Tax

The UK Government is carrying out inspections and imposing fines on companies found to be non-compliant with the national minimum wage. Geraldine Browne highlights the common mistakes that organisations sometimes make. Her Majesty’s Revenue and Customs (HMRC) achieved record enforcement results this year, identifying £15.6 million of underpayments. The number of workers identified as underpaid was more than double that in 2016/17 and the highest number since the national minimum wage (NMW) came into force. There is no doubt that the Government’s commitment to this clampdown is working; we are seeing an increase in NMW reviews. There has also been a significant rise in whistleblowing over the NMW. HMRC received a record 5,053 reports of suspected underpayments in 2017, which had doubled from the year before. We expect that this will continue to increase with new payslip rules, which are due to come into force in April 2019. The main change will mean that any worker paid on an hourly basis will be due a payslip showing the number of hours worked. The aim is to help workers establish if they have been paid the correct amount under the NMW.  When we look beyond the headline figures, we see that most businesses take NMW compliance very seriously. In fact, of the 239 employers named and shamed, 85 were found to be underpaying just one employee, indicating that mistakes are being made, not malicious intent. Public naming and shaming has a huge impact on the reputation of a business. Employers tend to focus on ensuring that they are paying the correct rates to the correct categories of employee. They understand the rates but do not always understand the principles of what constitutes time for pay. It is a complex area and worth reviewing some of the common pitfalls. What is work time? There are periods of travelling time when the minimum wage must be paid to a salaried worker. When they are travelling in connection with their work, any rest periods taken during the time they are working counts as time worked, as does waiting for a train, waiting to collect goods, meeting someone in connection with work and travelling to a training venue. Employers need to address how they record and pay for this time. Contrast this to the recent Court of Appeal case on “sleep-ins”. The Court of Appeal decided that sleep-in workers were not entitled to national minimum wage for time spent asleep during a sleep-in shift. This case, Royal Mencap Society v Tomlinson-Blake again focused on time worked with the employee arguing that time asleep was time worked. The outcome left the care sector in limbo as we await to hear if the Supreme Court will hear this appeal. In the meantime, this sector continues to pay employees for sleep-ins until a decision is reached. Many employers have systems whereby their workers clock in and out and this data is passed to a payroll department to process hourly paid workers. This area will be reviewed in detail by a NMW inspector. If they do come across a case where an employee has not been paid for time worked, this will form part of non-compliance with the NMW. This can easily happen. For example, the employee has clocked in at 8.10am, but has been paid from 8.15am. It is worth having your own internal review of this data to ensure compliance. One slip-up can be costly. Deductions It is not just what employers pay that requires review, but also what deductions they make from pay. There are deductions that will not reduce the employee’s pay for minimum wage purposes. These include deduction for income tax, national insurance and accidental overpayment of wages. Deductions can cause unintentional error. The employer may deduct something from the employee’s salary, which may take their pay below the NMW. For example, an employer may deduct the cost of the uniforms from staff salaries, bringing the employee below the NMW. Employers may wish, instead, to provide uniforms free of charge or, alternatively, spread the deductions over several pay periods. Review your pay practices In summary, the Government continues to put measures in place to protect employees from NMW exploitation. This is how it should be, even when it raises additional challenges for business. To safeguard against non-compliance, employers should conduct a thorough review of their pay practices in all areas of NMW. Substantial fines accompany NMW offences and the damage to the employer’s reputation can be significant. It can impact on business sales and on businesses’ ability to attract key talent in the future. You may think you are complying, but one error can lead to the naming and shaming. It’s worth moving this topic further up your organisation’s agenda and investing the time in a thorough review.   Geraldine Browne is Tax Director at BDO Northern Ireland.

