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InterTradeIreland Simple Guide to Cross Border Business October 2009
 

InterTradeIreland Simple Guide to Cross Border Business October 2009

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The guide, developed as part of the InterTradeIreland / MicroTrade initiative, provides companies with basic advice when exploring the potential for cross-border business. The guide provides ...

The guide, developed as part of the InterTradeIreland / MicroTrade initiative, provides companies with basic advice when exploring the potential for cross-border business. The guide provides information relating to the tax, legal and financial obligations and implications on businesses operating on an all-island basis.
‘A Simple Guide to Cross-Border Business’ provides information for companies exploring opportunities across the border by offering them an accessible, easy to use publication with signposting to additional detailed resources. The Guide was compiled in association with FPM Chartered Accountants, Morgan McManus Solicitors and Northern Bank’s Treasury Service.

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    InterTradeIreland Simple Guide to Cross Border Business October 2009 InterTradeIreland Simple Guide to Cross Border Business October 2009 Document Transcript

    • A Simple Guide to Cross Border Business October 2009
    • Foreword Anything you Removing barriers to cross-border trade and business development plays a key To address this issue, InterTradeIreland has developed the First Stop Shop need to know part in stimulating demand for goods service to provide practical information and services, increasing the size of and advice to businesses wishing to the local market-place and improving trade on a cross-border basis. The competitiveness North and South. service also provides market intelligence such as cross-border market information, about trading 2008 was a challenging year for those trade statistics and sectoral reports to engaged in cross-border trade. Falling SMEs that need a quick grasp of their demand was experienced on both sides new target market. of the border, particularly in sectors associated with the construction industry. A Simple Guide to Cross Business is cross-border? The total value of cross-border trade a key part of the First Stop Shop. It declined from €3.1bn to €2.8bn. The food has become the first point of reference and drink products industry remained the for any company seeking to enter the key sector. cross-border market, offering up-to- date and user-friendly, comprehensive However, the potential of cross-border information on questions connected with trade remains high as research findings doing business in the other jurisdiction. InterTradeIreland’s First Stop Shop can provide from a recent InterTradeIreland Gravity The subjects covered, include legal relevant up to date information in these areas: Model research project shows.1 For total considerations, taxation and banking • Legal & Tax Advice manufacturing trade over the period 1998 issues among others. • Sales & Marketing to 2007, the gap between expected and If there are questions which the Simple actual North to South trade was 82% • Currency & Finance Guide does not answer, InterTradeIreland (ie, less than 20% of its potential) while has a Trade Accelerator Voucher to assist • Procurement for South to North trade the same gap companies. Under this a business can get • Cross-border Trade Statistics & Sectoral Reports was 77%. This potential for more trade is up to €2,000/£1,800 worth of business consistent across almost all sectors. advice to deal with cross-border issues. E: firststopshop@intertradeireland.com This gap between actual and potential The First Stop Shop and the Simple cross-border trade is confirmed by results Guide to Cross Business are central T: 028 3083 4100 (048 from Ireland), from InterTradeIreland’s Business Monitor. to companies exploiting new business Around 40% of businesses throughout opportunities on their doorstep. and ask for First Stop Shop. the island take part in cross-border trade InterTradeIreland will continue to offer leaving plenty of untapped business assistance to companies to avail of opportunities for cross-border trade. these opportunities and create stronger economic links between North and South InterTradeIreland’s report, Regulatory through collaborative partnerships in Barriers to Cross-Border Trade and science technology and innovation, trade Business, has found that there is a lack of and capability improvement. awareness among businesses of the many subtle differences between regulations If you would like any further information in Ireland and Northern Ireland. This lack on the First Stop Shop or other of awareness and knowledge can create InterTradeIreland initiatives please a perception that cross-border trade is a contact us on: 028/048 3083 4100 or costly or complex activity. info@intertradeireland.com 3 www.intertradeireland.com/firststopshop 1 InterTradeIreland, A gravity model approach to estimating expected volume of North/South Trade (May 2009).
    • Contents Section Question Page 01 I am based in Ireland and want to sell products into Northern Ireland 07 02 I am based in Ireland and want to sell services into Northern Ireland 15 03 I am based in Ireland and want to buy products from Northern Ireland 23 04 I am based in Ireland and want to buy services from Northern Ireland 29 05 I am based in Ireland and want to establish a presence in Northern Ireland 35 06 I am based in Northern Ireland and want to sell products into Ireland 41 07 I am based in Northern Ireland and want to sell services into Ireland 49 08 I am based in Northern Ireland and want to buy products from Ireland 59 09 I am based in Northern Ireland and want to buy services from Ireland 65 10 I am based in Northern Ireland and want to establish a presence in Ireland 71 11 We are looking at cross-border distributorships or agencies 77 12 We are exploring a cross-border joint venture 83 13 The Debt Collection Legal Process - Republic of Ireland and Northern Ireland 87 Appendix Useful Topics 99
    • Section 01 I am based in Ireland and want to sell products into Northern Ireland
    • 1.1 Must I have an office in NI? Regulations visit the following I am based in Ireland and want to sell products into Northern Ireland It is not necessary to have an office websites – in Northern Ireland to facilitate sales www.consumerline.org and the of goods if the goods are to be sold website of the UK Department of directly to the purchaser. However, Trade and Industry (Consumer and if you wish to target a broader Competition Policy) – spectrum of clients you may wish www.dti.gov.uk/ccp. See also the to consider establishing a presence NI Department of Enterprise Trade there. If so, go to Section 5. and Investment website (Consumer Affairs Section) – 1.2 Must I form a company in NI? www.detini.gov.uk A Company is not necessary but if you anticipate profits in the UK 1.6 At what point does the risk or your venture has an element of pass from me (the seller) to the risk to it, you may wish to consider purchaser? ring fencing this within a Company Risk, in terms of loss, is the structure. The rates of tax in the responsibility that a carrier, UK must also be considered in borrower, user/purchaser of determining the route you want to property or goods assumes if there take. As trade increases, it may is damage or loss. “Passing of be advisable for tax reasons to Risk” means the point at which the establish a separate company. buyer will be responsible for the goods. For example, if goods are 1.3 Do I need a licence to sell delivered by lorry, who bears the products in NI? loss if the goods are stolen in transit Not generally, but this depends before they reach the purchaser? on the type of product to be sold. For example, a licence would be This issue arises just as much required for sale of pharmaceuticals. within your own jurisdiction as in a Specific advice should be taken on cross-border context and is covered each occasion. by the Sale of Goods legislation, which is broadly similar in both 1.4 Must I declare my goods at jurisdictions. Customs? Do I need to complete Normally, where the seller arranges export documentation? delivery to the purchaser, risk will There is free movement of goods only pass to the purchaser on within the EU and the only goods receipt of delivery. In a cross- which need to be declared at border sale, this may therefore Customs are excisable goods i.e. mean that risk would only pass to tobacco, spirits, wines and beer. the buyer when he receives the goods in NI. 1.5 Must my product meet certain regulations? In a cross-border context, it may You must ensure compliance be wise to consider appointing with required Consumer/Health & a Distributor in the cross-border Safety Standards. Specific advice market to ensure risk passes to should be taken on each occasion the Distributor. As soon as that but assistance may be obtained Distributor collects goods from your from websites. For Consumer premises in ROI, the risk passes to 9
