The unprecedented circumstances currently facing businesses makes it more important than ever to carefully manage your tax affairs, writes Declan McEvoy, Head of Tax with IFAC.
Set out below are practical tax tips to optimise cashflow during the Covid-19 crisis.
Corporation Tax/Income Tax
- When calculating your preliminary tax, this can be based on 90% of your 2020 income rather than 100% of 2019 income;
- Consider whether a phased payment arrangement could benefit your business;
- Consider changing your year-end (e.g. from 31 December to 30 June) to capture poor trading results in the first six months of the year;
- Have you got losses to set back? If so, file early. This includes R&D claims;
- Check whether your business could benefit from the Government’s Covid-19 Wage Support Scheme;
- If your business has ceased trading, terminal losses for income tax purposes should be claimed as soon as possible;
- In all circumstances, ensure that you file on time;
- If you anticipate difficulty, it is vital to engage with Revenue at the earliest opportunity.
Corporation Tax Returns
Revenue has confirmed that the application of a surcharge for Corporation Tax returns for accounting periods ending June 2019 onwards (i.e. due from 23 March onwards) is suspended until further notice.
The published Revenue position refers only to a surcharge on the filing of Corporation Tax returns. A surcharge applies where a return is filed late. The late payment of the related tax liability will attract interest.
While Revenue has confirmed that it will not impose interest on the late payment of certain VAT and PAYE liabilities, currently this does not extend to Corporation Tax liabilities.
VAT
- Consider writing off any debts that are not collectable (box T2 on the VAT return form). VAT bad debt relief only applies to written off debts — it does not apply to provisions for doubtful debts;
- Check that the current VAT rates being charged are correct;
- Consider whether your business should be in a VAT group;
- Consider whether to send out pro-forma invoices to delay the VAT point on sales until cash is received;
- Ensure that you file your VAT returns on time.
Employee pay
- Continue to file your payroll information with Revenue as it falls due. This will help ensure that penalties are avoided;
- Check if you can avail of the Government’s COVID-19: Temporary Wage Subsidy Scheme;
- Keep an eye out for other relevant Government supports for employers.
Benefit-in-Kind on Employer-Provided Vehicles
- Revenue recently issued information on the application of BIK during the Covid-19 restrictions. For employer-provided vehicles, the following will apply:
- If the employer takes back possession and the employee has no access to the vehicle, no BIK shall apply for the period;
- Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use; Records should be maintained to show that the employer has prohibited its use and no such use has occurred, for example, communication from the employer, photographic evidence of odometer, etc;
- Where the circumstances in the previous example don’t apply if limited or reduced business mileage is undertaken, and personal use is limited, the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due. Appropriate records should be kept, for example, business mileage travelled in January, amount of private use, photographic evidence of odometer, etc;
- Where an employee continues to undertake business travel, as usual, the usual BIK rules will apply.
