Deadline for payment of Capital Gains Tax 2023

Tax Planning and Structuring

The dates you pay and file Capital Gains Tax (“CGT”) are based on the date you sold, gifted or transferred (i.e., “disposed of”) an asset. Payment of CGT is due before the actual return is filed. There are two dates and periods that are relevant for the payment of CGT liabilities. The first period relates to disposals of assets (including land, shares in companies, property, foreign currency etc.)  in the period 1 January 2023 – 30 November 2023 i.e. the “initial period”. If a gain arises in this initial period, the CGT on this asset disposal is due for payment by 15 December 2023.

If a disposal of an asset occurs in the period 1 December – 31 December 2023, i.e. the “later period”, the CGT is due for payment by 31 January 2024.

The CGT return must be filed by 31 October in the year after the date of disposal. For disposals of assets in 2023, a CGT return must be filed by 31 October 2024. A return should be filed even if no tax is due in order to claim potential reliefs or allowable losses, which can be used against future capital gains.

When calculating the CGT due it is important to ensure that the gain is calculated correctly. Failure to make a payment by the due dates outlined above or an underpayment of CGT may result in interest being imposed on the underpayment amount of the CGT.

Payments can be made via Revenue’s Online Service (“ROS”) or on myAccount (for PAYE employees only) if you are registered for CGT. If you are not registered for CGT, then you must register for CGT and then make the payment via ROS or myAccount.

If you have any queries on the above or would like to know more, please do not hesitate to contact us to discuss.

083 087 5936

info@phairandco.ie

Filing your 2022 Income Tax Self-Assessment Return

In this article we outline the main considerations for individuals who are unsure of their obligations in relation to their self-assessed annual income tax return and also whether they have an obligation in this regard. The associated mind map summarises the main considerations into four branches, which are outlined in more detail below.
Income Tax Mind Map

1. Filing Deadlines

It is coming into that time of year when the annual tax returns for self-assessed or self-employed individuals are due. Self-assessed individuals are required to file a Form 11 income tax return with Revenue in respect of their 2022 income by 15 November 2023, where they file online using the Revenue Online Service (“ROS”). For paper versions, the deadline date is 31 October 2023. The Form 11 is a more detailed and, dare I say it, burdensome return than the Form 12 return that can be filed via Revenue’s MyAccount Service. In summary, the Form 12 is for individuals who only have employment income taxed through the Pay As You Earn (“PAYE”) system and non-PAYE net income of less than €5,000 in a calendar year.

Recent statistics returned by Revenue in their 2022 annual report show that there were 839,433 registered for self-assessment tax in Ireland in 2022, an increase of 11,192 on the 2021. This figure includes individuals, partnerships, trusts and estates. A comparison of Revenue’s 2022 annual report to the last report pre-Covid in 2019, shows an increase in the self-assessed income tax and USC tax take of €683 million, which is a whopping 27% increase. The annual increase in the income tax registrations along with the significant increase in self-assessed income tax/USC tax take could be “low-hanging fruit” for Revenue compliance interventions or audit queries, if they were to target, say, individuals who may or may not have a tax advisor/agent to assist them with their Form 11 returns. In this article, we will focus on the compliance obligations for Individuals in respect of their 2022 income.

2. Persons required to file a Form 11 return – Chargeable Persons

Irish legislation dictates that “chargeable persons” are required to file a Form 11 each year but did you know that as well as self-employed individuals, this category also includes the following:
  • Individuals who were granted share options by their employer during the year.
  • Individuals who opened a foreign bank account during the year.
  • Individuals who have a PAYE source of income along with net income from non-PAYE activities of €5,000 or more.
  • Individuals who have a PAYE source of income along with gross income from non-PAYE activities of €30,000 or more.
  • Individuals who are proprietary directors in a company (a proprietary director is a director whose shareholding is 15% or greater in the company).
  • Individuals who have relocated to Ireland and whom are relief under the Special Assignee Relief Programme (“SARP”).

3. Payments Required for Chargeable Persons

Payment of the outstanding 2022 tax liability is also due by the 31 October 2023, which is extended to 15 November 2023.

A chargeable person is obliged to make an advance payment of their tax liability for the tax year. This is known as preliminary tax. The individual is obliged to make the payment by 31 October in the tax year, which is usually extended to the middle of November where the individual files their return via ROS.

If we take the point of view of “chargeable persons” in 2023, in order to avoid interest the amount of the preliminary tax payment must amount to at least one of the following:

  • 90% of the tax payable for the tax year in question (being tax payable from non-PAYE activities for 2023), or
  • 100% of the tax payable for the previous tax year (being tax payable from non-PAYE activities for 2022), or
  • 105% of the tax payable for the pre-preceding tax year (being tax payable from non-PAYE activities in 2021). In order to avail of this option a direct debit arrangement must have been put in place in the pre-preceding year (2021 in our case).

4. Penalties for non-compliance

In order to incentivise individuals to file their income tax returns and make their associated income tax payments on time, Revenue will impose penalties for late filing of income tax returns and late payment or underpayment of income tax liabilities.

Non-Filing of returns

A late filing surcharge will be imposed where a Form 11 is not filed by the due date of 31 October 2023, or the extended deadline date of 15 November 2023 where filing via ROS. The surcharge applicable where a return is filed less than two months late, i.e. before 31 December 2023, is 5% of the tax liability for the year, subject to a maximum surcharge of €12,695.