Dec 03, 2018
Tax

David Duffy highlights the latest VAT cases and discusses recent VAT developments. IRISH VAT UPDATES Finance Bill  The Finance Bill (as initiated) contained a small number of provisions in relation to VAT, which are summarised below.  As announced in the Budget, the Bill confirmed that the VAT rate for certain goods and services, mainly in the tourism and hospitality sectors such as hotel accommodation, restaurants and admissions to many attractions, will increase from 9% to 13.5% with effect from 1 January 2019. The 9% VAT rate will continue to apply to newspapers (and similar publications) and the provision of sporting facilities. The 9% VAT rate will also be extended to e-books and digitally supplied publications with effect from 1 January 2019. This follows an EU-wide agreement reached in October to allow member states apply reduced rates of VAT to digital publications. The other VAT-related provisions in the Bill include: a technical amendment relating to the VAT treatment of sales of residential property by liquidators, receivers and mortgagees; and the withdrawal of a VAT relief in situations where VAT has been charged on the supply of a telephone card, which is then used outside the EU. EU VAT UPDATES Share transaction costs The question of a taxpayer’s entitlement to recover VAT on costs in relation to share transactions has been the subject of much debate and case law in recent years. In recent months, there have been two further European Court of Justice (CJEU) decisions, namely Ryanair (C-249/17) and C&D Foods Acquisitions (C-502/17). Ryanair was a referral to the CJEU from the Irish Supreme Court. In its decision, the CJEU confirmed Ryanair’s entitlement to fully recover VAT on professional costs relating to its bid to acquire Aer Lingus. This was on the basis that, if the acquisition had been successful, Ryanair would have provided management supplies to Aer Lingus. Prior CJEU judgments had confirmed that the provision of management services by a parent company to its subsidiary is a VATable “economic activity” giving a right to VAT recovery. While Ryanair only acquired a minority interest in Aer Lingus and did not provide any management services to it, the CJEU judgment confirmed the entitlement to VAT recovery based on the intended taxable economic activity of managing the subsidiary. The C&D Foods Acquisition case, a referral from the Danish courts, bore similarities to the Ryanair case in that it related to an intended but uncompleted share transaction. However, in this case, the taxpayer intended to sell rather than acquire shares. The taxpayer was a holding company which was actively involved in managing its subsidiaries, but engaged various consultants to advise it on the sale of the shares in its subsidiary. The proceeds from the sale were intended to pay down a debt owed to a bank. The CJEU ruled that the VAT on consultancy costs relating to the proposed share disposal was not recoverable as the proceeds of the share sale would not be used for taxable business activities.  The two cases mentioned above highlight the ongoing complexity of the VAT recovery position on costs relating to share transactions and the importance of considering the exact fact pattern in each case. Hire purchase transactions In Volkswagen Financial Services Limited (VWFS) (C-153/17), the CJEU concluded that VWFS is entitled to partial VAT recovery on the overhead costs of its hire purchase business.  This was the case even though these costs were incorporated into the finance charge forming part of the hire purchase contract rather than the cost of the underlying goods. HMRC in the UK had sought to argue that there should be no VAT recovery. By way of background, hire purchase is treated for VAT purposes as both a taxable supply of goods (the initial handing over of the asset/vehicle) and an exempt supply of credit (i.e. the margin earned by the finance provider). Under consumer law, the hirer is required to disclose separately on the hire purchase agreement the price of the vehicle and the finance element. The CJEU first confirmed that the VAT treatment of hire purchase as separate supplies of goods and finance was valid. However, the principal dispute arose in relation to the recovery of input VAT on general overheads in running the VWFS hire purchase business. VWFS argued that the proportion of the input VAT recoverable on overheads should be based on the number of exempt and taxable transactions carried out, with each hire-purchase transaction counting as two transactions (i.e. a taxable supply of goods and an exempt supply of credit). On this basis, half of the general overhead VAT would be recoverable. HMRC argued that the residual input VAT was a cost component of the exempt transactions alone and, therefore, no VAT should be recovered. The CJEU did not accept HMRC’s position that no VAT was recoverable on general overhead costs of the hire purchase business. While it did not specify the exact methodology to use, it nonetheless confirmed that the taxable supply, as well as the exempt supply of credit, should be factored into the calculation.  As the hire purchase VAT rules operate similarly in Ireland to the UK, providers of hire purchase products may wish to review their VAT recovery position in light of the judgment. David Duffy is a VAT Director at KPMG.