    • him. For further definitions, 1.10 What if I am employing someone a new business venture in will depend on the VAT status of I am based in Ireland and want to sell products into Northern Ireland see Distributor and Sales Agent in NI to work for me? Northern Ireland, to obtain written your customer. If your customer (Section 11). To determine which legislation confirmation from your Insurance is VAT registered and the goods applies (i.e. UK or ROI) it is Company in the Republic of Ireland are being exported to NI for 1.7 What liability do I have for important to establish where the that it will cover your vehicles/ business purposes, effectively defective products in NI? employee will be carrying out their drivers for business purposes in no VAT need be charged by the If goods are being sold through a duties. In certain circumstances, Northern Ireland. supplier. However, the customer Distributor in Northern Ireland, the if your Company is based in ROI must account for the VAT under the Distributor will generally be required and employs a NI resident to carry 1.13 Are the traffic/vehicle regulations reverse charge mechanism (note to take on liability for defective out duties in NI, a special scheme the same in NI? that special wording in this regard products. This would be subject known as a “direct payment While traffic/vehicle regulations must be included on your invoice). to the Distributor being entitled scheme” must be operated in the are broadly similar, specific advice In this case you will need to verify to indemnity from the seller for UK and the employee is required should be taken in each instance. your customers VAT status and those defective products. In such to register and account for PAYE/ For further information on driver keep evidence that the goods have circumstances, the Distributor National Insurance Contributions in and vehicle licensing in Northern been exported. If the customer is would deal directly with the buyer the UK. Ireland go to the NI Department of not registered for UK VAT, then Irish and would in turn be entitled to be Environment website – www.dvlni. VAT must be charged. compensated by the seller for any Bear in mind that if you employ gov.uk. In certain instances, should loss arising to the Distributor as someone in NI to work for you, that you wish to avoid the expense of You should also be aware of the a result of the sellers negligence/ employee can avail of rights under compliance with the traffic/vehicle rules regarding distance selling e.g. breach of contract. If, however, NI Employment legislation. Specific regulations of a second jurisdiction, selling goods directly to non VAT goods are sold by you personally legal advice should be taken with it may be wise to consider retaining registered persons by mail order, or through a Sales Agent, then you regard to the employment contract. a courier or transport agent to catalogues, via the internet etc. will be liable for defective products While ROI and NI employment deliver your goods within Northern Each EU member state has its own under Northern Ireland legislation. legislation are broadly similar, Ireland. distance selling thresholds and if there are specific areas where you exceed these thresholds you 1.8 Do I need to have product liability the legislation differs between the 1.14 Do I need a written contract? are required to register for VAT in insurance? two jurisdictions e.g. redundancy It is very wise in all instances to that member state and charge VAT Yes. You should also ensure payments. have a written contract. In cross accordingly. that the current product liability border sales, it is particularly insurance policy issued to you 1.11 Is my Employers Liability important to define such matters as The distance selling threshold for in the Republic of Ireland is not Insurance valid in NI? when risk passes, the liabilities of selling into ROI is €37,500 from 1 restricted to sales within the Your Employer’s Liability Insurance Distributors or Sales Agents etc. It May 2009 (increased from €35,000). Republic of Ireland. If it is so is most likely NOT valid in NI. is also important to define whether restricted, you will need to negotiate Specific advice should be taken by the Courts in Northern Ireland or The distance selling threshold for with your insurance company to you from your Insurance Company. the Republic of Ireland will have selling into UK is £70,000. ensure that the product liability If employing someone in Northern jurisdiction to resolve legal disputes. insurance extends to sales into the Ireland, it is essential that the If your exports from the RoI exceed United Kingdom. employee is covered by insurance 1.15 What are typical payment/credit €635,000 per annum you will be which applies to Northern Ireland terms? required to complete ROI Intrastat 1.9 In the event that the product is Health & Safety Law. Typical credit terms are 30 days. Returns. defective at delivery, what do I However, this can vary considerably need to know about after-sales 1.12 Are my vehicles/drivers insured in practice and depending on the 1.17 Should I invoice in sterling service in NI? in NI? sector in which you operate. or Euro? Unless you are selling through Normally, vehicles used for business The first point to note is that, from a a Distributor, you or your Sales purposes should be specifically 1.16 Do I charge Irish VAT? Must I technical point of view, VAT invoices Agent will be liable for after-sales insured for such uses. It would register for UK VAT? can be expressed in a foreign service for that defective product in be wise, prior to undertaking If you are selling goods directly currency but the corresponding Northern Ireland. from ROI the charging of VAT figures should be shown in Euro. 10 11
    • The invoice must also contain the 1.18 Is it worthwhile opening a sterling 1.20 Can I protect myself again 1.22 Where do I pay my tax? I am based in Ireland and want to sell products into Northern Ireland actual VAT amount in Euro. account? exchange rate fluctuation? If you are self-employed in the ROI Where you are making and receiving Exchange rate risk is an important you will be required each year to A copy of the invoice must be sterling payments, it is often consideration and should always be submit a tax return by 31st October kept to show the figures that were advantageous to maintain a sterling actively managed. This is best done following the end of the tax year. adopted. bank account. This provides the by netting payments and receipts. At this date, you are also required ability to net currency payments However amounts and timings to pay to the Collector General in For conversion purposes you against currency receipts, thus rarely match exactly, so forward Limerick the balance of tax you owe should use the Central Bank rates minimising the number of foreign foreign exchange contracts can be for the tax return you are submitting which are published in the daily exchange deals that you do. Every used. and also make payment towards newspapers at the time of supply. foreign exchange deal is subject to the current tax year – known as a ‘spread’ (the difference between A forward foreign exchange contract preliminary tax. It is possible to agree an alternative the bank’s buying and selling is a binding contract between two rate with the Revenue i.e. a prices), so the fewer deals you do parties to buy or sell a specified If you operate through the medium calendar month exchange system. the less ‘spread’ you pay. amount of foreign currency at of a limited Company in ROI the Please note the agreed method an agreed rate on or between a payment date for corporation tax must then be used for all of your Where there is considerable bias specified future date or dates. has become more streamlined and foreign currency transactions. towards payments or receipts, all small companies (where the hence minimal netting, a sterling These contracts are offered by all company’s corporation tax liability Your NI client may prefer to account will provide an excellent the major banks and allow you to for the prior year was < €200,000) agree a price in sterling and pay audit trail and the ability to convert guarantee a future value for your will be required to have paid either you in sterling, so that they are currency in larger amounts which sterling receipts, thus completely 90% of their expected corporation not exposed to exchange rate are liable to attract a better rate of eliminating foreign exchange risk. tax liability for the current period or fluctuations. If you want to facilitate exchange. they can pay 100% of the prior year your client, you might agree a It is prudent to compare the spot liability by the 21st of the month sterling equivalent with your client, 1.19 How do I open a sterling account? price (i.e. the exchange rate now) prior to the end of their accounting either on the invoice or as part of The most convenient way to and the forward market price (i.e. date to the Collector General. a separate contract or agreement. open a sterling account will be the price that the bank will commit The disadvantage of this is that via your existing bankers as to offering you at a point in the From the 14 October 2008 if the you then assume the exposure to this will minimise the amount future) before agreeing any deal. company is a large company exchange rate fluctuation. of documentation that you will (where the company’s corporation be required to produce to meet 1.21 How can I ensure I get paid? tax liability for the prior year was Some firms will state on their legislative requirements. Your It is preferable to insist on “cash > €200,000) then the payment invoices that, should client existing relationship manager will be on delivery”. If you cannot get is due in instalments. The First companies wish to settle the invoice familiar with your needs and may payment on delivery and the Instalment should be 50% of in sterling, they should contact their also be holding security or deeds to purchasers subsequently defaults Corporation Tax liability in the accounts department on the day of facilitate overdraft or loan facilities on payment then it would be preceding accounting period or settlement to agree a suitable rate which may be extendible to your advisable to retain the services 45% of Corporation Tax liability of exchange on that day. new account. of a Solicitor/Debt Collection in the current accounting period Agency within Northern Ireland to due by 21st date of the sixth Do not forget to consider your own That said, there is nothing to stop collect payment. While there are month prior to year end. The circumstances and whether or not it you using another bank specifically circumstances where it would be Second Instalment is due payable would suit you to receive sterling at for your foreign currency business possible to secure judgment in on the 21st date of the eleventh a certain point in time. and some account holders prefer to the Republic of Ireland (where the month of the accounting period. shop around and form a secondary contract may have been made), it An amount payable will bring the banking relationship. is advisable to secure judgment in total preliminary tax paid to 90% Northern Ireland as it will in turn be Corporation Tax liability for current Sterling accounts can be domiciled easier to enforce an NI Judgment accounting period. in ROI without the need to approach against an NI Debtor. a bank in NI. 12 13
