Headline Verdana Bold Accounting for Tax Eoin Stanton & Frances Lenihan

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2 Headline Verdana Bold Accounting for Tax Eoin Stanton & Frances Lenihan Manager, Tax Director, Tax

3 Eoin Stanton Budget 2019 and Finance Bill 2018 Domestic 2018 Deloitte. All rights reserved. Deloitte Financial Reporting Plus 3

4 Budget 2019 and Finance Bill 2018 VAT Tourism Activities Increase in the VAT rate applicable to tourism activities from 9% to 13.5% (hotel accommodation, restaurant meals, cinema, hairdressers etc.) Rate change with effect from 1 January 2019 Printed newspapers and certain electronically supplied publications Printed newspapers to retain the 9% VAT rate The VAT rate on certain electronically supplied publications (e-books and electronically supplied newspapers) will be reduced from 23% to 9% Also with effect from 1 January 2019 Sporting Facilities The supply of sporting facilities (swimming pools, gyms, leisure facilities etc.) to retain the 9% VAT rate 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 4

5 Budget 2019 and Finance Bill 2018 VRT Hybrid Vehicles VRT relief on hybrid vehicles will be extended to the end of 2019 Diesel Surcharge 1% VRT surcharge on the registration of diesel vehicles across all VRT bands WLTP VRT categories will be based on the new WLTP measuring system (Worldwide Harmonised Light Vehicle Testing Procedure) Result in an increase in VRT on most new cars This is estimated to result in an average of between 2% and 4% point increase in the VRT rate from 2020 in addition to the 1% surcharge on diesel cars Transitional arrangements resulting in smaller increases will be in place before then 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 5

6 Budget 2019 and Finance Bill 2018 Corporation Tax Commitment to 12.5% corporation tax rate for trading income Three Year Start-Up Relief Relief for profit-making start-up companies that create and maintain jobs Extended for a further three years until end of 2021 Accelerated Capital Allowances for Gas-Propelled Vehicles and Refuelling Equipment To encourage the use of natural gas and biogas as a substitute for diesel Accelerated Capital Allowances for Employer Provided Fitness and Childcare Facilities Aims to incentivise employers to provide fitness and / or childcare facilitates Measure was introduced in Finance Act 2017 Commence with effect from 1 January Deloitte. All rights reserved Deloitte Financial Reporting Plus 6

7 Budget 2019 and Finance Bill 2018 Corporation Tax Film Relief for companies Credit relief extended to 2024 New tapered uplift proposed for productions in areas designated under the State Aid regional guidelines Subject to State Aid approval Employment and Investment Incentive Scheme (EIIS) Measures were expected to be bought forward in Finance Bill to increase its efficiency and effectiveness Administration moving to self-certification model Some changes in terms of the operation of the scheme Relief for certain investments in micro companies / small start-up enterprises 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 7

8 Budget 2019 and Finance Bill 2018 Income Taxes / USC 750 increase in income tax standard rate cut-off point USC reduction in rate from 4.75% to 4.5%, increase in band that applies for 2% rate Increase in some credits like the Home Carer Credit (up 300) and the Earned Income Credit (up 200) Mortgage interest relief for landlords - 100% interest deduction will apply from 1 January % BIK rate for electric vehicles provided to employees - Extension from 31 December 2018 to 31 December Cap of 50,000 on the Original Market Value Deloitte. All rights reserved Deloitte Financial Reporting Plus 8

9 Budget 2019 and Finance Bill 2018 Employment Taxes Further increase of 0.1% in employer contribution to National Training Fund Levy Forms part of Employer PRSI rate Class A and H Increase of 0.1% will yield 69m Weekly threshold for higher rate of ER PRSI will increase from 376 to 386 from 01/01/2019 Employer PRSI % 10.95% 11.05% 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 9

10 Budget 2019 and Finance Bill 2018 Key Employee Engagement Programme ( KEEP ) Budget 2018 introduced a share-based remuneration incentive for unquoted SME companies to attract key employees. Available for qualifying share options granted between 1 January 2018 and 31 December Gains arising to employees on the exercise of KEEP share options will be liable to Capital Gains Tax on disposal of the shares, in place of the current liability to income tax, USC and PRSI on exercise Deloitte. All rights reserved Deloitte Financial Reporting Plus 10

11 Budget 2019 and Finance Bill 2018 KEEP: Qualifying Individual Changes Fulltime employee/director in a qualifying company Office or employment capable of lasting > 12 months Work at least 30 hours per week Cannot own, directly or indirectly, more than 15% of the company Qualifying Individual If satisfy the conditions to date of cessation exercise within 90 days Cease to qualify if exceed this 15% limit Annual award cannot exceed 100% of remuneration in a year 300,000 lifetime limit 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 11

12 PAYE Modernisation What is Changing Revenue Payroll Notification (RPN) will replace P2C (tax credit certificate) RPNs will be available in real time for new employees Payroll software uses details returned in the RPN to calculate tax On or before making a payment employer must report: Amount of pay Payment date Income tax/usc/prsi/lpt deducted Revenue issues statement by 5 th of following month showing liability Employer can accept or amend the statement Statement deemed a return by 14 th where no action taken Payment is due as normal (23 rd for ROS pay and file) 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 12

