With everyone being told to tighten their belts as the recession looms over us here is a quick and easy way of saving money.

Like death & tax’s, insurance is another cost we can’t escape !

But now with www.chill.ie we can soften the blow.

Within a few minutes of filling in a few basic questions you can save HUNDREDS of euros on your insurance bill. And it covers, house, life, car health, travel  etc.

It works just like a broker, except you get to see what the competition is charging. And it does work !!!

Let me know how you get on.

Rehab Ireland are calling for all student designers/artists to design a logo for the ABLE Business Excellence Award. For more details go to www.able.ie

The main business excellence award itself is open to private sector companies of all sizes who have demonstrated committment and achievement as both employers and providers of services to people with disabilities.

What will the VRT changes mean?

Everybody is talking about the changes in VehicleRegistration Tax (VRT) that are coming in July, but there seems to be significant confusion about whether car prices will rise or fall. We take a look at the changes.

The changes in the VRT rates for new cars and cars imported into Ireland from 1 July will mean that cars with lower levels of exhaust emissions will pay a lower rate of VRT and also a lower rate of annual road tax. The changes were announced in the Budget in December and were designed to encourage the use of cars with cleaner engine systems.

So, if you’re in the market for a new car now or over the next few months, make sure to check out the car’s CO2 rating - it’s equally as important as the economy figures and interlinked in terms of future running costs.

Diesel cars achieve lower levels of emissions than many equivalent petrol cars. The sales results for January and February of this year already indicate that the percentage of diesel sales has risen from under 20% of the market to over 30%. This trend will continue as we near the July deadline.

What does it all mean?

The new VRT system will mean a lower rate of VRT for cars that have lower carbon dioxide (CO2) exhaust levels. Cars that pollute more will incur a higher level of taxation. This means a move away from the system where VRT is based solely on the size of the vehicle’s engine.

From July, there will be a seven-band CO2 emissions system, from Band A to G. The system will be underpinned by a new CO2 Emissions Labelling System for cars, similar to the energy efficiency labels for white goods such as fridges and washing machines.

All cars sold after 1 July next will be required to have an emissions band clearly marked. The new rates will range from 14% to 36%.

Cleaner cars will be cheaper

The new VRT rules offer drivers the option of making informed decisions in an effort to get lower car prices by opting for cars that give a lower VRT rate. Prices of bigger cars and some 4×4s with high emissions levels will definitely rise.

The Government will continue to give incentives for hybrid electric and flexible-fuel cars. After 1 July, there will be a further top-up relief up to €2,500 on the VRT payable on such cars. Fully electric cars and electric mopeds will be exempt from VRT from 1 January 2008.

The changes in the VRT system should mean lower prices for some cars, almost all of which are diesel-engine models. Most petrol-engine cars will have a higher level of VRT than in the past, pushing up prices. Bigger diesel-engine SUVs and 4×4s that do not have lower CO2 emissions engines will also take a price increase, as was flagged in leaks prior to the Budget.

Many larger cars and 4×4s generate CO2 exhaust emissions levels that are over the 226g/km top rating. That means that their VRT rating will rise from the previous top rating of 30% to either 32% or the new top rating of 36%. Some large estate cars such as the Volvo V70 2.5T with petrol power and a CO2 rating of 222g/km will experience a slight rise in prices as a result, while the top end V70 3.2-litre engine model will get the full 36% rate.

Large 4×4s with powerful engines that emit high levels of CO2 will also be penalised. The figures from the Department of Finance indicate that many of them will or should increase in prices due to a higher VRT rate. Land Rover has already confirmed that it expects to lift prices across the range from Freelander to Range Rover due to the new VRT rates.

How is the CO2 rating calculated?

The Department of Finance says that the CO2 emissions rating for each new car being registered in Ireland will be determined based on the emissions information contained in the model’s Certificate of Conformity. This is a document which has been required under European Law since 2001. Sales brochures normally contain a CO2 emissions figure in the section under economy based on this information. There are various opinions on whether this is accurate or not, but it is a common system and the only one that can be used currently.

