Budget Dermot Brennan - DBASS

Transcription

1 Budget 2018 Dermot Brennan - DBASS

2 Budget Summary } Concentrated on Middle Income Earners People with Income < 70,000 = Now 48.75% However - People Over 100,000 Still Paying 55% Tax on all income > 100k } We still have 12.5% Corporation Tax Rate Companies are very attractive to use for Tax Planning Key to attracting and retaining the Strong FDI into Ireland

3 USC Tax Changes } Lower USC Rate by 0.5% to 2% } 5% USC Rate to 4.75% } 600 to Middle USC band ceiling

4 Income Tax Changes } Standard Rate (20%) Band by 750 Tax Saving of 150 p.a. } Earned Income Credit (Business Owners/Selfemployed) 200 to 1,150 } Home Carer Tax Credit 100

5 What does this mean to me? } Example = Married Couple, 1 Income & 2 Children } Gross Income = 70,000 } Total Increase = 628 p.a. } This increase of 628 p.a. stays the same for all salaries > 70k

6 KEEP Scheme for Employees } KEEP Employee Share-Option Incentive Scheme Designed to help SME s Retain Key Employees Tax incentive to offer key employees share-based remuneration Tie their performance to the performance of the Business

7 KEEP Scheme Example } Share Option provided to Employee on 01/05/2018 to purchase 10,000 of 1 shares (current market value) } 01/05/2021 (3 years later) shares are worth 3 per share so Employee exercises option to purchase shares for 10,000 i.e. Benefiting from a discount of 20,000 } 10/04/2024 The shares are worth 4 per share and the employee Sells the shares for 40,000. Pre-Tax Gain = 30,000 After-Tax Gain = 20,100 } As result of KEEP this employee will save Tax of 3,150 vs. Pre-Budget

8 Stamp Duty } Rate by 4% to 6% on Commercial Property

9 Rental Sector Reliefs } Mortgage Interest Relief by 5% Interest Deductibility increased from 80% to 85% on Rental Income for 2018 Increased Incrementally by 5% from 2019 onwards until back to 100% (last seen in 2009) } Pre-Letting Expenses You can claim pre-letting expenses (up to max. of 5,000 per property) against Rental Income Applies to properties that have been vacant for 12 months or more Clawback if property taken off rental market within 4 years

10 CGT Capital Gains Tax } Change to 7 Year CGT Relief Owners of qualifying assets can now Sell those assets between the 4 th and 7 th year from acquisition Still obtain the full CGT relief

11 Green Tax Measures } 0% BIK (Benefit in Kind) on Electric Vehicles For a period of 1 year could be gone next year Electricity used in the work-place to charge same will also be exempt for BIK } Accelerated Capital Allowances for Energy Efficient Equipment Was due to expire at end of 2017 but now extended to end of 2020 Means you can W/off Full Cost of the purchase of Energy Efficient Equipment in the year of purchase Ensure the new asset is listed on the Register

12 VAT & Excise Duties } 9% VAT Rate Retained for Tourism Sector } Price of 20 Cigarettes will increase by 50 cent } No change to petrol, diesel or alcohol } Sugar Tax on Sugar Sweetened Drinks Introduced from 1 st April 208 Rates of 20c or 30c per litre

13 Michael Byrne FCA- Partner

14 Context } Company Tax- 12.5% {since 1998) } Capital Gains Tax (CGT)-33% } Capital Acquisitions (Inheritance) Tax (CAT)-33% } Income Tax /PAYE up to55% } Budget 2018-NO REAL CHANGE

15 OPPORTUNITY KNOCKS? Taxable Salary, Dividends Income Splitting Maguire Distribution Ltd Pension Retirement, Entrepreneur Relief Jim & Joan Personal Holding Company

16 Company Typical Irish SME } Maguire Distribution- Incorporated Joan Maguire 33, Jim Maguire 34, son Stephen 8, son Joe 3 } Premises owned by Jim, used by company, loan obtained from Bank } Jim & Joan Modest Salary plus pension } Significant growth from mid 2000 s aided by 12.5% rate

17 Directors Pension Investment Fund } Start Early } Tax Relief Open Goal Corporation Tax Income Tax } Compounding tax free- powerful } Stay in control Self Admin Fund-(SSAP) } Purchase property- easier to fund