13 PAYE Modernisation Preparing for 1 January 2019 For each payroll identify: What are the pay elements? How does the information get to payroll? Review of position to date on each item Do procedures need to change? Employers must ensure they have: Registered all employees Received an up to date Tax Credit Certificate (P2C) for each employee Correct Personal Public Service Number (PPSN) for all employees. Completed the P45 process correctly List of employees to be provided: Current employees (including directors) Employees on long term leave such as maternity leave or sick leave Pensioners in receipt of payments Seasonal or temporary employees who have not been given a P45 Employees on a career break who have not been issued a P45 Employees for whom PAYE exclusion orders have been received By 31 October Deloitte. All rights reserved Deloitte Financial Reporting Plus 13

14 Frances Lenihan Budget 2019 and Finance Bill 2018 International 2018 Deloitte. All rights reserved. Deloitte Financial Reporting Plus 14

15 Budget 2019 and Finance Bill 2018 International Tax Landscape Ongoing developments in the international tax landscape OECD s Base Erosion and Profit Shifting (BEPS) project EU Anti-Tax Avoidance Directives (ATAD) US Tax Reform EU ATAD 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 15

16 Budget 2019 and Finance Bill 2018 International Tax Landscape Ireland s Corporation Tax Roadmap Published by the Finance Minister on 5 September 2018 Identified a programme of action for implementing changes in relation to Ireland s corporation tax regime, not only in Budget 2019, but over a number of years Referenced a number of consultations with taxpayers for Q and throughout 2019; Interest deductibility limitations and and the ATAD anti-hybrid provisions (Q4 2018) Review of Ireland s Transfer Pricing Provisions (early 2019) Alternative options of moving to a territorial regime and simplification of the double tax relief rules (early 2019) 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 16

17 Budget 2019 and Finance Bill 2018 International Tax Landscape Exit Tax Section 627 TCA 1997 included an exclusion from the application of an exit tax at a rate of 33% where companies migrated or transferred assets offshore and where certain conditions are met Changes were expected as it was required in line with EU ATAD changes (which require the changes to be effective from 1 January 2020) Changes announced which are effective from midnight on Budget Day Exit tax is to apply at a rate of 12.5% on any unrealised gains once the assets leave the scope of Irish taxation Anti-avoidance provision Seeks to apply the CGT rate (33%) rather than the 12.5% rate where the transfer/migration forms part of a transaction to dispose of the asset and the purpose of the transaction is to benefit from the 12.5% rate rather than the CGT rate Finance Bill Deferral of payment 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 17

18 Budget 2019 and Finance Bill 2018 International Tax Landscape Controlled Foreign Company ( CFC ) rules Aim to deter companies from shifting profits into non-genuine low tax structures Effective for accounting periods beginning on or after 1 January 2019 Department of Finance has confirmed that Ireland intends to implement Option B, as included in Article 7 of the ATAD On 7 September 2018 the Department of Finance published a CFC Feedback Statement Encouraged stakeholders to provide feedback on the proposed CFC rules that will be included in Finance Act 2018 Consultation process Finance Bill updates 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 18

19 Customs Current situation Free movement of goods (once duty paid) VAT and Excise duties at National level Customs Union = Single trading area Common external tariff - Duty rates set at Union level Free-trade agreements are negotiated at Union level 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 19

20 Customs Current situation & Post-Brexit - Imports Goods (all ex UK) Oil and coal Pre Brexit Goods in free circulation, move excise - suspended under EMCS Post Brexit No Deal Scenario UK no longer be able to use EMCS system, goods will have to be cleared at port, paying duty and VAT and EMCS raised for inbound movement at port Animal feed Cars Foodstuffs Goods in free circulation, no customs control Goods in free circulation, no customs control Goods in free circulation, no customs control Goods will have to be cleared at port, import declaration made paying duty and VAT before release 3.8% Goods will have to be cleared at port, import declaration made paying duty and VAT before release tariff 10% Goods will have to be cleared at port, import declaration made paying duty and VAT before release, potential veterinary examination EMCS Excise Movement and Control System 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 20

21 Customs Post-Brexit Imports No Deal Scenario UK will be a third country Electronic import declaration - AEP Customs formalities will apply Duty and VAT payable at border Internal resources Change to internal systems 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 21

22 Customs Current situation & Post-Brexit - Exports Goods Pre Brexit Post Brexit No Deal Scenario Excise goods to UK Goods in free circulation, move excise-suspended under EMCS EMCS movement to port, export declaration presented to Revenue advance notification period Other goods to UK Goods transiting the UK on way to EU RO-RO to Brittany Goods in free circulation, no customs control Goods in free circulation, no customs control Goods in free circulation, no customs control Export declaration presented to Revenue, approved for export Transit document required (TAD), proof of Union status, completed in NCTS system No change EMCS Excise Movement and Control System NCTS New Computerised Transit System 2018 Deloitte. All rights reserved Deloitte Financial Reporting Plus 22

