2015 – A YEAR IN REVIEW
By Noelle O’Connor, O’Donovan Lavin Accountants
As the year draws to a close Noelle O’Connor, Director of Business Services takes a look back at 2015 from a business, accounting and tax point of view.
The first 11 months of 2015 has seen over 17,300 new companies registered in Ireland. It would take only approximately 650 start-ups in December to beat last year’s total of 17,941 new company formations.
The highest yearly total for start-ups in the last 15 years was in 2006 when 19,306 companies were formed.
It is unlikely that we will be able to match or better that number in 2015, however, it is encouraging to note that if just 1,000 companies were formed this month then 2015 will be the second best year for start-ups in the “noughties” – beating the 18,325 figure seen in the year 2000.
The Government further showed their commitment to start-up’s in October’s budget by extending the corporation tax start-up exemption for a further 3 years to the end of 2018.
The Revenue Commissioners have upped the ante in 2015 with the number of Revenue Investigations/Audits increasing on the prior year.
There are a number of reasons as to why you or your business may be selected for Revenue Audit. Firstly according to the Revenue it screens all tax returns and reviews the businesses tax compliance history.
Through its’ REAP technology, the information the Revenue now collects has grown significantly. Failure to make tax returns and payments on time may also prompt a revenue investigation so it is important that all returns are filed on a timely basis.
The Revenue finds cases for audit by various projects it runs from time to time which examine tax compliance in particular trades or professions.
One of the most notable Revenue Investigations in 2015 was the Revenue’s Investigation into medical consultants. It has been said that over €30 million has been collected in unpaid tax and penalties as part of their ongoing investigations.
The Revenue has also been focussing on motor and travel expenses incurred by Company Directors and Director’s loans taken from Companies.
Revenue Warn Builders – We’ll be Back!
In August 2015, the Revenue Commissioners warned builders and tradesmen to be on the guard in relation to tax compliance as the construction sector slowly recovers from the recession.
The Revenue have highlighted the following areas and have encouraged builders to review their tax compliance and regularise their shortcomings:
- Operation of the eRCT system, including a complete reporting of payments and contracts;
- Reconciliations of Home Renovation Incentive Scheme with VAT Returns;
- Cross checking of eRCT , PAYE/PRSI and VAT Returns;
- Review of VAT reverse charge basis of accounting for VAT and PAYE/PRSI procedures.
This can be a very complex area for those in the trade so good advice is essential as large fines and penalties will be incurred if the system is not operated correctly.
Companies Act 2014
The introduction of the Companies Act 2014 on 1st June 2015 was by far the most significant change introduced in 2015. The Act is the largest ever passed by the Oireachtas and it places Irish Company Law on a new footing.
The new act aims to:
- Consolidate statutory Company Law;
- Codify Company Law, to state clearly in legislation the rules of Company Law that have emerged from the courts; and
- Reform Company Law in certain areas making it much easier to do business in Ireland.
The main provisions of the Act include the following:
- Creating of new Company types including the introduction of a new simpler LTD structure and a Designated Activity Company (DAC) which are similar structures to the private limited company as we know it.
- Expands the availability of the audit exemption to a number of different company types that could not avail of it before;
- Codifies Directors duties;
- Allows Mergers & Acquisitions of private companies; and
- Introduces Summary Approval Procedures to ease prohibitions on certain restricted activities.
The new LTD company structure is a much simpler company format, in that it may have just one Company Director which is a huge benefit for small to medium sized companies. The sole Director cannot act as the Company Secretary however, so a second individual is required. The Company Secretary however has a lot less onerous obligations than a Company Director.
Company Directors are now examining their conversion options and how the options will affect their company. Some Companies see the DAC as the most appropriate company type for them. This is because they may be subject to other factors which require that they keep an objects clause or maybe the Company has investors or bankers that require them to be a Designated Activity Company (DAC).
As mentioned below there is “the Irish option”. That is do nothing and the Company will automatically be converted into a LTD company after the 18 month transitional period.
There are some issues with the “do nothing” option particularly in relation to the Memorandum and Articles of Association, so it is important to obtain good advice in relation to this.
What is the Time Frame for Changes?
The Act provides for an 18 month transition period after the 1st June 2015 during which time private companies will need to decide which type of new entity best suits their needs.
1st June 2015 – 30th November 2016: All existing companies limited by shares will be treated as DAC’s until:
- They convert to a LTD company; or
- Re – register as a DAC.
As mentioned previously those that elect not to convert to either type of new entity during the transition period will be treated as a DAC for that time and at the end of the 18 month period will automatically become an LTD.
So as you can see 2015 has been a year of considerable change as to how business is being done in Ireland. There are many challenges facing all of us in 2016 but as they say challenges are what make life interesting, overcoming them is what makes life meaningful.
Finally on behalf of the Partners and Staff at O’Donovan Lavin, I would like to wish you all a Merry Christmas and Prosperous New Year.