Where a return is filed more than two months late, the surcharge is 10% of the tax liability, subject to a maximum surcharge of €63,485.

Non-Payment or underpayment of tax liabilities

Where a payment of an outstanding tax liability is late or indeed underpaid, Revenue may impose a late penalty interest amount on the outstanding tax liability from the date the tax is due for payment.

This penalty interest is a daily rate of 0.0219% (8% per annum) of the outstanding tax liability, which will be backdated to the date that preliminary tax was due in respect of the year and not the tax return date, i.e. 31 October 2022 in respect of the 2022 income tax return.

Deadline for payment of Capital Gains Tax 2022

The dates you pay and file Capital Gains Tax (“CGT”) are based on the date you sold, gifted or transferred (i.e., “disposed of”) an asset. Payment of CGT is due before the actual return is filed. There are two dates and periods that are relevant for the payment of CGT liabilities. The first period relates to disposals of assets (including land, shares in companies, property, foreign currency etc.)  in the period 1 January 2022 – 30 November 2022 i.e. the “initial period”. If a gain arises in this initial period, the CGT on this asset disposal is due for payment by 15 December 2022.

If a disposal of an asset occurs in the period 1 December – 31 December, i.e. the “later period”, the CGT is due for payment by 31 January 2023.

The CGT return must be filed by 31 October in the year after the date of disposal. So for disposals of assets in 2022, a CGT return must be filed by 31 October 2023. A return should be filed even if no tax is due because of potential reliefs or allowable losses.

When calculating the CGT due it is important to ensure that the gain is calculated correctly. Failure to make a payment by the due dates outlined above or an underpayment of CGT may result in interest being imposed on the underpayment amount of the CGT.

Payments can be made via Revenue’s Online Service (“ROS”) or on myAccount (for PAYE employees only) if you are registered for CGT. If you are not registered for CGT, then you must register for CGT and then make the payment via ROS or myAccount.
If you have any queries on your Capital Gains Tax return or would like to know more, please do not hesitate to contact us to discuss on 083 087 5936 or info@phairandco.ie

Start up Exemption for Companies

If you have recently started a new company, you may be able to apply for tax relief for start-up companies. This relief reduces corporation tax that may be due in the first five years that the company is trading, subject to certain conditions. The relief can be applied to profits earned from the trade of the company or on chargeable gains made on assets sold by the company that have been used for the purposes of the trade.

The main conditions for start-up relief include:

  • The company must be setup between 1 January 2009 and 31 December 2026,
  • The company must be carrying on a qualifying trade (excluded from this is trades inherited from previous owners/companies and land development but this is not exhaustive),
  • The company must pay employers PRSI on the salaries of employees, restricted to €5,000 per employee, and
  • The company’s corporation tax liability must not exceed the specified levels, i.e. Corporation tax of €40,000 in a tax year. Reduced relief may still be available if the company’s corporation tax liability is less than €60,000 in a tax year.

If a company qualifies for start up relief, then no corporation tax will be due from the company where the calculated corporation tax liability for the year in question is less than €40,000. Where a company’s corporation tax liability is between €40,000 and €60,000, then marginal relief may be available to the company to reduce their corporation tax bill.

Example:

Sexton Ltd is an Irish company setup on 1 January 2020 and prepares its accounts to 31 December. It is carrying on a new qualifying trade (of selling sandwiches).

Year 1: In 2020, it earned €10,000 in profits and employed three individuals. Tax due on these profits at 12.5% is €1,250.

As the company paid €4,000 in employers PRSI, it is entitled to claim a full relief for the corporation tax liability of €1,250.

Year 2: In 2021, the company earned €100,000 in profits and still employed three individuals. Tax due on these profits at 12.5% is €12,500.

As the company still paid €4,000 in employers PRSI, it is entitled to claim €4,000 of a deduction against it’s corporation tax return.

So in 2021, the company will be liable to pay €8,500 in corporation tax (€12,500 liability less start up relief of €4,000 via employers PRSI).

Start up relief can be quite valuable from a cashflow perspective for recently set up companies and it is important to remember to make a claim this relief in the company’s corporation tax return.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact us on 083 087 5936 or info@phairandco.ie.

Obligations of Company Directors who own 15% or more of a Company

Directors who own more than 15% of the ordinary share capital of a company (i.e. Proprietary Directors) are required to file an income tax return via Revenue’s Online Service (ROS) for every year that they continue to hold the directorship. This is still the case even if the director only earns PAYE income through a separate employment(s).

These income tax returns will require the disclosure of payments made by the company to the directors during the year in question, as well as expenses incurred for the benefit of the directors. Any income earned from other sources must also be disclosed, including foreign income, depending on the residency status of the director in question.

Strong penalties exist for proprietary directors who do not file their tax return on time. Revenue can impose a 5 or 10% surcharge on the income tax paid via the PAYE system (deducted via payroll) even though all the relevant liabilities have been deducted at source. Therefore, it is very important that proprietary directors ensure their filing obligations are made on time.

Exemptions from the obligation to file returns are available for certain directors of shelf companies, directors of genuinely dormant companies and others who take up temporary directorships in the period prior to a company commencing activity. The timing of commencement activities is a matter of fact and each case should be looked at on it’s own merits.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact us on 083 087 5936 or info@phairandco.ie.