Recent publicity regarding
staff entertainment

The Irish Times (18th November) carried an article headed “Revenue clampdown could spoil the office party as taxes hit workplace celebrations”. The timing of this in my opinion is purely to spread unnecessary fear and attract debate among readers.

The existing Revenue Tax and Duty Manual (Part 05.01.01i) covers this area. In summary, and interpreting the guidance, there are 2 key takeaways. The first is in order for any entertainment to be allowable as staff entertainment, and thus not subject to Benefit in Kind, the event must be open to all employees and be reasonable. Whether all attend is not of consequence. What is meant by reasonable is not defined, but a company all expenses paid trip to London, covering flights, meals, shows, football matches, etc, would be unlikely to be deemed reasonable. The Revenue manual lists events such as Christmas parties and special occasion meals as examples. The second is an unwritten, but unofficially recognized is that no more than 4 events per year are allowable.

In relation to a director bringing key clients/suppliers out for a high-end meal, or event, by the letter of the law, BIK should be applied on the directors! While the company may pay the cost of the meal/event, it is disallowed for Corporation Tax purposes. As the article mentioned there are ongoing discussions between Revenue and the accounting bodies, to get further clarity on the matter.

Are you starting a new
business or need a new
companyin January?

The latest date to file forms to incorporate a company in Ireland is 9th December,
so if you do need a new company for any reason, get in touch as soon as possible.

Tax free vouchers

Christmas is the most common time of year that employers utilise this opportunity. Basically an employer may provide to an employee a voucher or pre-paid credit card up to the value of €1,000 and it is tax free to the employee – no Benefit in Kind is payable. The other benefit is that there is no employer’s PRSI therefore it saves you, the employer, a further 11.15% employer’s PRSI compared to if you were giving the employee a salary payment of €1,000.

Please note the limit for 2024 remains at €1,000 – the new increased amount of €1,500 only becomes effective from 1st January 2025. Remember, you, the owner, director are also entitled to avail of this. Many people’s spouses are the second director of their company, and we are often asked can they receive a voucher. The Revenue guideline states the person must be an employee, and part of the definition of employee states the person must receive a salary.

Note, that if you were to pay your spouse say €1,000 in respect of director’s fees for 2024 in December’s payroll, this would then classify them as an employee, and they too could then be given a €1,000 voucher. You, the director, could if you wished, also buy/give yourself (and spouse if applicable) a further €1,500 voucher on the 1st January 2025.

How do I know if I have made money in 2024? –
Management Accounts

In relation to pension contributions mentioned above, or merely knowing what bonus’s your business can afford to pay in December this year, we can if you wish produce Management Accounts to October 2024, to give you a good idea of how the year has gone, and then meet with you to discuss these and your options. Please contact us to arrange this if this is of interest to you.

Pension time again

If your company has made profits in 2024 (and assuming your year end is 31st December), a very tax efficient way to reduce the company’s exposure to Corporation Tax is having the company make additional lump sum contributions to the directors pensions before 31st December. The contribution is subject to limits, but the amount that may be contributed is significant, and subject to various conditions. The closer you are to retirement age, the more attractive this becomes, as the first €200,000 of a pension may be accessed tax free (subject to a maximum of 25% of the fund) and the next €300,000 may be accessed at 20% tax. If you and your spouse happen to be the directors of your company, this can be doubly attractive. Please speak to your pension advisor if you wish to progress this or explore how it may benefit your personal circumstances.

Did you make a Capital Gain between 1st January and 30th November 2024?

If you have been fortunate enough to make a capital gain in the above period, you must pay the tax by 15th December next. The return of the details is not required until we file your Income tax return for 2024 next year, but the tax liability (if any) must be paid. If its not paid by this date you are leaving yourself exposed to potential interest and penalties. Please note, that if you have ever made losses of a capital nature in the past, you may offset these losses against the gain you have now made. If you make a gain in the period 1st – 31st December 2024, that tax must be paid by 31st January 2025. If you need any assistance with this please do not hesitate to contact Michael Dempsey in our office (mdempsey@guardianma.ie).