    • The balancing payment of Tax in this instance is paid on 31 Section 02 Corporation Tax for all companies January and 31 July of each year is due to be paid to the Collector General by the 21st of the eight month after the year end. with January being the time for paying the balance of tax for the previous tax year and also the I am based in Ireland If you also intend forming a company in NI, tax will have to be 1st payment on account for the current tax year. The July payment is the 2nd payment on account for and want to sell services paid to the Collector of Taxes in Shipley, Bradford. UK corporation tax is generally payable 9 months that same tax year. Payments on account are calculated at 50% of the previous year’s tax liability. into Northern Ireland and 1 day after the Company’s year end, though special rules apply to Again credit will be available in large companies where payments on Ireland for any UK tax paid. account must be made. Payments on account for a large company are made quarterly with the first payment due 6 months 14 days after the start of the accounting period. This payment should equal 25% of the estimated profits at that date. The second quarterly payment should be for 50% of the estimated profits and the third payment for 75% of the estimated profits with a final payment due 3 months 14 days after the end of the accounting period. If you open a branch in NI, UK corporation tax will be payable in respect of branch profits. Credit will be given against the Irish tax in respect of UK tax suffered but it is restricted to the lower of the two taxes. If you open an establishment in NI but not through the medium of a Company you will come within the self assessment arrangements and will be required to submit a UK tax return by 31 October (for manual returns) or 31 January (for online returns) following the end of the tax year (5 April) and pay any tax becoming due to the Collector of Taxes. 14
    • 2.1 Must I have an office in NI? service, and you will be liable for I am based in Ireland and want to sell services into Northern Ireland It is not necessary to have an office sub-standard work provided in NI. in Northern Ireland to facilitate a Note that NI law will apply. supply of services. However, if you wish to target a broader spectrum 2.6 Do I need professional/trade/ of clients you may wish to consider indemnity insurance? establishing a presence there. If so, Professional/Trade Indemnity go to Section 5. Insurance is an insurance policy which provides indemnity to you 2.2 Must I form a company in NI? the Service Provider by your A Company is not necessary but Insurance Company for Breach of if you anticipate profits in the UK Contract. That is, in the event that or your venture has an element of you, the service provider, provide risk to it, you may wish to consider a substandard service by which ring fencing this within a Company the Service Receiver sustains structure. The rates of tax in the loss, then the insurance company UK must also be considered in guarantees to pay any loss which determining the route you want to the service receiver has suffered. take. As trade increases, it may This is a service insurance which be advisable for tax reasons to should specifically be taken out in establish a separate company. Northern Ireland and you will be required to take out this insurance 2.3 Do I need a licence to sell my over and above the professional services in NI? indemnity insurance which you may This will depend on the type of have in the Republic of Ireland for service to be sold. For example, services provided in the Republic of if selling financial services it would Ireland. Again, you should check be necessary for you to consult the with your Insurance Broker as to Financial Services Authority (FSA). the adequacy of your insurance for Specific advice should be taken on provision of services in Northern each occasion. Ireland. 2.4 Must my services adhere to 2.7 What if I am employing someone certain regulations? in NI to work for me? This will depend on the type of To determine which legislation service being sold. For further applies (i.e. UK or ROI) it is information on regulations which important to establish where the may apply go to – employee will be carrying out their www.businesslink.gov.uk. duties. In certain circumstances, Specific advice should be taken on if your Company is based in ROI each occasion. and employs a NI resident to carry out duties in NI, a special 2.5 What liability do I have for scheme known as a ‘direct payment substandard work in NI? scheme’ must be operated in the Just as you would be liable for UK and the employee is required substandard work provided in ROI, to register and account for PAYE/ if undertaking services in Northern National Insurance Contributions in Ireland, you are bound by contract the UK. to ensure the provision of a proper 17
    • Bear in mind that if you employ instances, should you wish to Services such as consultancy/ Please note the agreed method I am based in Ireland and want to sell services into Northern Ireland someone in NI to work for you, that avoid the expense of compliance data input etc. are fourth schedule must then be used for all of your employee can avail of rights under NI with the traffic/vehicle regulations services and can be zero rated if foreign currency transactions. Employment legislation. Specific legal of a second jurisdiction, it may be your customer is VAT registered advice should be taken with regard wise to consider retaining a courier in the UK. In this instance the Your NI client may prefer to to the employment contract. While or transport agent to deliver your customer will account for the UK agree a price in sterling and pay ROI and NI employment legislation goods within Northern Ireland. VAT. you in sterling, so that they are are broadly similar, there are specific not exposed to exchange rate areas where the legislation differs 2.11 Do I need a written contract? Services relating to land take place fluctuations. If you want to facilitate between the two jurisdictions e.g. It is very wise in all instances to where the specific land is situated your client, you might agree a redundancy payments. have a written contract. In cross- however there is an extension to the sterling equivalent with your client, border services, it is particularly reverse charge rule if the supplier either on the invoice or as part of 2.8 Is my Employers Liability important to define whether the is based outside the UK and the a separate contract or agreement. Insurance valid in NI? Courts in Northern Ireland or customer receives the service for The disadvantage of this is that It is more than likely that your the Republic of Ireland will have business purposes in the UK. you then assume the exposure to Employers Liability Insurance issued jurisdiction to resolve legal disputes. exchange rate fluctuation. in the Republic of Ireland will NOT However please note that this is a be valid in respect of services 2.12 What are typical payment/credit highly complex area and you should Some firms will state on their provided by them for you in NI. It terms? seek professional advice specific to invoices that, should client is also important to note that in NI Typical credit terms are 30 days. your own circumstances. companies wish to settle the invoice (except for “one man” companies) However, this can vary considerably in sterling, they should contact their Employers Liability Insurance is in practice and depending on the Information can also be found accounts department on the day of compulsory. Consult with your sector in which you operate. on the Revenue Commissioners settlement to agree a suitable rate insurance provider. website at www.revenue.ie and of exchange on that day. 2.13 Do I charge Irish VAT? Must I at the HM Revenue & Customs 2.9 Are my vehicles/drivers insured register for UK VAT? Are there website at www.hmrc.gov.uk. Do not forget to consider your own in NI? special rules for services? circumstances and whether or not it Normally, vehicles used for business There are special rules that apply 2.14 Should I invoice in sterling or would suit you to receive sterling at purposes should be specifically to VAT in respect of services and euro? a certain point in time. insured for such uses. It would the charge to VAT will depend on The first point to note is that, from a be wise, prior to undertaking the type of service supplied and technical point of view, VAT invoices 2.15 Is it worthwhile opening a sterling a new business venture in also the deemed place of supply. can be expressed in a foreign account? Northern Ireland, to obtain written In some instances, the VAT charge currency but the corresponding Where you are making and receiving confirmation from your Insurance arises where the customer is based figures should be shown in Euro. sterling payments, it is often Company in the Republic of Ireland and the customer must account for The invoice must also contain the advantageous to maintain a sterling that it will cover your vehicles/ the VAT under the Reverse Charge actual VAT amount in Euro. bank account. This provides the drivers for business purposes in Mechanism. For other services, ability to net currency payments Northern Ireland. however, the place of supply is A copy of the invoice must be against currency receipts, thus where the supplier is based. kept to show the figures that were minimising the number of foreign 2.10 Are the traffic/vehicle regulations adopted. exchange deals that you do. Every the same in NI? There is a commonly held belief foreign exchange deal is subject to While traffic/vehicle regulations that just because a customer is For conversion purposes you a ‘spread’ (the difference between are broadly similar, specific advice registered for VAT, the service should use the Central Bank rates the bank’s buying and selling should be taken in each instance. supplied should be zero-rated. This which are published in the daily prices), so the fewer deals you do For further information on driver is NOT always the case, and you newspapers at the time of supply. the less ‘spread’ you pay. and vehicle licensing in Northern should seek professional advice Ireland go to the NI Department of regarding the rate of VAT to be It is possible to agree an alternative Where there is considerable bias Environment website – charged in respect of the services rate with the Revenue i.e. a towards payments or receipts, www.dvlni.gov.uk. In certain you supply. calendar month exchange system. 18 19