Dec 03, 2018
Tax

Helen Byrne, Senior Tax Manager at EY Ireland, outlines the relevant compliance dates for December 2018 and January 2019. RELEVANT COMPANY DATES 14 December 2018  Dividend withholding tax return filing and payment date (for distributions made in November 2018). 21 December 2018  Due date for payment of preliminary tax for companies with a financial year ended 31 January 2019. If this is paid using ROS, this date is extended to 23 December 2018. Due date for payment of initial instalments of preliminary tax for companies (not “small” companies) with a financial year ended 30 June 2019. If this is paid using ROS, this date is extended to 23 December 2018. 23 December 2018 Last date for filing corporation tax return Form CT1 for companies with a financial year ending on 31 March 2018 if filed using ROS.  Due date for any balancing payment in respect of the same accounting period. Loans advanced to participators in a close company in the year ended 31 March 2018 may need to be repaid by 23 December 2018 to avoid the assessment (on the company) of income tax thereon. A concessional three-month filing extension for iXBRL financial statements (not Form CT1) may apply. For 31 December 2017 year ends, this should extend the iXBRL deadline to 23 December 2018. 31 December 2018 Last date for filing third-party payments return Form 46G for companies with a financial year ending on 31 March 2018. Latest date for payment of dividends for the period ended 30 June 2017 to avoid Sections 440 and 441 TCA97 surcharges on investment, rental and professional services income arising in that period (close companies only). Contributions made by employers to approved occupational pension schemes are tax deductible on a payment basis, as are charges on income (e.g. patent royalties and certain interest). Companies with 31 December year ends may wish to review their positions to maximise/ minimise deductions before the year end. A two-year time limit applies to some corporation tax group relief and loss relief claims. Potential claims for the period ending 31 December 2016 may need to be considered prior to 31 December 2018.  Research and development (R&D) tax credits in respect of R&D expenditure incurred in an accounting period ended 31 December 2017 must be claimed by 31 December 2018. A similar deadline applies to capital allowance claims for intangible assets.  Country by Country Reporting Notifications relating to the fiscal year ended 31 December 2018 must be made to Revenue no later than 31 December 2018, via ROS (where necessary). 1 January 2019 Controlled foreign company (CFC) rules in effect from this date. 14 January 2019  Dividend withholding tax return filing and payment date (for distributions made in December 2018). 21 January 2019 Due date for payment of preliminary tax for companies with a financial year ended 28 February 2019. If this is paid using ROS, this date is extended to 23 January 2019 Due date for payment of initial instalments of preliminary tax for companies (not “small” companies) with a financial year ended 31 July 2019. If this is paid using ROS, this date is extended to 23 January 2019. 23 January 2019 Last date for filing corporation tax return Form CT1 for companies with a financial year ending on 30 April 2018 if filed using ROS. Due date for any balancing payment in respect of the same accounting period. Loans advanced to participators in a close company in the year ended 30 April 2018 may need to be repaid by 23 January 2019 to avoid the assessment (on the company) of income tax thereon. A concessional three-month filing extension for iXBRL financial statements (not Form CT1) may apply. For 31 January 2018 year end, this should extend the iXBRL deadline to 23 January 2019. 31 January 2019 Last date for filing third-party payments return Form 46G for companies with a financial year ending on 30 April 2018. Latest date for payment of dividends for the period ended 31 July 2017 to avoid sections 440 and 441 TCA97 surcharges on investment, rental and professional services income arising in that period (close companies only). Country by Country Reporting Notifications relating to the fiscal year ended 31 January 2019 must be made to Revenue no later than 31 January 2019, via ROS (where necessary). PERSONAL TAXES 15 December 2018  Capital gains tax due in respect of any chargeable gains arising on disposals in the period 1 January 2018 to 30 November 2018 must be paid on or before 15 December 2018.  31 January 2019   Capital gains tax due in respect of any gains arising on any disposals in the period 1 December to 31 December 2018 must be paid on or before 31 January 2019. GENERAL 31 December 2018  Valuation date for 2018 domicile levy. Irish assets held on this date will be taken into account in ascertaining if the €5 million ‘Irish asset test’ has been met. A four-year time limit generally applies to repayment claims. A claim for repayment of corporation tax for the year ended 31 December 2014 must generally be lodged with Revenue by 31 December 2018. Claims for repayments of income tax for the year of assessment 2014 must also be submitted by 31 December 2018.  Termination of Home Renovation Incentive Scheme, with the exception of cases where planning permission is in place by 31 December 2018 and work is carried out by 31 March 2019. Expiration of young trained farmers stamp duty relief. 1 January 2019 Removal of five-year exemption from IREF withholding tax for disposals occurring or unrealised profits or gains recognised in the income statement on or after 1 January 2019. Employers will be required to report employee remuneration and PAYE to Revenue on a real-time basis. 8 January 2019        Under mandatory reporting rules, promoters of certain transactions may be required to submit quarterly ‘client lists’ in respect of disclosed transactions made available in the relevant quarter. Any quarterly returns for the period to 31 December are due on 8 January. Due date for submission of return and payment of IREF withholding tax in connection with the accounting period ended on or before 30 June 2018. Note: The above does not take account of Budget 2019 and Finance Bill 2018.