18 Directors Pension Investment Fund } Max Fund- 2.15M Each } Tax Free Max - 440K Each } Pass on efficiently {ARF}- does not die } Top tip Always draw a salary (x2) No salary No service

19 Power of Compounding Jim s Retirement Fund ,009,537

20 Net of Tax Fund Without a Retirement Fund Year Year Deposits Year Total Deposits Total Return Fund Value LESS 40% TAX 1 5, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,861.35

21 Power of Compounding } TARGET FUND 1M } Invest 500 per month at 25 years old } Invest 1,000 per month at 35 years } Invest 2,150 per month at 45 years } Invest 6,000 per month at 55 years } Assumed 6% Annual Growth in fund

22 Tax Effective Wealth Extraction } Pension Net of Tax Position vs Salary } Assume No Growth in fund } Company pays 50,000 p.a. over 15 years = 750K } Tax Paid on Salary would be 412,500 } Tax Paid on Taking all out of pension 292,500 } Saving 120,000

23 Retirement Relief } Up to 750,000 Tax Free on Sale of your Business } Divide & Conquer -E.g. Husband & Wife = 750K x 2 } Key Ages Aged 55+ No Later than 65! } Liquidation, Share Buyback- Access Cash

24 Entrepreneur Relief } Reduced CGT Rate of 10% } Lifetime Limit 1,000,000 } 3 year continuous ownership-qualifying business assets } Minimum 5% Shareholding &50% time in service } Liquidation, share buyback

25 Business Property Relief 90% Reduction in Taxable Value of Relevant Business Property (business valued at < 3.1M can pass tax (CAT) free to a child) Must be T/f of a Business Not Individual Assets Strict and Detailed Conditions Attaching to the Relief

26 Cash Extraction - Maguire Distribution } 2017 Company Value 3 million Cash in the company 1.5 million Property 600K (held outside company with bank loan 200K) Jim = 50 Shares Joan = 50 Shares

27 Cash Extraction - Maguire Distribution } Son Working in the Business 1. Transfer 50 Shares to Son Stephen 2. Company buys back other 50 Shares for 1,500,000 TAX FREE CASH to Jim and Joan 3. Premises transferred to Stephen at same time 4. Jim takes lump sum TAX FREE retirement payment 200K from pension at 65

28 Cash Extraction - Maguire Distribution } Summary of CASH Extraction 1. Total GIFT to Stephen = 2.1m No Tax (Stamp Duty of 1% = 21,000) 2. Jim and Joan paid No Tax, paid off loan and retained 1.3M cash plus a pension 3. Jim now Consults to the company for a fee 4. Implications of doing nothing until 66+

29 Business Property relief - Stephen Value of Business & Premises 2,100,000 Reduction of 90% (1,890,000) Taxable Value 210,000 CAT Threshold to Child (310,000) Tax NIL

30 Holding Company Structure Stephen Owns Hold Co. Owns Maguire Distribution Ltd Maguire Distribution Dividends Up e.g. 2m CASH to Hold Co Tax Free and Safe. Sell Maguire Distribution Tax Free (Participation exemption)

31 } "Opportunities are like sunrises. If you wait too long, you miss them." William Arthur Ward

32 Thank You Copy slides

33 Gerry Keenan Investment Consultant Non Executive Director Business and Executive Coach

34 Budget Briefing 2018 Gerry Keenan Non Executive Director Investment Consultant Business and Executive Coach October 11 th

35 McKinsey Global Economy Survey Domestic Economic Conditions 36 Gerry Keenan Budget 2018 Briefing 36

36 McKinsey Global Economy Survey Domestic Economic Conditions Ø In nearly every region, respondents views on their home economies have surpassed expectations from six months ago. 37 Gerry Keenan Budget 2018 Briefing 37

37 McKinsey Global Economy Survey Potential risks to Global Economy over next 12 months 38 Gerry Keenan Budget 2018 Briefing 38

38 McKinsey Global Economy Survey Potential risks to Global Economy evolving YTD 39 Gerry Keenan Budget 2018 Briefing 39

39 McKinsey Global Summary Results September 2017 Risks to domestic growth over next 12 months Political instability in different world regions, and Europe one of the highest. Not surprisingly high in the US and Asia Pacific. This is increasing!!! Economic asset bubbles such as government debt prices, property, equities are all seen as risks. Bear in mind that seeing the risks does not mean that people don t think they will get through them. On balance they believe they will. 40 Gerry Keenan Budget 2018 Briefing 40