For used-car imports, the CO2 rating will have to be declared on form VRT4 (Declaration for registration of a used vehicle) by the person registering the vehicle. The declaration will be required to be supported by documentary evidence of the CO2 rating. This could be provided in a Certificate of Conformity, a previous registration certificate or a certificate from the manufacturer or a main distributor (provided in each case the CO2 rating is included). Alternatively, a certificate from an organisation approved by the Revenue Commissioners to provide such certificates could be used as documentary evidence of the emissions levels.

Where a certificate or a measurement is not available or fails to satisfy the Revenue Commissioners, the VRT charged could be set at the maximum rate allowable. Such a VRT rating would be open to appeal through the VRT appeals system.

Motor tax rates increase

The rates of motor tax rose by 9.5% for cars below 2.5 litres and by 11% for larger cars from 1 February 2008. The bigger impact will come in July when motor tax bands on all new cars sold from then on or used cars registered for the first time in Ireland will have a new annual motor tax charge. Existing cars will continue to be taxed on the current basis of engine size. This means that your car tax will be at the raised February rate - not the new CO2 rate - until you change to a new car sometime after July.

There will be seven bands in total, ranging from €100 a year for the greenest cars to €2,000 for cars with the highest emissions ratings. It will result in savings of more than €300 for motorists who chose the lowest emissions vehicles.

A key part of the motor tax and VRT initiatives will be a new mandatory labelling system for cars based on CO2 emission levels. This will be accompanied by an active public information campaign which will promote the purchase of fuel-efficient cars. You can expect to see this on all new cars in advance of the July VRT changes.

Visit the Revenue Website and click on: ‘Construction Services - New VAT rules for Principal Contractors and Sub-contractors - from 1 September 2008′
to view the letter which will issue to each:

• Principal contractor
• Subcontractor (established in the State)
• Principal contractor/subcontractor
• Subcontractor (established outside the State)
• Public Body
• Agent

If you’ve been reading the newspapers lately you will have seen that the Revenue Commissioners are now focusing attention on undeclared deposit accounts.

The Revenue have made it compulsary for banks, building societies, credit unions etc to make automatic returns to them on deposits they hold for customers. 

What the Revenue is really going after is monies held in accounts which have not been disclosed.

Anyone with at least €100,000 on deposit (for 2005, 2006 or 2007) will be targeted. The deposits can be over a number of accounts.

D Day is the 15th of September - thats when the institutions have to make their disclosures.

Coinciding with this date, taxpayers must notify the Revenue by this date, that they intend to make a voluntary disclosure. 

If you miss this deadline you may be subject to penalties.

According to Revenue, taxpayers who make a prompt volantary disclosure will face  ’substantially mitigated’ penalties for underpaid tax.

Once qualifying tax payers have notified Revenue of their intent to make a disclosure by the Sept 15th deadline, full details of their tax liability are not required for another four months. People availing of the voluntary disclosure must submit a full declaration, a computation of their tax liability, including interest and penalties, and full payment by January 15th 2009.

 Taxpayers whos’ tax affairs are in order for these deposits need not worry.

E.g if you received the money through the disposal of a second house and have paid your capital gains tax then  there will be no issue.

Problems will arise where the amount on deposit has not gone through the tax net properly.

Act now to avoid interest, penalties and publication in the quarterly list of tax defaulters.

Employing a good accountant is the first and most obvious move to make when trying to keep your tax bill down.

Complementing this is for you yourself to invest a bit of time into learning the tax system and becoming aware of the various schemes out there to help you learn the tax system.

This article looks initially at the most obvious people who will help reduce your tax liability.

It’s not your employer, it’s not your bank manager and it’s not your local politician! It’s much closer to home than that. It’s your family!

Here are ten tips to help you maximise tax breaks which relate to your family.

1. PAYE - Joint Assessment (Married couple)

Review the tax you are paying either from your payslips or the P60 you get at the end of each year.

Check to see your maximising both the tax credits you get and the standard rate cut offs. Invariably a married couple pay less tax through joint assessment rather than single assessment.

2. Sole Traders – employ your family.

A salary paid to a spouse in this case is not liable to PRSI. Also your total income tax bill is reduced by using the married couple’s tax band. If he/she is not working you would not be able to avail of the full allowance.