Dec 03, 2018
Personal Impact

Burnout is a very real problem, but organisations can ease the burden with some simple adjustments.   Stress, pressure and deadlines are part of the everyday workload of managers. But when the common feeling of stress tips over into burnout it can be a serious problem, affecting not just your own health and performance but that of your team and organisation. Some researchers say that as many as 50% of medical professionals and 85% of financial professionals have been affected by burnout. Others say that as few as 7% professionals have been seriously impacted. While researchers may disagree on the numbers, they do agree that burnout is associated with many negative physical and psychological health outcomes such as depression, sleep disturbances, anxiety, and increased alcohol and drug use. Burnout is a psychological syndrome that is characterised by a negative emotional reaction to one’s job as a consequence of extended exposure to a stressful work environment. It produces feelings of inadequacy and alienation, which affects personal and professional relationships. Stressed people think they will feel better if they can get on top of the situation, whereas burnout is associated with the belief that one’s situation will never be rectified. How to spot the signs of burnout Burnt-out colleagues are not difficult to see. Once productive and engaged, the quality of their work will decrease; they will come in late to work; interactions with colleagues will become curt; and they will become prone to illness, thus absenting themselves from the office more frequently.  How to address burnout If companies look at their role in creating workplace stress, which inevitably leads to burnout, there is every chance they can eliminate the factors that lead to burnout. Recent research suggests that there are three steps leaders can take to address burnout in organisations: Reduce excessive collaboration The endless rounds of meetings and conference calls, which aim to include every stakeholder in every decision. Very often, this type of collaboration is required by corporate cultures, yet is far beyond what is required to get the job done. Burnout is also driven by the always-on digital workplace. Switching off a personal device lays the emotional impact at the individual executive’s door rather than with the company’s policy. Call off unnecessary meetings There is huge demand for collaboration in contemporary organisations with little in the way of technology and norms to manage it. Left to their own devices, most employees will manage their time in ways that reduce stress and burnout. Companies could also challenge the assumption that collaboration (two heads are better than one) and meetings are the best way to get things done. Recent research on introverts subverts this assumption and provides alternative methods (such as breaking work tasks into individual, pair and small group tasks) to capture the creativity and talent of all organisational members. Stop overloading the most capable employees The best people in organisations, at every level, are overwhelmed by meetings, emails and interruptions. They then cannot do the job for which they have been hired because they are busy collaborating with other people. Giving people the space and time to do their job may be the most important intervention companies make to address burnout and drive success. It is a win-win for everybody. Dr Annette Clancy is an organisational consultant and also researches organisational behaviour, in particular emotion in organisations.