40 World Economic Outlook World Output % Growth f United States Europe (Euro) UK The Big Picture - Eurozone Emerging & Developing Europe Source: PWC Gerry Keenan Budget 2018 Briefing 41

41 World Economic Outlook In Europe, the trend is very positive. Expectations are revised upward for many European economies to increase with positive momentum. In the US, while the economy is strong, the momentum is nothing as strong as Europe. Policy is in stalemate and the changes the president has sought are being blocked. So we don t expect a big stimulus but the proposed The Big Picture tax changes - Eurozone might reverse that. It s chaotic. UK!!! What do we know, it s CHAOTIC TOO! 42 Gerry Keenan Budget 2018 Briefing 42

42 World Inflation Outlook Global US UK Eurozone Japan Gerry Keenan Budget 2018 Briefing 43

43 World Inflation Outlook There is no overbearing pressure from labour costs, commodity prices or energy prices. Global Central Banks showing little signs of concern about their inflation targets being exceeded. Exception is UK, Brexit issues. Excess money flooded in by the Central Banks will be gradually withdrawn. US has begun. Interest rates will rise as a consequence but very, very slowly. 44 Gerry Keenan Budget 2018 Briefing 44

44 Budget Background to Irish Economy Irish Economic Outlook (Growth %) GDP Investment Consumer Expenditure Public Government Expenditure Exports Source: ESRI Oct Gerry Keenan Budget 2018 Briefing 45

45 Budget Background to Irish Economy Irish economy is growing strong and it has width and depth now. Investment is strong, consumer spending is strong, exports growing strongly and government is pushing spending into more needy areas inline with growth elsewhere in the economy. Call for government expenditure to exceed the economy wide expenditure growth. Different views on wisdom of doing this!!! 46 Gerry Keenan Budget 2018 Briefing 46

46 Budget Background to Irish Economy Inflation CPI % Average Hourly Earnings % Employment Levels ( 000) Unemployment Rate % Government Balance (% GDP) Government Debt (% GDP) Gerry Keenan Budget 2018 Briefing 47

47 So What Do You Need to Sweat About? Brexit?? too early, nobody knows what s going to happen yet. Large corporations will need to look differently but not you, yet The World Economy No The Irish Economy No Inflation No Interest Rates No Unemployment/employment - Yes If you re a leader in your firm you need to think about you and the company 48 Gerry Keenan Budget 2018 Briefing 48

48 Challenges for you and your Company You and everyone are busy, busy. I can t get good people anymore Where is the company going how old are you? Will you sell the company or grow it and stay a shareholder Lots of big questions facing the company and you Gerry Keenan Budget 2018 Briefing 49

49 How to Deal with the Issues Work harder yourself, keep the head down, have your wife/husband/family friend do the books in the night or weekend You re probably doing this now because we are getting short of skills in the market Head down further. Gerry Keenan Budget 2018 Briefing 50

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51 An Alternative Way!! Yes, there is one Get your head up, not down Think and talk Think things out with a Coach, business advisor etc. Train your office guys to lift their heads. They ll enjoy it more and get more done You will probably need 1-2 more good people get them now and look after them Gerry Keenan Budget 2018 Briefing 52

52 Budget Government Revenue and Expenditure 2018 Budget deficit 2017 forecast at 0.3% GDP and Pre-Budget % Balanced Budget Pre-Budget committed spending increases are 1.1bn giving total spending 52.4bn. Water charge refunds 173m, Christmas bonus to long term Social Welfare, Action Plan for Housing and Homelessness, the Public Investment (Capital) Plan etc. Tax revenue rises Pre-Budget, income Tax + 1.3bn, VAT + 600m, Corporation Tax 360m, growing economy boosting the coffers anyway The Big Picture is predetermined before the Budget Gerry Keenan Budget 2018 Briefing 53

53 Budget Expenditure and Tax Incentives 2018 Gerry Keenan Budget 2018 Briefing 54

54 Budget 2018 Budget 2018 a bag of dolly mixtures with something for everyone Not surprising since they lost seats in the last election being accused of forgetting too many 1.2bn fiscal package additional spending and tax cuts split roughly 2 thirds, 1 third + 684m current spending, + 214m capital spending, 335m tax reductions 55 Gerry Keenan Budget 2018 Briefing 55