    • hence minimal netting, a sterling These contracts are offered by all payment date for corporation tax If you open a branch in NI, UK I am based in ROI and want to sell products into NI account will provide an excellent the major banks and allow you to has become more streamlined and corporation tax will be payable in audit trail and the ability to convert guarantee a future value for your all small companies (where the respect of branch profits. Credit currency in larger amounts which sterling receipts, thus completely company’s corporation tax liability will be given against the Irish tax in are liable to attract a better rate of eliminating foreign exchange risk. for the prior year was < €200,000) respect of UK tax suffered but it is exchange. will be required to have paid either restricted to the lower of the two It is prudent to compare the spot 90% of their expected corporation taxes. 2.16 How do I open a sterling account? price (i.e. the exchange rate now) tax liability for the current period or The most convenient way to open and the forward market price (i.e. they can pay 100% of the prior year If you open an establishment in NI a sterling account will be via your the price that the bank will commit liability by the 21st of the month prior but not through the medium of a existing bankers as this will minimise to offering you at a point in the to the end of their accounting date to Company you will come within the the amount of documentation that future) before agreeing any deal. the Collector General. self assessment arrangements and you will be required to produce to will be required to submit a UK tax meet legislative requirements. Your 2.18 How can I ensure I get paid? From the 14 October 2008 if the return by 31 October (for manual existing relationship manager will be It is preferable to insist on “cash company is a large company returns) or 31 January (for online familiar with your needs and may on delivery”. If you cannot get (where the company’s corporation returns) following the end of the also be holding security or deeds to payment on provision of the tax liability for the prior year was tax year (5 April) and pay any tax facilitate overdraft or loan facilities service and the service receiver > €200,000) then the payment is due becoming due to the Collector of which may be extendible to your subsequently defaults on payment, in instalments. The First Instalment Taxes. new account. then it would be advisable to should be 50% of Corporation Tax retain the services of a Solicitor/ liability in the preceding accounting Tax in this instance is paid on 31 That said, there is nothing to stop Debt Collection Agency within period or 45% of Corporation Tax January and 31 July of each year with you using another bank specifically Northern Ireland to collect payment liability in the current accounting January being the time for paying for your foreign currency business should your client default payment period due by 21st date of the sixth the balance of tax for the previous and some account holders prefer to in due course. While there are month months prior to year end. The year and also the 1st payment on shop around and form a secondary circumstances where it would be Second Instalment is due payable account for the current tax year. The banking relationship. possible to secure judgment in on the 21st date of the eleventh July payment is the 2nd payment on the Republic of Ireland (where the month of the accounting period account for that tax year. Payments Sterling accounts can be domiciled contract may have been made), it an amount payable will bring the on account are calculated at 50% of in ROI without the need to approach is advisable to secure judgment in total preliminary tax paid to 90% the previous year’s tax liability. a bank in NI. Northern Ireland as it will in turn be Corporation Tax liability for current easier to enforce an NI Judgment accounting period. Credit will be given in Ireland for any 2.17 Can I protect myself against against an NI Debtor. UK tax paid. exchange rate fluctuation? The balancing payment of Exchange rate risk is an important 2.19 Where do I pay my tax? Corporation Tax for all companies 2.20 Is there Professional Services consideration and should always be If you are self-employed in the ROI is due to be paid to the Collector Withholding Tax in NI? actively managed. This is best done you will be required each year to General by the 21st of the eighth Irish Income Tax, at the standard rate, by netting payments and receipts. submit a tax return by 31st October month after the year end. is deducted from payments made for However amounts and timings rarely following the end of the tax year. Professional Services by Government match exactly, so forward foreign At this date, you are also required If you are deemed to be providing Departments, state Bodies, Local exchange contracts can be used. to pay to the Collector General in a professional service in a close Authorities etc. This is known as Limerick the balance of tax you owe company then you may be liable to Professional Services Withholding Tax A forward foreign exchange contract for the tax return you are submitting an additional surcharge on certain (“PSWT”). is a binding contract between two and also make payment towards undistributed income, it is important parties to buy or sell a specified the current tax year – known as to seek advice to determine if Services considered as Professional amount of foreign currency at preliminary tax. you fall within the definitions of Services are medical, dental, an agreed rate on or between a a professional service before veterinary, architectural, engineering, specified future date or dates. If you operate through the medium commencing trade. accountancy, consultancy, legal etc. of a limited Company in ROI the 20 21
    • Non-resident businesses supplying Section 03 “Professional Services” to Government Departments etc will be liable to PSWT. If no other Irish taxes (ie Income Tax or Corporation I am based in Ireland Tax) are due then a refund of PSWT can be obtained on application to the Revenue Commissioners. and want to buy products There is no professional services withholding tax in the UK. The from Northern Ireland only type of withholding tax that applies in NI is in relation to the construction industry. The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be made. These payments may be made gross in some circumstances or tax at 20% or 30% may be deducted from payments net of VAT. As the amount of tax if any to be applied to payments is dependant on the subcontractors own status with HMRC the principal contractor has an obligation to verify the subcontractors details before making any payments. This is a very complex area and specific professional advice should be sought. 22
    • 3.1 Are there any Customs issues to to make payment when no foreign I am based in Ireland and want to buy products from Northern Ireland be aware of? currency account exists, i.e. for one There is free movement of goods off transactions. A fee is usually within the EU and the only goods payable for the purchase of a draft. which need to be declared at Customs are excisable goods e.g. The most secure payment method tobacco, spirits, wines and beer. is an electronic bank–to-bank transfer. Whilst normally more Also please note that excisable expensive than the previous goods are imported by appointing a methods it provides cleared funds REDS Agent. to the recipient at a known value date and ensures safe receipt. This Should your imports from NI exceed is especially useful where goods €191,000 per annum you will need are dispatched upon receipt of to submit RoI Intrastat returns. payment. 3.2 What are typical payment/credit 3.4 What currency should I pay my terms? supplier in? Typical credit terms are 30 days. There is no definitive answer to this However, this can vary considerably as individual circumstances differ. in practice and depending on the However, you should endeavour to sector in which you operate. pay in the currency most suitable to your needs and reach agreement 3.3 How do I pay my supplier? with your supplier accordingly. The simplest and most cost effective way of effecting payment If you wish to resell your purchases to suppliers is usually to write a in euro, then buying in euro foreign currency cheque. This is would probably be most suitable where having a foreign currency as this would eliminate your account really comes into its own foreign exchange risk all together. as it avoids having to arrange Effectively, the risk is passed back electronic transfers or the purchase to the NI supplier. of a draft from your bank. The foreign currency account can be If you have a surplus of sterling you either funded by currency receipts might wish to pay the NI supplier in or periodic currency purchases from sterling. your bank. Currency purchases can usually be made by telephone or In all cases, it is important to get internet dealing. the best value for money, so whilst it may be convenient to pay an NI Whilst the simplest method of supplier in euro, it is vital that this paying is by cheque writing, there convenience is not out-weighed by are other methods available for one a price disadvantage. It could be off transactions or where additional more cost efficient to manage the payment security is required. Banks foreign exchange risk yourself if will sell foreign currency drafts to the supplier has loaded his price to their client’s, however these offer cover his risk, as is often the case. little advantage from the purchasers perspective other than an ability 25