23 Headline Verdana Bold Reflections from 2018 and thinking ahead Kevin Butler, Maria Down, Tim Crotty

24 Perspectives on M&A Ronan Murray Partner, Corporate Finance

25 Agenda Agenda Introduction The Irish M&A landscape 2018 Positioning your business for a sale Criteria for developing an M&A strategy Trade Investor vs. Private Equity Defining the acquisition criteria Management Buy-Outs

26 Introduction Ronan Murray Partner, Corporate Finance Belfast 1 National Team 7 Key services Galway Dublin Limerick Cork

27 The Irish M&A landscape 2018 Overview Ireland Ireland remains a very active market. Deal volumes have increased by almost 6%, while overall values of 14.9bn were reported in Industries Business services and TMT have been notably strong but financial services, healthcare and pharma and industrials all remain very active. Brexit Some macro-economic uncertainty may impact continued demand from international corporate and private equity buyers for good Irish assets and strong outbound activity from our clients acquiring in overseas markets Strong year to date. We expect that the Irish M&A market to remain busy through to the end of the year. Private equity The robust macro-economic fundamentals here are driving activity levels, private equity is very active, a number of sectors are particular hot and mid-market deal volumes are very strong.

28 Positioning your business for a sale Strong recurring revenue business model Longstanding customers High win / low loss ratios Long term contracts IP ownership Strong management team Strong margin growth Point of differentiation vs competitors in the market Internationalisation or ability to internationalise High quality, accurate and timely financial information Strong Finance Director and the right reporting systems and technologies in place Proven track record of growth and acquisitions

29 Criteria for developing an M&A strategy What does the ideal acquisition target look like? How important is R&D and the ability of a target to bring innovation? Geographic focus which markets are of particular interest? Are you looking to integrate the target business or are you acquiring a business which will be standalone and comes with a management team?? Are there any particular products that are a gap for you that would be a real benefit to provide? What s our ideal timescale to progress with an acquisition? What is the funding capacity of the transaction and what scale of acquisition are you looking for? Who will be the key deal lead within the acquiring Company to take ownership for driving this forward? What do you see as the main challenges to executing on an acquisition?

30 Trade Investor vs. Private Equity There are a number of differences between trade and private equity transactions Trade Investor Valuation Potentially pays strategic multiple and value synergies Appetite for acquisition depends on current strategic focus of the business, pricing expectations sometimes lower than PE depending on the market Structure May acquire a minority % of shares, providing partial exit for the shareholders, but typically has controls around ultimate exit (including a put and call) Diligence Typically less onerous than PE as usually understand the business Synergist business case Management Business may be integrated into larger group or continue to function more independently, depending on intended post-acquisition structure Founders may remain or exit depending on their aspirations and the integration plan Private Equity Majority Value driven by PE returns including buy-and-build potential Debt capacity also a factor PE house will generally seek a controlling stake, but sale of a minority interest is possible Founders can co-invest roll into NewCo Aligned on exit Diligence usually very thorough Focus on growth business plan Reliance on external advisors Founders can exit partially but MD needs to be in place backing the management team Management has shareholding to participate in the upside on PE (usually 3 to 5 years) Equity incentivisation of next layer of management Control/Culture Will depend on post-acquisition structure of the overall business and level of integration. Future opportunity Potential synergy upsides Exit plan needs careful consideration New institutional shareholder Potential active Board representation via non-exec director Management continues to drive performance of business PE fund is backing management team Significant equity upside Potential sweet equity for management, value on next exit Access to capital for acquisitions

31 Defining the acquisition criteria Financial Target enterprise value Target EBITDA range Group leverage targets Earnings and cashflow growth Acquisition financing Strategic Routes to market / value Transparent business model Potential for future growth Knowledge / IP opportunities Operational Presence in target markets Significant growth Costs of integration Optimal operational footprint Risk/Ability to execute Execution risk Potential downside risks Integration synergies

32 Management Buy-Outs (MBOs) MBOs present a great opportunity to own the business that they are already operating and deliver an accelerated growth path for the business Private equity backers are attracted to MBO teams with credible organic or buy and build growth strategies MBO teams looking for funding need a robust business plan capable of withstanding rigorous due diligence Agreeing a price can be difficult as shareholders want to maximise the value achieved on exit with management teams seeking to acquire the business at a lower price Every business requires a bespoke funding structure but now is the time to consider a buyout due to the availability of funding

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34 The future of work Kevin Butler Partner Headline Verdana Bold

35 What is really happening

36 Rate of change Technology is progressing exponentially Technology Individuals Businesses Public policy 1970s 1980s 1990s 2000s 2010s Today Source: Deloitte Human Capital Trends, 2017

37 The augmented workforce Employees Joint Ventures Contractors Freelancers D I S R U P T E D Crowds Robots Source: Deloitte, 2017 G r e a t e r n u m b e r o f t a l e n t o p t i o n s

38 7 Disruptors Technology is Everywhere Career 100 year life Jobs Vulnerable to Automation AI, Cognitive Computing, Robotics Diversity/Generational Change Tsunami of Data Explosion in contingent work

39 We ve been here before Copyright 2018 Deloitte Development LLC. All rights reserved. Deloitte Future of Work 39

40 Closing address Honor Moore