55 Budget bn allocated to current spending + 3.4% 5.3bn capital spending + 17%. Doubling Forecast Government deficit 0.2% GDP compared with 0.3% Government spending is 12,700 for every person living here More teachers the pupil teacher/ratio reduced to the lowest ever 26:1 More in police force 800 Gardai civilians More staff in health services 1, Gerry Keenan Budget 2018 Briefing 56

56 Budget 2018 Key Budget Focus : Housing Health Services 57 Gerry Keenan Budget 2018 Briefing 57

57 Budget Housing Commencement notices for new houses + 47%. Planning permissions + 49% 1.8bn for housing 2018, 3,800 social houses by LA and AHB and additional 500m for further expansion up to Target 33,000 new social houses by then. New House Building finance agency funded by ISIF state agency with 750m Gerry Keenan Budget 2018 Briefing 58

58 Budget Housing Commencement notices for new houses + 47%. Planning permissions + 49% 1.8bn for housing 2018, 3,800 social houses by LA and AHB and additional 500m for further expansion up to Target 33,000 new social houses by then. New House Building finance agency funded by ISIF state agency with 750m Gerry Keenan Budget 2018 Briefing 59

59 Budget 2018 Other Property Increased mortgage relief scheme introduced in 2014 expanded out to 2020 Help to Buy scheme is maintained Commercial property stamp duty increased to 6% (ouch!) Development land purchases will be exempt from the increase if development is within 30 months Unused development site tax 3% in 2019 for 2018 rising to 7% 2020 for 2019 very complex, what about zoned land? Gerry Keenan Budget 2018 Briefing 60

60 Budget 2018 Health Services + 685m bringing total 15.3bn An additional 1,800 staff across all medical needs 40m for Primary Care developments + 40m to TUSLA the child and family agency primarily to fill in gaps in hours of services How many extra beds are opened up will probably be a key outcome Gerry Keenan Budget 2018 Briefing 61

61 Budget 2018 Tax Rises Excise duty on cigarettes up 50 cent Sugar sweetened drinks tax introduced VAT on sunbeds up to 23% from 13.5% Commercial stamp duty up 2% - 6 % National Training levies up 0.1% to 0.8% rising again to 1% over 3 years Tax relief for capital spending on intangible assets cut to 80% No change in 9% VAT on Tourism Gerry Keenan Budget 2018 Briefing 62

62 Budget 2018 Tax Cuts 20% tax band up by 750 to 34,550 USC rates 2.5% - 2%, 5% % Self employed earned income relief increased to 1,150 (still way behind PAYE relief of 1,600 New share options schemes for employees in SME s Gerry Keenan Budget 2018 Briefing 63

63 Budget 2018 Brexit 300m Brexit loan scheme for SME s with big focus on food companies 871m Budget for Dept of Business Enterprise and Innovation 40 new staff for department and state agencies Government gearing up for the operational demands of Brexit Gerry Keenan Budget 2018 Briefing 64

64 Budget 2018 Conclusion A good budget. Housing problem will be eased over time and support for the health service Personal taxation relief has begun 2018 will be a busy year. Brexit will take shape. Your costs should be ok. Profits should be good. Lots will go on in this busy environment For best results lift your head up and keep thinking about the future Gerry Keenan Budget 2018 Briefing 65

65 Put First Things First Dermot Brennan DBASS Things which Matter Most Must NEVER be at the Mercy of Things which Matter LEAST Goethe ( )

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68 Stand Back and Look at Your Business & Your Role as a Leader

69 Am I Doing Now What I Should be Doing? Is this the best use of my Time?

70 Where Do I Start?

71 Be Honest with Yourself 1 Step at a Time

72 What Information do I Need to make Informed Decisions?

73 If You Don t Like Reading Check out his Videos on You Tube

74 mypsybercoach.com

75 Thank You } Please Give Feedback Sheets to DBASS Team } Raffle for Cinnamon Garden Indian Restaurant Voted Best Family Friendly Restaurant 2016

76 Disclaimer } We have made every effort to ensure that the information provided in this seminar is accurate, but we cannot accept responsibility for the consequences of any action you take in reliance on its contents. } If following the seminar you have any matters you would like to discuss, please contact any of the partners at info@dbass.ie