    • 3.5 Is it worthwhile opening a sterling 3.7 Who is responsible for VAT? 3.9 What if the goods turn out to be I am based in Ireland and want to buy products from Northern Ireland account? If you are VAT registered in ROI and defective and the vendor will not Where you are making and receiving you are purchasing goods from a repair/replace? sterling payments, it is often UK VAT-registered person and the If the goods are defective, because advantageous to maintain a sterling goods are to be exported to you in the sale will have occurred within bank account. This provides the ROI for the purposes of your trade, NI, in the normal course the buyer ability to net currency payments the UK entity will take a note of your will sue the seller in the Northern against currency receipts, thus VAT number and business address, Ireland Courts i.e. where the minimising the number of foreign which they must then verify with HM contract occurred. Even if the exchange deals that you do. Every Revenue & Customs (HMRC). Once contract occurred in ROI (e.g. where foreign exchange deal is subject to HMRC confirm the VAT details, the the seller from NI sold the products a ‘spread’ (the difference between UK entity may zero rate the supply in ROI through a Sales Agent in the bank’s buying and selling of goods to you. ROI) it may still be more appropriate prices), so the fewer deals you do to sue the seller in NI as it would the less ‘spread’ you pay. You will then account for the VAT on be easier to enforce an NI judgment the goods under the reverse charge against an NI seller. There are, Where there is considerable bias mechanism i.e. you will charge however, circumstances where towards payments or receipts, yourself Irish VAT on the goods you it may only be possible to issue hence minimal netting, a sterling receive and provided the goods proceedings in ROI where witnesses account will provide an excellent are for the purpose of your taxable in ROI are not compellable to audit trail and the ability to convert trade, you will also be able to claim attend Courts in NI to prove the currency in larger amounts which a deduction for this VAT. circumstances of the contract. are liable to attract a better rate of exchange. 3.8 When do I assume the risk for the goods? 3.6 How do I open a sterling account? Normally, where the seller arranges The most convenient way to delivery to the purchaser, risk will open a sterling account will be only pass to the purchaser on via your existing bankers as receipt of delivery. In a cross- this will minimise the amount border sale, this may therefore of documentation that you will mean that risk would only pass to be required to produce to meet the buyer when he receives the legislative requirements. Your goods in ROI. It would be to the existing relationship manager will be buyers benefit if risk only passed to familiar with your needs and may him on receipt of the goods in ROI. also be holding security or deeds to For example, if risk passed to the facilitate overdraft or loan facilities buyer on collection of the goods in which may be extendible to your NI and the goods were damaged in new account. transit in NI, then the buyer would be obliged to ensure that he was That said, there is nothing to stop properly insured for transit of those you using another bank specifically goods. Often, the contract will for your foreign currency business define at which point risk passes. and some account holders prefer to A seller (who generally draws up shop around and form a secondary the contract) will however want banking relationship. to ensure that risk passes at the earliest point. Therefore, a buyer Sterling accounts can be domiciled should ensure to read the Contract in ROI without the need to approach of Sale carefully. 26 a bank in NI. 27
    • Section 04 I am based in Ireland and want to buy services from Northern Ireland
    • 4.1 What are typical payment/credit 4.3 What currency should I pay my I am based in Ireland and want to buy services from Northern Ireland terms? supplier in? Typical credit terms are 30 days. There is no definitive answer to this However, this can vary considerably as individual circumstances differ. in practice and depending on the However, you should endeavour to sector in which you operate. pay in the currency most suitable to your needs and negotiate with the 4.2 How do I pay my supplier? supplier accordingly. The simplest and most cost effective way of effecting payment If you have a surplus of sterling to suppliers is usually to write a you might wish to pay the Northern foreign currency cheque. This is Ireland supplier in sterling. where having a foreign currency account really comes into its own In all cases, it is important to get as it avoids having to arrange the best value for money, so whilst electronic transfers or the purchase it may be convenient to pay a of a draft from your bank. The Northern Ireland supplier in euro, foreign currency account can be it is vital that this convenience either funded by currency receipts is not out-weighed by a price or periodic currency purchases from disadvantage. It could be more your bank. Currency purchases can cost efficient to manage the usually be made by telephone or foreign exchange risk yourself if internet dealing. the supplier has loaded his price to cover his risk, as is often the case. Whilst the simplest method of paying is by cheque writing, there 4.4 Is it worthwhile opening a sterling are other methods available for one account? off transactions or where additional Where you are making and receiving payment security is required. Banks sterling payments, it is often will sell foreign currency drafts to advantageous to maintain a sterling their client’s, however these offer bank account. This provides the little advantage from the purchasers ability to net currency payments perspective other than an ability against currency receipts, thus to make payment when no foreign minimising the number of foreign currency account exists, i.e. for one exchange deals that you do. Every off transactions. A fee is usually foreign exchange deal is subject to payable for the purchase of a draft. a ‘spread’ (the difference between the bank’s buying and selling The most secure payment method prices), so the fewer deals you do is an electronic bank to bank the less ‘spread’ you pay. transfer. Whilst normally more expensive than the previous Where there is considerable bias methods it provides cleared funds towards payments or receipts, to the recipient at a known value hence minimal netting, a sterling date and ensures safe receipt. This account will provide an excellent is especially useful where goods audit trail and the ability to convert are dispatched upon receipt of currency in larger amounts which payment. are liable to attract a better rate of exchange. 31
    • 4.5 How do I open a However please note that this is Ireland (as a requirement of I am based in Ireland and want to buy services from Northern Ireland sterling account? a highly complex area and you membership of the Northern Ireland The most convenient way to open should seek professional advice Law Society) is obliged to have a sterling account will be via regarding the VAT implications of Professional Indemnity Insurance your existing bankers as this the services you are acquiring. in Northern Ireland. If in doubt, you will minimise the amount of Further information can be found should request the service provider documentation that you will be on the Revenue’s website at to confirm that he has Professional required to produce to meet www.revenue.ie and click on Indemnity Insurance for his services legislative requirements. Your Leaflets & Guides, then VAT and in the jurisdiction in which he existing relationship manager will be then Guide to VAT 2008 – see provides those services. If the familiar with your needs and may Chapter 4. Northern Ireland service provider is also be holding security or deeds to providing those services in Ireland, facilitate overdraft or loan facilities 4.7 What if the service is then it is important to ascertain which may be extendible to your substandard? that the Northern Ireland service new account. If the service is provided by the provider has professional indemnity Northern Ireland service provider in to provide services in Ireland. That said, there is nothing to stop Northern Ireland, you would issue you using another bank specifically proceedings against the service for your foreign currency business provider in Northern Ireland e.g. and some account holders prefer to where an architect draws up plans shop around and form a secondary in his Northern Ireland office for banking relationship. your house in Ireland. If the service is provided by the Northern Ireland Sterling accounts can be domiciled service provider in Ireland, you in Ireland without the need to would issue proceedings against approach a bank in Northern the Northern Ireland service Ireland. provider in Ireland e.g. a Northern Ireland builder constructing your 4.6 Who is responsible for VAT? house in Ireland. The rules relating to VAT on services are different (and more complex) 4.8 Is it necessary for the service than those relating to goods. provider in Northern Ireland to have professional/trade The charge to VAT will depend on indemnity insurance? the type of service supplied. In While it is not compulsory in some instances, the VAT charge either jurisdiction that service arises where the customer is based providers have Professional/Trade and the customer must account for Indemnity Insurance, it is generally the VAT. However, for other services, a requirement of membership the place of supply is where the of professional organisations. supplier is based, and the supplier For example, just as a Solicitor must charge VAT on the supply. in Ireland (as a requirement of Examples of services which can be membership of the Law Society zero rated if the customer is VAT of Ireland) is required to have registered are consultancy/data Professional Indemnity Insurance input services. within Ireland, a Solicitor in Northern 32 33
    • Section 05 I am based in Ireland & want to establish a presence in Northern Ireland
