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dermot obrien presentation on tax at The Business of Fun 2011

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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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    dermot obrien presentation on tax at The Business of Fun 2011 dermot obrien presentation on tax at The Business of Fun 2011 Presentation Transcript

    • AOIFE Conference 2012 Tax Issues for Events’ and Festivals’ Organisers Dermot O’Brien Dermot O’Brien & Associates November 2012
    • 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
    • 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
    • Payroll Taxes
      • PAYE, PRSI, Levies
      • Critical Issue:
        • Employed versus Self-employed
      • Position clear for permanent staff
        • Includes permanent, some temporary, part-time
    • 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
    • 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
    • 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
    • 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
    • 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
    • VAT Issues
      • Fundamental Principle:
        • Event Income taxable  VAT on costs recoverable
        • Event Income exempt  VAT on costs irrecoverable
    • 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?
    • 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
    • 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
    • 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
    • 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.
    • 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.
    • 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
    • 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
    • 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?
    • 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.
    • Questions
      • And, hopefully, some answers.
      • Thank you.