With there being only two certainties in life, death and taxation, Kieran Horgan of HTH Accountants goes through the many considerations required for your tax affairs.

Taxpayer nearly always seem to wait until the tax deadline before talking to their accountant about tax issues but I always feel the best time to start the discussion is early in the year. It gives you more time to consider the issues and the options. Taxpayers and businesses need to be more proactive and seek advice in advance of executing business transactions, and transferring assets and wealth to the next generation. There are many invaluable tax reliefs which with careful planning can be availed of, to minimise both capital gains tax and capital acquisitions tax.

When contemplating disposals of businesses, business owners can naively believe that it can be sold quickly with little advance planning. The reality is it takes considerable time to streamline a sale.

Some of the very valuable tax reliefs potentially available concerning a sale are set out below, and specific steps frequently need to be executed, in advance of such sales, to ensure that these valuable tax reliefs can be fully availed of.

Inheritance tax

Inheritance tax is paid on gifts and inheritances and is charged at 33 per cent. The exemption thresholds (tax-free amounts) for them were reduced considerably. The exemption threshold between parents and children is currently €335,000. In the case of a family with two children, inheritance tax will arise, on the excess value of an Estate over €670,000 (€335,000 x 2), at the rate of 33 per cent. As a result, substantial unexpected inheritance tax liabilities are arising in many instances.

Two very beneficial tax reliefs when selling a business, from a capital gains tax perspective, include retirement relief and the 10 per cent entrepreneurial relief.

From an inheritance tax perspective, there are very valuable reliefs called business relief, and agricultural relief, which can reduce the value of qualifying business assets, by up to 90 per cent, in certain instances. These reliefs are extremely valuable and must be fully availed of where possible.
That said, there are numerous conditions which need to be satisfied; hence the need for a detailed analysis and action plan well in advance of the transaction date.

Suggestions for consideration from an inheritance tax planning perspective might include making a will and reviewing regularly, executing enduring powers of attorney, or utilising the €3,000 annual small gift exemption threshold for gifts.

Special purpose life assurance (Section 72 Insurance) policies might be considered to provide funds to pay the inheritance tax, particularly in the case of estates, consisting of illiquid assets. Proceeds from such policies are not subject to inheritance tax. Discretionary trust clauses are frequently included in wills, to provide for children with disabilities. Sometimes, the disposal of an asset triggers both a capital gains tax liability and an
inheritance tax liability. In some instances, a tax relief is available whereby the capital gains tax liability can be offset against the inheritance tax liability.

A simple example of this is a parent gifting a property to a child. Such a transaction could trigger a capital gains tax liability for the parent and an inheritance tax liability for the child.

Tax of investment

Non-resident landlord withholding tax has been introduced since July 1, 2023. This new regime will no doubt create administrative and cash flow issues for non-resident landlords. Such landlords will need to provide certain information, to either the rent collection agent or the tenant, including confirmation of their non-residency status, confirmation of tax reference number and local property tax ID for the rented property.

It’s important for non-resident landlords to get up to speed with this new withholding tax system, which will be operated on ROS, and MyAccount. The Revenue Commissioners are very active with compliance interventions. They take decisive action when they feel that tax leakage needs to be addressed.

In addition, Revenue is actively reviewing taxpayers who have participated and/or benefited from various profit-sharing arrangements, including share options schemes. Revenue frequently cross-references employer share activity tax returns, with details of share transactions returned in an employee’s personal tax return.

These profit-sharing schemes are used more frequently to remunerate employees in a tax-efficient manner. Some taxpayers are now only realising their legal obligations to file income tax and/or capital gains tax returns, for such transactions.
Many taxpayers are overpaying personal tax due to the failure to claim certain tax credits, which are frequently overlooked. These unclaimed credits and allowances include medical expenses, health insurance (if subject to BIK), college fees, working from home allowance, home carer credits, annual CGT exemptions and flat rate expenses applicable to specific career categories.

The practice expects substantial growth, particularly bearing in mind the Revenue Commissioners’ current modus operandi and the vast increase in the level of Revenue Interventions, combined with the increased activity in succession planning and transferring wealth and assets to the next generation.

Bearing in mind the two certainties in life, death and taxation, it does make sense to adopt a proactive approach to your tax affairs.