    • 5.1 Are there any advantages to my encountered when establishing I am based in Ireland and want establish a presence in Northern Ireland establishing a presence in NI? his initial presence in ROI. For The issue of establishing a presence example, it will be necessary to in the other jurisdiction is generally take on the expense of a lease/ more relevant to service providers purchase of a premises, building rather than to sellers of goods. insurance, electricity, telephone Sellers of goods can manufacture supply, payment of commercial or procure their products within ROI rates and other related expenses. and establish a satisfactory means For assistance on “start-ups” within of delivery of those goods into NI. Northern Ireland, visit Enterprise NI The goods may be sold through at www.enterpriseni.com or Invest shops within NI and therefore NI at www.investni.com. the origin of the manufacture of those goods is not that important. As regards tax, if you choose to However, a service provider will be operate as a sole trader in the UK, providing a personal service and, your business is chargeable to as such, his presence and identity UK tax and you must also make a to the client are that bit more return of this income to the Revenue important. The main advantage Commissioners. However, double of establishing a presence in NI is taxation relief will be available. more direct access to that market. Where you don’t establish an Where you operate as a trading actual presence, you are relying company, there is an exposure to on the integrity of sales agents, a higher rate of tax as ROI trading distributors and couriers/transport companies are taxed at 12.5% agents. It is difficult sometimes to whereas UK trading companies are convince buyers/clients that you are generally taxed at 21% for small in a position to provide an effective companies and at 28% for large service within that jurisdiction where companies. you do not actually have a presence in that jurisdiction. 5.3 Should I open a branch or a subsidiary? There may be wider opportunities For clarification purposes, a for grant aid depending on branch is merely an extension of your business sector. There are a company, whereas a subsidiary also some attractive tax saving is a legal entity in its own right. In methods available in the UK, such the UK, the term branch has been as generous capital allowances. superseded by the term “permanent Professional tax advisers in establishment”. Northern Ireland should be able to advise on these issues. A Limited Liability Company incorporated in the Republic of 5.2 Are there any disadvantages to Ireland may wish to establish a my establishing a presence in NI? branch in Northern Ireland. This An ROI business person deciding is facilitated under European Law to establish a presence in NI which requires that certain filings will go through almost the very must be made by the Republic same business start-up expenses of Ireland Company with the which he would have originally Companies Office in Northern 37
    • Ireland. It is important to bear in the conduct of the business then Whether you choose to operate via I am based in Ireland and want establish a presence in Northern Ireland mind that a “branch” in legal terms it is NewCo that will be involved in a subsidiary company, a branch only applies to Corporations e.g. the legal proceedings not Company or as a sole trader, remember limited liability companies. So, for A. Therefore, in terms of limiting to register with HM Revenue & instance, a partnership or a sole the risk for the parent company Customs on time to avoid late trader would not, in the legal sense, in establishing a new business in registration penalties. establish a “branch” across the a foreign jurisdiction, there may Border. Therefore it is only in the well be practical reasons to use If you choose to establish a context of Corporations that exists a subsidiary as opposed to a presence in the UK, registration for a requirement for filing information branch. If a Company merely has VAT must be considered but you and details with the Companies a branch the Company itself is are entitled to the same registration Office in Northern Ireland. From exposed to all legal liability for the thresholds in the UK as an ordinary a legal viewpoint a branch is not actions of the foreign branch and UK business. If you exceed this a separate legal entity from the losses accumulated by that branch. threshold, you must register for VAT Company that established that By having a separate Company within 30 days. branch. To take an example, we (subsidiary) such risks and losses could have a Republic of Ireland can be limited to that Subsidiary 5.5 Can we be taxed twice? incorporated Company with a and ordinarily the Parent Company If a UK subsidiary is formed its branch Office in Belfast. The legal should be protected. It should be profits will be liable to corporation entity doing business in Belfast is noted, however, that the decision tax in the UK. the Republic of Ireland Company. whether to establish a branch or It just happens to have an office in a subsidiary tends to be primarily If a permanent establishment (or Belfast. informed by the tax implications. branch) is formed, the profits of that For more on tax issues, go to establishment will be taxed in the On the other hand a subsidiary is Section 5.5. UK, but will also be liable to tax in a completely separate legal entity Ireland. However, double taxation from the parent company. Once 5.4 What formalities must we relief will be given in respect of the again, subsidiaries only apply to undertake? element of profits taxed twice. Corporations e.g. Limited Liability It will be necessary to decide Companies) as opposed to sole whether you propose to trade as traders or partnerships. To take an a Sole Trader/Partnership or as a example, Company A is established Limited Liability Company. and trades in the Republic of Ireland and decides to set up a If you are operating via a company, new business in Belfast. Rather regardless of whether the trading than merely establish a branch, is carried on via a subsidiary they decide to establish a separate or a permanent establishment, Northern Ireland Company to there is a requirement of the conduct the business on their Companies Registry (www.detini. behalf. In the normal course gov.uk/cgi-bin/get_builder_ the new Company, NewCo, is page?page=1966&site=7) to incorporated in Northern Ireland register the entity on the external but its shareholder is Company companies listing using form A. As such, Company A owns all BR1. A charge applies. Annual of NewCo. The important legal accounts must also be submitted distinction is that the business to Companies Registry in respect of being conducted in Northern Ireland subsidiaries. is conducted by NewCo and if a legal dispute arose in respect of 38 39
    • Section 06 I am based in Northern Ireland and want to sell products into Ireland
    • 6.1 Must I have an office in ROI? 6.5 Must my product meet certain I am based in Northern Ireland and want to sell products into Ireland It is not necessary to have an office regulations? in ROI to facilitate sales of goods You must ensure compliance if the goods are to be sold directly with required Consumer/Health & to the purchaser. However, if you Safety Standards. Specific advice wish to target a broader spectrum should be taken on each occasion of clients you may wish to consider but assistance may be obtained establishing a presence there. If so, from websites. For Consumer go to Section 10. Regulations visit the following websites – 6.2 Must I form a Company in ROI? A Company is not necessary but www.consumerassocation.ie if you anticipate profits in the ROI Consumer Association of Ireland or your venture has an element of www.fsai.ie risk to it you may wish to consider Food Safety Authority of Ireland ring-fencing this within a Company www.odca.ie structure. The rates of tax in the Office of the Director of Consumer ROI must also be considered in Affairs determining the route you want to www.entemp.ie take. As trade increases, it may Department of Enterprise Trade be advisable for tax reasons to & Employment (go to “Consumer establish a separate company. Protection Section) www.ifsra.ie 6.3 Do I need a licence to sell Irish Financial Services Regulatory products in ROI? Authority Not generally, but this depends on the type of product to be 6.6 At what point does the risk sold. For example, a licence pass from me (the seller) to the would be required for the sale of purchaser? pharmaceuticals. Specific advice Risk, in terms of loss, is the should be taken on each occasion. responsibility a carrier, borrower, user/purchaser of property or goods 6.4 Must I declare my goods at assumes if there is damage or loss. Customs? Passing of Risk means the point at Do I need to complete export which the buyer will be responsible documentation? for the goods. For example, if goods are delivered by lorry, who There is free movement of goods bears the loss if the goods are within the EU and the only goods stolen in transit before they reach which need to be declared at the purchaser? Customs are excisable goods i.e. tobacco, spirits, wines and beer. This issue arises just as much within your own jurisdiction as in a Should your exports from NI exceed cross-border context and is covered £270,000 per annum you will need by the Sale of Goods legislation, to submit UK Intrastat returns. which is broadly similar in both 43
