Is your accountant adding value?

March 2017

Introduction• Anthony Boyle – Co-owner of Tax Assist Accountants & The Glackin

Business Institute Ltd• Team of 4 financial professionals with an extensive range of

qualifications and experience• Barry Mullen; Experienced lender / Debt Negotiator and qualified

financial advisor; Masters in Business Improvement.• Breda Friel; Qualified Accountant with extensive Industry and

practice experience.• Hugh Shevlin; Ran his own sole trade business for many years before

completing a degree in accounting and gaining several years practice experience locally.

• Anthony Boyle; Chartered Tax Advisor and qualified financial advisor.

Introduction

• We provide a range of services in addition to the traditional accountancy services of: – Accounts preparation, – Preparing and filing Tax returns – Vat preparation and filing, – Managing payroll (p30’s, p45’s, p60’s, p35)These undoubtedly provide value and indeed add value in terms of time saved and being revenue compliant but we also believe clients benefit from and want:

Is my accountant adding value?– Detailed and targeted forward tax planning to ensure they pay as

little tax as possible now and in future– People with the necessary experience negotiating legacy debt

positions, – Advice on property purchases (Personal, company, child’s name, in

trust, via my pension fund??)– Advice when they are raising finance and how to maximise their

chance of being approved which is a combination of positioning in addition to preparing a business plan, and associated cash flow projections

– Advice around having income when they stop working,– Advice on investing money, – Advice on how to best protect themselves and their families

Pay as little tax as possible Make me aware of Incentives & grants

• Tax changes constantly– Every Budget, – Every Finance Bill, – Every statutory instrument made– Every European Directive set, – Every case law precedent, – Every loop-hole closed)

• It’s complex and complicated • Take advice; Get it in writing (Consultant example)• If it’s not in writing it doesn’t exist!

Paying as little tax as possible• Income tax (examples to follow)• Corporation tax (see examples and incentives)• Capital gains tax (e.g. Land CPO, Retirement relief, PPR relief) • Capital Acquisitions tax (e.g. Post death tax planning /

disclaimers)• Stamp duty and PRSI (online PRSI contribution history check)• Vat (e.g. of Audit on retailer / Deli, peanuts ,chewing gum)• In my view you and your accountant should be talking about

these matters in advance.• I cannot stress enough the need for advance planning with

significant tax saving opportunities!

Income tax!• Sole trader or Ltd Company (Answer = it depends on your individual

circumstances – I could give a different answer to “almost” identical circumstances e.g. garage owner)

• Factors include:– Cost, – Tax, – Protection of limited liability (Falcarragh case)– Gravitas, – Incentives (Start up company relief, BES, SURE)– Losses (Are they likely; do you / spouse have additional income– spouses income– Is there goodwill and are there historic losses (if so significant planning

opportunity may exist)

Income taxCommon Mistakes / opportunities

• Sole traders using civil service travel and subsistence rates – not allowed• Clients claiming travel expenses to which they are not entitled (e.g. Consultant /

Travel log)• Claiming VAT back on business related meals – not allowed• Claiming VAT on Petrol (Diesel is allowed but only on a vouched basis)• Rental income not being allocated efficiently between among spouses• Spouse making AVC’s but only getting relief at the 20% rate• Claiming medical / dental expenses to which you are not entitled e.g. club

refunds (ACL)• Not claiming expenses to which you are entitled (example of business van / car);

cost of gluten free food for “Diagnosed” Coeliacs• Not claiming credits to which one is entitled (Highland radio example 100> ;

your accountant can’t know unless he asks / questions)• Net Pay (into the hand!) arrangements.

Income tax some common mistakes (Opportunities)

• Clients leasing land; not availing of exemption (S644 TCA 1997) (€18-40k; 5-15 Years)

• Client (Employee of his father)not claiming PAYE tax credit; refund €6,600

• Client not applying VAT correctly; Legislation changed in Budget 2016 and client didn’t know.

