Overview of the Tax System in Ireland

Ireland operates a self-assessment system whereby individual tax payers and companies are responsible for operating their own tax filings.

In Ireland various taxes operate such as

  • Taxes on Capital known as Capital Gains Taxes (CGT)
  • Taxes on Inheritances or Gifts known as Capital Acquisitions Taxes (CAT)
  • Taxes on Income of persons and companies (Income Tax)
  • Social Insurance taxes such as the universal social charges and (USC & PRSI)

Value Added Tax (VAT)

Ireland as a member of the European Union also administers a value added tax or indirect tax system. The rules around VAT can be particularly complex with different types of goods being taxed at different rates in various member states and each member state allowed to set its own headline rates for various goods and services.

The Revenue Commissioners

In Ireland the regulatory body for tax is the Revenue Commissioners. The Revenue Commissioners administer the tax filing and compliance system and are responsible for interventions and audits and are empowered under legislation with a wide array of powers to investigate tax payers and third parties where they believe that there may be tax evasion.

The Tax Appeal Commissioners

In Ireland if a taxpayer is aggrieved by a particular tax interpretation they may appeal an assessment to the Tax Appeal Commissioners. The Tax Appeals Commission may be further appealed to the High Court on a point of law if required.

Tax Services

Tully Rinckey Ireland Solicitors are well-equipped to handle a range of tax consultancy services. We work closely with accountants and tax advisors and can assist you with both tax compliance and tax consultancy requirements.

Domestic Services

  • Assisting in Tax Audits and interventions
  • Tax disclosures and tax reporting obligations
  • Assisting in appeals to the Tax Appeal commission
  • Assisting in Judicial reviews to the High Court
  • Tax efficient wills and trusts
  • Asset and project financing
  • Capital markets and structured finance
  • Company mergers and acquisitions and strategic investments
  • Corporate reorganisations and restructurings
  • Real estate finance, structures and transactions
  • Capital allowances (tax depreciation)
  • Irish Real Estate Investment Trusts (Irish REITs)
  • Irish Real Estate Funds (IREFs)
  • Property investment and funding structures
  • Property development and funding structures
  • Structuring for investing and holding specialist properties
  • Tax litigation and revenue powers

International Services

  • Corporate investment into Ireland
  • Demergers and disposals
  • Investment funds
  • International tax and cross-border planning
  • Private equity and hedge fund transactions and structures
  • Securitisation
  • Transfer pricing

Finance services related to tax and litigation that Tully Rinckey Solicitors can assist with include:

  • Alternative finance
  • Aviation and asset finance
  • Corporate banking and real estate finance
  • Debt issuances
  • Derivatives
  • Fintech
  • Investment and funding platforms
  • Irish funds (QIAIFs (including ICAVs), CCFs, Unit Trusts)
  • Loan sales
  • Project finance
  • Structured finance and securitisations

To schedule an initial consultation, contact us at +353-1-9637000  or contact@tullylegal.ie

Tax Treatment of Air BnB Rentals

The Revenue have published an updated E Brief on the tax treatment of income arising from short term accommodation.  

What constitutes a trade?

The tax treatment depends on whether the rental activity is classified a trade or not. Trade is not defined in Irish tax law and whether something constitutes a trade is a subjective question where an activity is examined as to;

-Its subject matter, (looking at the type of activity)

-circumstances, (around the activity)

-supplementary work, (required to carry out the activity)

-motive, (profit or other motivations)

-frequency of transactions (once off is not indicative of a trade)

Tax Treatment of Air BnB Rentals

The E Brief sets out that consideration needs to be given if the owner is actively letting out the property on a commercial basis with a view to the realisation of a profit. If this is so then they must examine the income tax, capital gains tax and VAT position of the money received.

If the activity is a Trade, money received is taxed as trading income. This allows wear and tear allowances, expenses and pre-trading expenditure to be deductible. However, it will usually operate to disallow the principal private residence relief from CGT from the property if it is your family home. This means a portion of your home will be treated as a business premises and you will have to pay capital gains tax on that portion of your home if you decide to sell it. This could be a considerable amount of tax which could exceed the rental income earned. If your earnings exceed the VAT thresholds you will be obliged to register for and charge and account for value added tax.

