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dermot obrien presentation on tax at The Business of Fun 2011


Tax expert Dermot O'Brien presents at The Business of Fun 2011

Tax expert Dermot O'Brien presents at The Business of Fun 2011

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  • 1. AOIFE Conference 2012 Tax Issues for Events’ and Festivals’ Organisers Dermot O’Brien Dermot O’Brien & Associates November 2012
  • 2. Typical Structure of Organisations
    • Usually non-profit making
      • Profits not distributed to Members
    • Recipients of State subvention
    • Tax charitable status
    • Often have significant voluntary input
  • 3. Tax Heads
    • Income Tax and Corporation Tax rarely an issue
    • Likewise the Capital Taxes
    • VAT and Payroll Taxes the key tax heads
      • Focus of most Revenue Audit queries
    • Increasingly aggressive approach from Revenue in current difficult environment
  • 4. Payroll Taxes
    • PAYE, PRSI, Levies
    • Critical Issue:
      • Employed versus Self-employed
    • Position clear for permanent staff
      • Includes permanent, some temporary, part-time
  • 5. Payroll Taxes
    • Position less clear for short-term contracts
      • Performers, designers, directors, etc.
    • Revenue published guidelines
      • Criteria whether person is an employee:
        • Another directs how, when, where work is done
        • Only labour supplied
        • Paid fixed hourly/weekly/monthly wage
        • Work cannot be subcontracted
        • Does not supply materials for the job
  • 6. Payroll Taxes
    • Person an Employee?
      • Revenue guidelines – criteria (cont’d.):
        • Not exposed to financial risk
        • No responsibility for investment in the business
        • Works set or fixed hours per week or month
        • Works for one person or business
        • Receives expenses to cover travel/subsistence
        • Is entitled to extra pay or time in lieu of overtime
  • 7. Payroll Taxes
    • Person Self-employed?
      • Revenue guidelines – criteria:
        • Owns his/her business
        • Is exposed to financial risk for faulty work
        • Has responsibility for investment in business
        • Can profit from sound management
        • Controls how, where, when, what is done
        • Can hire others on his/her terms
        • Can supply similar services to more than one business or person at the same time
  • 8. Payroll Taxes
    • Person Self-employed?
      • Revenue guidelines – criteria (cont’d):
        • Provides materials
        • Provides equipment & machinery
        • Costs and agrees price for job
        • Provides own insurance cover, e.g. public liability
        • Controls hours of work
  • 9. Payroll Taxes
    • Criteria for employed/self-employed
      • No one criterion decisive
      • “ Smell Test”
      • Usually reasonably clear
      • Revenue seeking to move more people to employee status
      • Disadvantage = employer’s PRSI = 10.75%
      • Advantage = no VAT (possible saving of 21%)
      • Complication = consider BIK’s
  • 10. VAT Issues
    • Fundamental Principle:
      • Event Income taxable  VAT on costs recoverable
      • Event Income exempt  VAT on costs irrecoverable
  • 11. VAT Issues
    • Issues for Festivals
      • No admission charge
      • Identifying taxable income to which input VAT relates can be a challenge
      • Sponsorship?
      • Advertising?
      • Branding and Promotion?
  • 12. VAT Issues
    • Issues for Events
      • Promotion of, and admissions to, live musical and theatrical events VAT-exempt
      • But taxable if facilities available to consume food and drink during the performance
      • Rate is currently 9%
      • A venue could have both taxable and exempt events
      • Each event considered on its own merits
  • 13. VAT Issues
    • Deductible VAT for Event Promoters
      • May deduct VAT on all costs associated with taxable events
      • May deduct a proportion of VAT on costs incurred for both taxable and exempt events
      • No VAT deduction on costs attributable to exempt events
      • Key issue for recovery of VAT on capital expenditure
  • 14. VAT Issues
    • Event Promoters – self-accounting issues
      • Irish VAT payable on goods brought in from other EU MS (e.g. stage sets, etc)
      • Irish VAT payable on fees paid to overseas (EU as well as non-EU) service providers
        • Artists/performers
        • Designers/producers/directors
        • Royalties to authors/composers/playwrights
        • Lawyers and other professionals
        • Advertising
  • 15. VAT Issues
    • Event promoters – self-accounting
      • Self-accounted VAT is deductible where it is incurred in connection with taxable event
    • Example 1:
      • Opera promoter pays €20,000 to Italian tenor to perform in Ireland. Tickets to opera VAT exempt. Promoter pays €4,200 to Revenue.
  • 16. VAT Issues
    • Example 2:
      • The promoters of an arts festival pay €10,000 to a UK comedian to do a stand-up gig in a local venue. Patrons can buy and consume drink during the performance. Tickets to the gig are liable to VAT at 9%.
      • The promoters must pay €2,100 VAT on the comedian’s fee to the Irish Revenue. Because the gig is a taxable gig, the promoters can take a matching deduction for the VAT. No net VAT cost arises.
  • 17. VAT Issues
    • Taxable v Exempt Gigs
      • Benefits of taxable gigs clear to see from above example
      • Relatively low rate of tax on income
      • Potentially significant savings on costs
      • Not feasible in every scenario, but worth considering
  • 18. VAT Issues
    • Issues for Venue Owners
      • Same as before if also operating as promoter
      • Issue of box office needs careful attention if
        • Third party promoter, and
        • Event admission is taxable
      • Revenue have held venue owner liable to VAT on entire box office, even where contract in place with promoter to split box office
      • Clearly wrong, but that is their approach currently
  • 19. Key Point Summary
    • Is your charitable status secure?
      • Are you still doing what you told Revenue?
    • Employees or self-employed contractors?
      • Are you on the right side of the guidelines?
      • Should you be revising contracts?
    • Is the VAT status of your gigs unhelpful?
      • Could you be recovering more input VAT?
      • Are you accounting for the correct VAT on box office?
  • 20. Confront the Ostrich
    • What to do if you find tax underpaid?
      • Do not put the head in the sand and hope it will go away. It is unlikely to.
      • Reasonable mitigation of penalties, publication and prosecution if an unprompted disclosure made to Revenue.
      • Be careful about how you approach Revenue
      • For fools rush in where angels fear to tread.
  • 21. Questions
    • And, hopefully, some answers.
    • Thank you.