Dec 03, 2018
Personal Impact

Emotional intelligence and a high trust quotient are important attributes that result in more effective leadership and career success. How can you use your EQ and TQ to further your career in the New Year? A recent Harvard Business Review article, ‘What To Do If Your Career Is Stalled And You Don’t Know Why’, described how many talented executives careers stall or derail because of what they call ‘pandas’ – issues that may be perceived as innocent, but with powerful jaws that deliver a bite. The top three ‘pandas’ are executive presence, communication and peer-level relationships. Often, individuals are blissfully unaware of the existence of an issue that is blocking their progression.  As we consider our career trajectories going into 2019, it is essential that we familiarise ourselves with the story others tell about us. Having a career goal with insufficient self-awareness is like having a destination without a map of the terrain. Key areas to consider in this respect are emotional intelligence (EQ), our trust quotient (TQ) as well as our capacity to lead with agility. These concepts tie in with the most common pandas. EQ, TQ and agility Emotional intelligence relates to a set of competencies which impact how we engage with others (Table 1). There is a clear connection between these competencies and our levels of executive presence, communication skills and ability to build peer relationships.  TQ is a less commonly known dimension. It is a measure of an individual’s personal trustworthiness; a key to building good relationships. Being trustworthy and ethical may be considered a given in a profession such as accounting, however TQ is slightly different. TQ refers to how trustworthy your team, your peers or your clients find you.  Do they find you credible and reliable? Can they feel safe in trusting you with personal, confidential information and how much do we have their interest at heart versus our own interests? The higher our self-orientation, the lower our TQ.  The third element worth considering is leadership agility®. Leadership agility® is our ability to take wise and effective action amid complex, rapidly changing conditions. Many of us are trained to diagnose a situation and come up with the correct answer – that’s what experts are paid for! However, while expertise is highly valuable, sometimes we can rely on it too heavily and end up narrowing our field of vision and misdiagnosing an issue at hand. A black and white approach can lead to rigid thinking and peers, clients or team members may feel that their perspective is not considered or understood. 360 feedback If EQ, TQ and leadership agility® are areas to be navigated before creating a plan to progress your career in 2019, how can you find out what others say about you in relation to these dimensions? The most traditional way of getting such feedback is through a 360-feedback process. There are many 360 tools available in the market and all of them provide different information depending on the angle they take.  Another option worth considering is to identify some trusted individuals who have your best interests at heart and ask them a few questions: What do you consider to be my key strengths that I can use to build my career?  What could hold me back? If I were to pick one or two areas to develop, what should they be? What role/project would be an interesting next move for me, considering my strengths and areas of development? Career criteria Once you have opened up the conversation about your development, discussions about the next steps in your career will inevitably result. It’s a good time to explore what is important to you right now and in the year to come. Such considerations often include financial reward, career progression, flexibility/balance, learning experiences or meaningful work. Whether we prefer clearly defined career goals or to be opportunistic, having clarity regarding the important criteria for our careers is helpful when going into a new year.  In order for us to maximise our effectiveness and continued career success, it is important for us to understand the story others tell about us (including ‘pandas’) and reflect on the important criteria in our career. Once we have built this picture through conversations with others, we can establish the work we need to do to achieve our career aspirations through 2019 and beyond.Leadership Agility® is a registered trademark of ChangeWise. Eadine Hickey is Founder and Director at Resonate Leadership. QUESTIONS TO CONSIDER WHEN PLANNING YOUR CAREER MOVE IN 2019 As you consider your level of EQ and TQ, what do you believe are your strengths and what areas may require development? Is there a risk that you over-use your ‘expert mindset’ in certain situations and would benefit from taking a broader perspective on issues? Who could provide you with very constructive feedback on your strengths and development areas to support you in your career progression? What criteria and values are important to you as you consider your career for 2019 and beyond? Who could be of support to you in achieving your career goals (mentors, coaches, colleagues, friends)?

Dec 03, 2018
Feature Interview

Lucinda Woods ACA, the 2018 winner of the Early Career Accountant of the Year Award, shares her success story. Describe your current role at The Restaurant Group plc. The Restaurant Group plc operates over 500 casual dining restaurants, pubs and concessions across the UK. It employs roughly 15,000 people and is listed on the FTSE with a market capitalisation of around £500 million. I’m lucky to have a very diverse role within the group. I work for the CEO, managing a team that spans group strategy, commercial decision support, customer and market insight, and M&A. The breadth of my role has enabled me to support many strands of the turnaround of our casual dining division, as well as run deals such as the £15 million acquisition of the 11-pub company, Food & Fuel Ltd., and work on business development opportunities in our concessions division, which manages foodservice operations at airports. I also served as Interim Chief Marketing Officer last year, which was a great development opportunity for me, landing outputs on digital, brand strategy and retail marketing operations. Describe your average working week. I get up at 4.30am on Monday to commute to London and I fly back to Dublin on Thursday evening in time to put my son to bed. Fridays are spent catching up on things at home, and the occasional visit to the gym! How did you feel when you were announced as the Early Career Accountant of the Year? Humbled. There was a strong bench of talent nominated for the award so to be called out amongst that was an honour.  What in your view gave you the advantage over your peers? A combination of factors have enabled me to pursue my career ambitions and constantly challenge the boundaries of my comfort zone. From an early age, my parents inspired me to seek out opportunities and my husband has always been very supportive of my career choices and travel commitments. I’ve been very fortunate in terms of the organisations I worked with earlier in my career – KPMG, Investec Corporate Finance and Paddy Power Betfair – as management across all three provided me with tremendous encouragement and support. In addition, I’ve been supported by superb peers and mentors including my boss, who has been generous with his time, always encouraged me to focus on the customer and areas where I can have the most impact, and shown faith in me to do that. I’ve also been lucky to have many talented people work for me, and from whom I have also learned an enormous amount. You have also studied at Harvard. What was that experience like? I was fortunate to do the MBA programme at Harvard Business School. The experience of being surrounded by so many diverse and interesting perspectives was invaluable. I was also taught by many outstanding professors, including Michael Porter and Clay Christensen. What’s next for you? Nappies and sleepless nights! Our family headcount is about to increase with a new baby due in early 2019. Lucinda Woods is Strategy & Business Development Director at The Restaurant Group plc.

Dec 03, 2018