• Non tax related - Not having leases reviewed before entering / renewing (e.g. hairdresser, café)

• Non – tax related (Not challenging the bank on interest rate offered – significant savings possible)

Income tax / Corporation Tax Some more opportunities

• Annual €500 voucher (Directors qualify) S112B TCA 1997; (not convertible to cash; once per year• Covenants (High rate tax payer – low / zero rate parent)• Employing spouse / family members “legitimately”• Making last minute AVC contributions “Bed and Breakfasting”

– Teachers; nurses, HSE employees; civil servants.• Company Directors / employees can be provided at home with:• High speed internet connection• E-working €3.20 / day tax free• Computer equipment, fax machine, printers, scanners, disk drives• Cycle to Work scheme €1,000• Long service awards 20 years + €50 / per year (tangible item not cash / bonds)• Provision of medical check-ups• Cost of Christmas party is tax deductible• Cost of Courses / exam fees• Examination awards• Professional subscriptions

Pensions and tax planning

• Pensions have a poor reputation (in my view)• Lack of transparency, charges, poor returns, mis-selling– Bid / offer spreads / administration fees– Commission– Annual management charges– Fund running costs and Total expense ratios– Over selling by the industry (gross returns rather than net)

• But! One of the most tax effective ways of getting cash from a ltd company.

Final comments on tax planning

• Particular opportunities / risks in the areas of;– Succession (Family businesses passing to the next

generation and ensuring you qualify for the various reliefs)

– Business owners retiring / selling their businesses;– 10 year advance planning required.

• The devil is in the detail – take advice!

Most common incentives• SYOB – €40k of income tax free pa for 2 years• Back to work Education Allowance (STEA) (ESG)• Co. Start up relief, €320k profits tax free / 3 yrs (PRSI);31/12/2018• SURE – up to €700k at 20/40% refund (Mark €50k)• BES - €150k at 20/40% refund; Spouse can invest. (Mark)• Job Plus (€7.5k; €10k) (Several clients have availed of this incentive)• R&D Tax Credit; 25% of spend (accurate record keeping essential)• KDB (6.25%); 1/1/2016 onwards; income from exploitation of IP assets

(Apps / Food)– It is a regime for the taxation of income which arises from patents,

copyrighted software and, in relation to smaller companies, other intellectual property that is similar to an invention which could be patented

• See LEO website for excellent incentive / supports related tool!

Is your accountant adding value?• To some, accountants are dull and colourless but to some

SME’s they are trusted advisors, valuable sources of information providing many services.

• Do all accountants bring value? Certainly not, says Benoît Lavigne, professor of financial accounting and researcher at the research institute for SMEs at Université du Québec à Trois-Rivières. In some cases, accountants just want to be bean counters, but the main reason for this is that many SMEs don’t require anything more than bean counting and don’t understand the full value an accountant can bring to their business.

If you can’t measure it you can’t manage it!

• Bookkeeping (Do NOT let it slide)• Aside from compliance, Data capture while

boring / seemingly unimportant is crucial (Non-negotiable) for decision making.

• If you’re not on top of it; learn how; hire or outsource

What is the least you need to know or have you accountant help you know?

• Break Even point i.e. Turnover required to cover expenses only• Pricing (Art v science; what will the market tolerate?)• Turnover and Mark-up required to make €xxx,xxx profit• Gross margin v industry / competitors (for yourself,

revenue / lenders)• Expenses v the norm• Net profit / Net margin/ Tax• Monthly cash flow

Is your accountant adding value?• Adding value means making the numbers talk as opposed to

putting them together.• An x-ray is of little value without a diagnosis!• How does my business look?• How does it compare?• Profitability/ Margin / expenses / no. of staff etc.• You should be having this discussion regularly / at least

annually.• How best to present the figures (and the case) to a lender

can be the difference between getting or not getting finance.

Some of the reasons businesses fail?

• Insufficient Planning and projecting.• Poor / no Cash flow management.• Profitability is the measure of business success

but useless unless translated in to hard cash!• Why project? E.g. recent food business; not

viable without changes; cash-flow negative.• Think cash, project , monitor and be mean!