up your own business with you getting all of the credit that you so deserve. It is now or never and now definitely seems like the right time to take the plunge and go for it. The economy appears to have recovered, income tax rates are dropping and people are starting to spend again. Your ideas are already mapped out in your mind; now is the time to go out and execute them.
Messrs Noonan and Howlin were relieved to hear that Budget 2016 got a general stamp of approval from the European Commission this month. However, the Budget revealed by the ministers for Finance and Public Expenditure had drawn criticism from some quarters, including the Irish Fiscal Advisory Council. Many felt that expansionary measures were the last thing a rapidly recovering economy needed.
Digital technology has disrupted industries of all kinds, presenting new challenges and opportunities for Irish SMEs. Terms like cloud computing, digital marketing, data management and big data are now commonplace in boardrooms, as new and wonderful IT systems come on stream every day.
They are tearing down traditional barriers, and levelling the playing field, in an environment where consumer behaviour is utterly changed. Most businesses today depend on technology of some kind. Research by Amárach found that 30% of Irish SMEs were planning IT investment in 2015, and reports suggest that 14% of Irish SMEs have “online initiatives” in place to handle festive shoppers.
Many of these programmes and systems certainly save on resources and drive business efficiencies that were unthinkable just a few years ago. SMEs can streamline, integrate or automate their business processes, develop new services and reach new customer bases, all on a relatively low budget. However, with hundreds of new technologies coming on the market every month, it’s crucial that they pick the right technology for the job.
There has never been a better time for small and medium-sized businesses (SMEs) to form a group structure. Previously, the maintenance of a group structure due to stringent audit requirements was cost-prohibitive for most small businesses. This meant only larger organisations could take advantage of the benefits that a group structure brings.
Now that the Companies Act 2014 exempts small groups from audit requirements, small businesses are well-placed to avail of benefits such as loss relief, Capital Gains Tax (CGT) exemptions and Dividend Withholding Tax (DWT) exemptions.
Take the case of two companies operating under a group structure. Company A can sell its shares in Company B and pay no tax on the sales proceeds provided certain conditions are met. Up until June this year (2015), many Irish SMEs were unable to take advantage of this law. This is because the costs of an audit, a key requirement for the group structure under the Companies Act of 1963-2013, lay outside the resources of smaller companies.