    • jurisdictions. Normally, where the 6.8 Do I need to have product liability UK resident employees into ROI professional adviser if these rules are I am based in Northern Ireland and want to sell products into Ireland seller arranges delivery to the insurance? to work and they spend more likely to impact upon your business. purchaser, risk will only pass to the Yes. You should also ensure than 183 days per year working in purchaser on receipt of delivery. that the current product liability ROI, those employees must be on 6.10 Is my Employers Liability In a cross-border sale, this may insurance policy issued to you in an Irish payroll. Furthermore, the Insurance valid in ROI? therefore mean that risk would only Northern Ireland is not restricted Irish Revenue Commissioners will More than likely it is not. Specific pass to the buyer when he receives to sales within Northern Ireland. If automatically apply single person’s advice should be taken by you the goods in ROI. Often, the it is so restricted, you will need tax credits and allowances to such from your Insurance Company. If contract will define at which point to negotiate with your insurance earnings. employing someone in the Republic risk passes. A seller (who generally company to ensure that the product of Ireland it is essential that that draws up the contract) will however liability insurance extends to sales Where a NI employer has UK employee is covered by Insurance want to ensure that risk passes at into the Republic of Ireland. resident employees working in which applies to the Republic of the earliest point. RoI for more than 60 days the NI Ireland Health & Safety Law. 6.9a What if I am employing an ROI employer must register for Irish In a cross-border context, it may resident to work for me in ROI? payroll. There is no requirement to 6.11 Are my vehicles/drivers insured be wise to consider appointing a In general terms, if your Company operate Irish payroll where certain in ROI? Distributor based in the Republic of is based in NI and employs an ROI conditions are met (e.g. employee Normally, vehicles used for business Ireland to ensure that risk passes resident to carry out duties in ROI, taxed in UK, employees carry out purposes must be specifically to the Distributor. That is, the a PAYE scheme must be operated their duties in RoI for less than 183 insured for business use. It would risk passes to him once goods in ROI and you, as the employer, days, etc.). be wise, prior to undertaking are collected from your premises are required to register and account a new business venture in the in Northern Ireland. For further for PAYE/PRSI contributions in ROI. Please note that where the Republic of Ireland, to obtain written definitions, see Distributor and Similar schemes operate in NI in UK business has a permanent confirmation from your Insurance Sales Agent. respect of NI residents carrying out establishment (or deemed Company in Northern Ireland that it duties in NI for an ROI company. establishment) Irish PAYE must be will cover your vehicles/drivers for 6.7 What liability do I have for operated even if the employee only business purposes in the Republic defective products in ROI? Bear in mind that if you employ works for one day in Ireland. The of Ireland. If goods are being sold through someone in ROI to work for 183 day rule does not apply in this a Distributor in the Republic of you, that employee can avail of instance. 6.12 Are the traffic/vehicle regulations Ireland, the Distributor will generally rights under ROI Employment the same in ROI? be required to take on liability for legislation. Specific legal advice The UK employer must continue to While traffic/vehicle regulations defective products. This would be should be taken with regard to the operate UK PAYE in respect of the are broadly similar, specific advice subject to the Distributor being employment contract. While ROI days the employee carries out their should be taken in each instance. entitled to indemnity from the seller and NI employment legislation are duties in NI. The employer can only For further information on driver and for those defective products. In broadly similar, there are specific give a credit against the UK PAYE vehicle licensing in the Republic of such circumstances, the Distributor areas where the legislation differs due for the lower of the two taxes Ireland go to the following websites - would deal directly with the buyer between the two jurisdictions e.g. i.e. Irish PAYE v UK PAYE. Irish PRSI www.motortax.ie and would in turn be entitled to be redundancy payments. will not apply in this instance. Motor Tax Online compensated by the seller for any www.transport.ie loss arising to the Distributor as 6.9b What if I am sending NI This could result in employees Department of Transport a result of the sellers negligence/ employees into ROI to work receiving less take-home pay breach of contract. If, however, there? than they would if their salary was In certain instances, should you goods are sold by you personally This is a complex area, which has only subject to the NI/UK PAYE wish to avoid the expense of or through a Sales Agent, then you been further complicated by a system. This is likely to cause great compliance with the traffic/vehicle will be liable for defective products recent tightening of the rules by the complications and labour relations regulations of a second jurisdiction, under Republic of Ireland legislation, Irish Revenue Commissioners. If an problems for NI employers whose it may be wise to consider retaining and you will be liable for after sales NI employer, who does not have a employees are regularly assigned a courier or transport agent to service. permanent or deemed permanent to work in ROI. For this reason, you deliver your goods within the establishment in Ireland, is sending are strongly advised to consult your Republic of Ireland. 44 45
    • 6.13 Do I need a written contract? The distance selling threshold for exchange rate fluctuations. If you 6.18 How do I open a euro account? I am based in Northern Ireland and want to sell products into Ireland It is very wise in all instances to selling into ROI is €37,500. want to facilitate your client, you The most convenient way to have a written contract. In cross could choose to raise your invoice open a euro account will be border sales, it is particularly The distance selling threshold for in euro with the sterling equivalent via your existing bankers as important to define such matters selling into UK is £70,000. shown on same or agree a euro this will minimise the amount as – when risk passes, liabilities equivalent as part of a separate of documentation that you will of Distributors, liabilities of Sales If your exports of goods to VAT contract or agreement. The be required to produce to meet Agents etc. It is also important registered business in other EU disadvantage of this is that you legislative requirements. Your to define whether the Courts in Member States exceed £270,000 then assume the exposure to existing relationship manager will be Northern Ireland or the Republic per annum you will need to submit exchange rate fluctuation. familiar with your needs and may of Ireland will have jurisdiction to monthly Intrastat returns. also be holding security or deeds to resolve legal disputes. Some firms will state on their facilitate overdraft or loan facilities 6.16 Should I invoice in sterling invoices that, should client which may be extendible to your 6.14 What are typical payment/credit or euro? companies wish to settle the invoice new account. terms? The first point to note is that, from a in euro, they should contact their Typical credit terms are 30 days. technical point of view, VAT invoices accounts department on the day of That said there is nothing to stop However, this can vary considerably raised by an NI-based business settlement to agree a suitable rate you using another bank specifically in practice and depending on the can be issued in a foreign currency of exchange on that day. for your foreign currency business sector in which you operate. but you must also convert not only and some account holders prefer to the value of the invoice but the VAT Do not forget to consider your own shop around and form a secondary 6.15 Do I charge UK VAT? Must I amount into sterling on the invoice. circumstances and whether or not it banking relationship. register for ROI VAT? would suit you to receive euro at a If you are VAT registered in the UK, If you choose to raise an invoice certain point in time. Euro accounts can be domiciled in you will charge UK VAT if your RoI this way you must convert the same NI without the need to approach a based customer is not RoI VAT- into sterling by either: 6.17 Is it worthwhile opening a euro bank in ROI. registered. If your customer is RoI account? VAT registered and the goods are A) using the UK market selling rate at Where you are making and 6.19 Can I protect myself again being exported to them for business the time of supply which can be receiving euro payments it is often exchange rate fluctuation? purposes, you will verify their VAT found in National newspapers advantageous to maintain a euro Exchange rate risk is an important number and business address with bank account. This provides the consideration and should always be HM Revenue & Customs. This will or ability to net currency payments actively managed. This is best done then enable you to zero rate the against currency receipts, thus by netting payments and receipts. supply. B) use the period rate of exchange minimising the number of foreign However, amounts and timings published by HM Customs & Excise exchange deals that you do. Every rarely match exactly, so forward You will also have to complete an (also available from the National foreign exchange deal is subject to foreign exchange contracts can EC sales list giving details of your Advice Service) a ‘spread’ (the difference between be used. RoI customers. the bank’s buying and selling prices) Prior approval does not need to be thus the fewer deals you do the less A forward foreign exchange contract You should also be aware of the sought from HM Customs & Excise ‘spread’ you pay. is a binding contract between two rules regarding distance selling i.e. to use method B) above but where parties to buy or sell a specified selling goods directly to non-VAT- you have adopted the same you Where there is considerable bias amount of foreign currency at registered persons e.g. mail order, cannot then subsequently change towards payments or receipts, an agreed rate on or between a catalogues, via the internet etc. to another method of conversion hence minimal netting, a euro specified future date or dates. Each Member State has its own without prior approval of your local account will provide an excellent distance selling thresholds and if VAT business centre. audit trail and the ability to convert These contracts are offered by all you exceed these thresholds you currency in larger amounts which the major banks and allow you to are required to register for VAT in Your ROI client may prefer to agree are liable to attract a better rate guarantee a future value for your that member state and charge VAT a price in euro and pay you in euro, of exchange. euro receipts, thus completely accordingly. so that they are not exposed to eliminating foreign exchange risk. 46 47
