Tax Time – Succession Planning Considerations (Podcast)

Grant Thornton Ireland · Tax Time - Episode 6

This podcast was recorded on 29 June 2021.

David Moran, Tax Manager with Grant Thornton is joined by Úna Ryan, Tax Director with Grant Thornton.

David discusses the latest in tax developments. Úna shares her insights into the importance of planning for the future and ensuring you tax affairs are considered as you enter the golden years.

Tax developments

Changes to the Local Property Tax regime

The Minister for Finance, Paschal Donohoe TD has published the Heads of the Finance (Local Property Tax) (Amendment) Bill 2021 following approval from Government at the Cabinet meeting in early June. The Bill will give effect to a package of measures in line with the Programme for Government to address the future of the Local Property Tax.

Under the new regime, residential properties will be required to be valued on 1 November 2021 with a subsequent valuation required every 4 years.

The new rules will retrospectively value any residential property built between valuation dates as if it existed at the previous valuation date. New properties brought into the remit of LPT will be valued at the prior valuation date, i.e. 1 November 2021, which Revenue will provide assistance with to help determine the appropriate value.

The rates and bands have also been amended to reflect the higher value of residential properties in the last few years.

The department of finance estimates that there will be a yield of €580 million to the exchequer following the implementation of the new regime.

International tax developments

In a historic move, Finance Ministers of the G7 countries came to an agreement on the introduction of a new international minimum tax rate of 15% for multinationals and online tech companies at their meeting in London on 5 June, which is a move away from the 21% rate suggested by US President, Joe Biden earlier this year.

It was also agreed that at least 20% of profits above a 10% margin may be allocated to market jurisdictions where certain multinationals generate revenue.

Minister for Finance Paschal Donohoe has noted that Ireland could lose up to one fifth of its corporate tax revenue take which could be as a high as €2 billion per annum.

The global minimum tax rate is derived from Pillar 2 of the OECD BEPS Project, which aims to tackle the perceived tax challenges arising from Digitalisation.

Announcement of a membership of the new Commission on Taxation and Welfare

Minister for Finance, Paschal Donohoe TD announced on Thursday 3 June the members of the newly established Commission on Taxation and Welfare, which includes stakeholders from various public and private organisations. Professor Niamh Moloney who is Head of the Department of Law at the London School of Economics and Political Science will chair the new Commission.

The Commission were due to hold their first meeting on 4 June 2021 with the Commission due to submits its report to the Minister for Finance no later than 1 July 2022.

Further Covid Supports announced for businesses as they re-open

Minister for Finance, Paschal Donohoe TD has announced on 1 June 2021 a set of measures to provide support to businesses as they re-open and resume normal trading, including:

• Employment Wage Subsidy Scheme: The extension of the scheme to 31 December 2021;
• Covid Restriction Support Scheme: The extension and enhancement of the scheme to provide additional support to businesses upon re-opening and to give certainty to businesses still directly affected by public health restrictions. The scheme in its current form will continue to the end of 2021. The Government will also provide for an enhanced restart week payment – a single payment of three double week to businesses upon re-opening (subject to a maximum of €30,000). This enhanced restart payment is intended to incentivise them to exit the scheme and return to trading as early as possible;
• Business Resumption Support Scheme: A new additional business support scheme for businesses with reduced turnover as a result of public health restrictions is to be implemented in September 2021. Businesses whose turnover is reduced by 75% in the reference period (1 September 2020 to 31 August 2021) compared with 2019 will be eligible for the scheme. The scheme will be administered by Revenue and will operate in a similar way to CRSS.
• Debt Warehousing Scheme: Extension of the tax debt warehousing scheme to allow the period where liabilities arising can be "warehoused" to be extended to the end of 2021 for all eligible taxpayers, with an interest free period during 2022 and interest at a reduced rate of 3% thereafter. The scheme has also been extended to include overpayments of Employment Wage Subsidy Scheme in the scheme;

The Government has agreed to the drafting of legislation to provide for the above measures.

Succession planning

Úna Ryan, Tax Director, discusses the importance of planning for the future as well as the key tax consideration on passing your business to the next generation or getting ready to sell your business.

• Why is it important to start planning early to provide for your retirement, ensure the family business is passed to the next generation or identify what is needed to sell your business while ensuring that you avail of available tax reliefs.
• The tax reliefs for entrepreneurs who are thinking of taking a step back or retiring.
• Other areas to consider when planning for the future such as pension planning or termination payments on retirement.
• The key reliefs available for beneficiaries or the next generation and the potential traps one can fall into when inheriting or taking over a family business.