Also, a family member who works part time in your business can be paid up to €348 per week without incurring PAYE or PRSI – so long as they have no other income. This obviously cuts down your income tax bill as well as their wages are treated as a taxable expense within your tax computations.

3. Capital Gains on shares.

Shares can be transferred free of capital gains and stamp duty between spouses so as to double the annual tax exemption of €1,270.

4. Capital Acquisitions Tax (CAT).

Gifts or inheritances to your family members are liable to CAT of €20%.

Thresholds change per year but in 2008 the lifetime limits are as follows :

- son/daughter - €521,208

- Parent/brother/sister/niece/nephew/grandchild the limit was €52,121

- Other relationships have a limit of €26,060.

By carefully maximising these limits, gifts and inheritance tax can be minimised.

5. Make a Will

An example of the tax implications of not doing so can be seen by reading number 4 above again !

6. Transfer a house/site to a child.

In certain cases a house/site can be transferred from a parent to a child without the child incurring CAT.

But the child must occupy the house as their principal private residence and in the case of a site must build their principal private residence on the site.

7. Favourite Nephew / Niece.

In situations where you have no children but would like to pass on a gift/inheritance to a favourite nephew or niece, one can subject to conditions avail of the son/daughter limits outlined in 5 above to minimise Capital Acquisitions Tax.

8. Home Carers

This credit may be due if, as a married couple, you are jointly assessed for tax and you or your spouse, as a Home Carer provide care for

· A child for whom you are entitled to social welfare child benefit.

· A person who is permanently incapacitated.

· A person aged 65 or over.

The extra tax credit is at €900 but reduces base on the Home Carers income (if any).

9. Maternity Benefit is tax Free.

If you were in employment when you took maternity leave and received maternity benefit, this should have been paid to you tax free.

Some employers elect to pay the statutory maternity benefit as part of your salary, and have you return any cheques you get from Social Welfare to them directly. This simplifies things BUT you should not have paid any tax on this benefit.

10. Family Business.

If you have a family business you should be planning your tax affairs to obtian maximum reliefs on the transfer to the next generation

• Tax relief for personal pension contributions is limited to 15-40% (depending on age) of relevant income up to €262,382 (for the 2007 tax year) as adjusted for inflation annually.
• You may qualify for tax relief in respect of  donations made to charities and other approved bodies such ad educational institutions. Tax relief is granted to individuals at their marginal rate of tax and to trading companies at 12.5% as appropriate. The minimum donation to any one approved body if €250 in a tax year.
• Did you know that you can claim a tax deduction if you make a Deed of Covenant in favour of elderly/incapacitated parents/relatives ?
• Have you made a will and considered the impact of inheritance tax ? If you have drafted a will you should ensure thats it is tax effective.
• If you are married do you hold your assets in the most tax efficient manner ? Transfers of assets between spouses are exempt from stamp duty.

Renting out a property can have some tax issues which you need to be aware of.

If its a property you bought and are getting mortgage interest relief on, you will loose this relief.

However the interest you are paying is a taxable expense, and can be offset against any rental income you get on the property. You must inform the private residential tenancies board to claim this expense.

Other expenses that can be used to reduce your tax bill on this income include any management fees on the property, capital expenditure for furniture & fittings (written off over eight years) and also the cost of maintaining the property to be suitable for renting.

Other tax issues that arise from renting including stamp duty. If you rent out the property within 2 years of buying it you will be faced with revenue clawing back stamp duty relief. To avoid this you could opt for the revenues rent a room scheme. Here you can rent out part of your propery and avoid the stamp duty issue.You also can earn €10,000 tax free with this scheme.

If you decide to just rent out the property fully you must make an annual return on ths profit made by you and you will be liable for income tax.

Drop me a line for more information…

Welcome to McDowell & Co.

Our blog is here to help you to reduce your tax bill and save you money.

You may be a PAYE worker, a sole trader, a farmer, a small company etc.

You may have issues relating to the amount of tax you pay, to the accounting system you use, you may want help understanding your bottom line….its up to you.

Drop us a post and we will take it from there….