If the activity is not a trade, the money received may still be taxed as occasional income. What is occasional and what is a trade will be a subjective question and will likely give rise to disputes. Casual trading income will not give rise to allowable deductible expenses however the E Brief sets out it is long standing Revenue practice to allow incidental costs directly associated with the provision of such services which include commission paid to booking sites, cleaning fees, and a reasonable apportionment of electricity, gas, heating and other utilities. However annual costs associated with a property which would be payable regardless of the occasional letting such as insurance, TV License, general maintenance are not allowed. It is unlikely, where a room is rented as part of an occasional trade, for there to be any adverse CGT consequences.

This E Brief is a timely reminder that all persons who operate in this area to keep detailed records and to make sure that their tax affairs are correctly calibrated and up to date. It is important to note that Revenue have access to the Air BnB hosts data through the website and will be able to cross reference that data. Where individuals are not declaring this rental income they could face stiff interest and penalties.

 

The A Team- Accountants and Lawyers. Direct professional access- Accountants and rights of audience before the Tax Appeal commissioner and the High Court.

As set out in previous articles, a tax audit may be the first stage in a penal process. Additionally a tax appeal may be the first stage in a contested litigation.

I will briefly examine the consideration of accountants briefing Counsel to appear in tax cases before the tax appeal commissioners and the High Court.

As most lawyers will tell you, they may not be numerically gifted. Equally accountants are not trained lawyers. No more than any lawyer would attempt to provide audit services it is not expected that Accountants would be required to provide detailed legal services. However, accountants will have detailed intimate knowledge of their client’s finances and of the mechanics of filing the appropriate tax returns and have a unique appreciation of the nuances of the operation of the tax statutes in practice.

Under the Bar Council of Irelands Direct Professional Access Scheme since 1990 Accountants who are members of approved professional bodies have been granted direct professional access to members of the Bar in non- contentious matters primarily for legal opinions on discreet matters.

This does not extend to contentious matters. This was confirmed in Bond & Others v Dunne & Another [2017] IEHC 646 by Mr Justice Gilligan where it was confirmed that the Bar Council Code of Conduct prevents a barrister from providing legal services as a practicing barrister in relation to a matter which is a contentious matter and that a barrister cannot act for and conduct civil litigation on behalf of a party without being instructed by a solicitor.

It is therefore required when Accountants intend to appear before the Tax Appeal Commission or the High Court and wish to engage Counsel they will be required to engage the services of a solicitor to do so.  The legislation itself which underpins the establishment of the tax appeal commission allow an appellant to appoint an agent but is silent on their character.

They would be well advised to consider engaging a solicitor with a tax background as it should be noted that an appeal of a determination of the tax appeal commissioner is by way of a case stated to the High Court on a point of law.

The procedure for a Case Stated is that a party who is dissatisfied with a determination of the Commissioners as being erroneous on a point of law may by notice in writing require the Commissioners to state and sign a case stated for the opinion of the High Court. The request for a case stated must also be made within a short period of time (3 weeks) after the receipt of the determination.

From the date of the appointment of the Tax Appeal Commission the number of Cases Stated have been modest comprising 22 Cases Stated (as of July 2019) to the High Court. However, these are a significant number of the 46 Cases determined to date (as of November 2019).

At this stage, the difficulty of engaging Counsel or a Solicitor to review the case if they are not already appointed will be under severe time pressure, and Accountants may find themselves seeking to appoint Counsel, or a solicitor, or both at this point. Clearly this is not ideal.

A more advised scenario is to seek to reach out to professional contacts at the earliest point in the appeal procedure to appoint a solicitor and if required seek a legal opinion from Counsel. If it is considered that an appeal may be required it is suggested that a multi-disciplined team be compiled as early as possible.

After the case stated comes the matter of running the case in the High Court. At this point Counsel should, as a necessity for the protection of the client’s interests, be engaged. Accountants, generally, will not be experienced in Court procedures and practices and again a multi-disciplinary approach is appropriate in this process.

 

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