    • It is prudent to compare the spot If you choose to open a place of Section 07 price (i.e. the exchange rate now) business in ROI you will be liable to and the forward market price (i.e. the price that the bank will commit to offering you at a point in the ROI tax on the profits of your ROI business. These profits are also part of your UK self- assessment I am based in Northern future) before agreeing any deal. 6.20 How can I ensure I get paid? return but you will receive credit under the double taxation agreement for the element of profits Ireland and want to sell It is preferable to insist on “cash on delivery”. If you cannot get payment on delivery and the purchaser taxed twice If you operate through a Company services into Ireland subsequently defaults on payment in NI, tax will have to be paid to then it would be advisable to the Collector of Taxes in Shipley, retain the services of a Solicitor/ Bradford. UK Corporation tax is Debt Collection Agency within generally payable 9 months and 1 the Republic of Ireland to collect day after the Company’s year end, payment should your client default though special rules apply to large in payment in due course. While companies. there are circumstances where it would be possible to secure If you operate through the medium judgment in Northern Ireland (where of a limited company in the UK and the contract may have been made), choose to open a branch in ROI, it is advisable to secure judgment the branch profits will be liable to in the Republic of Ireland as it will tax in ROI (as well as in UK with in turn be easier to enforce an ROI double taxation relief). Corporation Judgment against an ROI Debtor. tax in the ROI has become more streamlined and all companies 6.21 Where do I pay my tax? will be required to have paid 90% If you are self employed in the UK, of their expected corporation tax you will be required to submit a tax liability one month prior to the end return by 31 October (for manual of their accounting date. There returns) or 31 January (for online are special rules relating to small returns) following the end of the companies – where the company’s tax year (5 April) under the self corporation tax liability for the assessment arrangements and previous year was < €200,000 they pay any tax becoming due to the can opt to pay their preliminary tax Collector of Taxes. Tax is paid on based on 100% of the prior year 31 January and 31 July of each liability. Corporation tax is also paid year with January being the time to the Collector General. for paying the balance of tax for the previous tax year and also the 1st payment on account for the current year. The July payment is the 2nd payment on account for that same tax year. Payments on account are calculated at 50% of the previous year’s tax liability. 48
    • 7.1 Must I have an office in ROI? www.odca.ie I am based in Northern Ireland and want to sell services into Ireland It is not necessary to have an Office of the Director of Consumer office in ROI to facilitate a supply Affairs of services. However, if you wish www.entemp.ie to target a broader spectrum of Department of Enterprise Trade clients you may wish to consider & Employment (go to “Consumer establishing a presence there. If so, Protection Section) go to Section 10. www.ifsra.ie Irish Financial Services Authority 7.2 Must I form a company in ROI? A Company is not necessary but 7.5 What liability do I have for if you anticipate profits in the ROI substandard work in ROI? or your venture has an element of Just as you would be liable for risk to it, you may wish to consider substandard work provided in ring-fencing this within a Company NI, if undertaking services in the structure. The rates of tax in the Republic of Ireland, you are bound ROI must also be considered in by contract to ensure the delivery of determining the route you want to a proper service. Note that ROI law take. will apply. As trade increases, it may be 7.6 Do I need professional/trade advisable for tax reasons to indemnity insurance? establish a separate company. Professional/Trade indemnity insurance is an insurance policy 7.3 Do I need a licence to sell my which provides indemnity to you services in ROI? the Service Provider by your This will depend on the type of Insurance Company for Breach of service to be sold. For example, if Contract. That is, in the event that selling financial services it would you, the service provider, provide a be necessary for you to consult the substandard service by which the Irish Financial Services Regulatory Service Receiver sustains loss, then Authority (IFSA). See its website at the insurance company guarantees www.ifsra.ie. Specific advice should to pay any loss which the service be taken on each occasion. receiver has suffered. This is a service insurance which should 7.4 Must my services adhere to specifically be taken out in the certain regulations? Republic of Ireland and you will be Again, this will depend on the type required to take out this insurance of service being sold. Specific over and above the professional / advice should be taken on each trade indemnity insurance which occasion but assistance may be you may have in Northern Ireland obtained from websites. For further for services provided in Northern information on regulations which Ireland. Again, you should check may apply go to – with your Insurance Broker as to the adequacy of your insurance for www.consumerassocation.ie provision of services in the Republic Consumer Association of Ireland of Ireland. www.fsai.ie Food Safety Authority of Ireland 51
    • 7.7a What if I am employing someone employer must register for Irish is compulsory in Northern Ireland, it 7.13 Do I charge UK VAT? Must I I am based in Northern Ireland and want to sell services into Ireland in ROI to work for me? payroll. There is no requirement to is not compulsory in the Republic of register for Irish VAT? Are there In general terms, if your Company operate Irish payroll where certain Ireland. It is however very advisable special rules for services? is based in NI and employs an ROI conditions are met (e.g. employees to have Employers Liability The rules relating to VAT on services resident to carry out duties in ROI, taxed in UK, employees carry out Insurance in the Republic of Ireland are different (and more complex) a PAYE scheme must be operated their duties in RoI for less than 183 as the level of Claims in ROI is than those relating to goods. in ROI and you, as the employer, days, etc.). generally higher than in NI. are required to register and account Currently the charge to VAT will for PAYE/PRSI contributions in ROI. Please note that where the 7.9 Are my vehicles/drivers insured depend on the type of service Similar schemes operate in NI in UK business has a permanent in ROI? supplied, the place of supply and respect of NI residents carrying out establishment (or deemed In the normal course, vehicles also the VAT status of the customer. duties in NI for an ROI company. establishment) Irish PAYE must be used for business use require to In some instances, the VAT charge operated even if the employee only be specifically insured for business arises where the customer is Bear in mind that if you employ works for one day in Ireland. The purposes. It would be wise, prior based and the customer must someone in ROI to work for 183 day rule does not apply in this to undertaking a new business account for the VAT via the reverse you, that employee can avail of instance. venture in the Republic of Ireland charge method. However, for other rights under ROI Employment to obtain written confirmation services, the default place of supply legislation. Specific legal advice The UK employer must continue to from your Insurance Company in is where the supplier is based, and should be taken with regard to the operate UK PAYE in respect of the Northern Ireland that it will cover the supplier must charge UK VAT on employment contract. While ROI days the employee carries out their your vehicles/drivers for business the supply. and NI employment legislation are duties in NI. The employer can only purposes in the Republic of Ireland. broadly similar, there are specific give a credit against the UK PAYE Examples of Fifth Schedule services areas where the legislation differs due for the lower of the two taxes 7.10 Are the traffic/vehicle regulations i.e. services that can be zero rated between the two jurisdictions e.g. i.e. Irish PAYE v UK PAYE. Irish the same in ROI? if the customer is VAT registered in redundancy payments. PRSI will not apply in this instance. While traffic/vehicle regulations the ROI, are consultancy/data input are broadly similar, specific advice services. 7.7b What if I am sending NI This could result in employees should be taken in each instance. employees into ROI to work receiving less take-home pay For further information on driver and New rules will come into effect on there? than they would if their salary was vehicle licensing in the Republic of 1 January 2010, after this date the This is a complex area, which has only subject to the NI/UK PAYE Ireland go to the following websites - default place of supply for services been further complicated by a system. This is likely to cause great www.motortax.ie between VAT registered businesses recent tightening of the rules by the complications and labour relations Motor Tax Online will be where the customer is Irish Revenue Commissioners. If an problems for NI employers whose www.transport.ie based. NI employer, who does not have a employees are regularly assigned Department of Transport permanent or deemed permanent to work in ROI. For this reason, The new rules also require an EC establishment in Ireland, is sending you are strongly advised to consult 7.11 Do I need a written contract? sales list to be completed in respect UK resident employees into ROI your professional adviser if these It is very wise in all instances to of intra EC supply of services, this is to work and they spend more rules are likely to impact upon your have a written contract. In cross currently only required for the intra than 183 days per year working in business. border services, it is particularly EC supply of goods. ROI, those employees must be on important to define whether the an Irish payroll. Furthermore, the 7.8 Is my Employers Liability Courts in Northern Ireland or Please note that foreign traders Irish Revenue Commissioners will Insurance valid in ROI? the Republic of Ireland will have carrying on business in ROI are automatically apply single person’s It is more than likely that your jurisdiction to resolve legal disputes. obliged to register for ROI VAT from tax credits and allowances to such Employers Liability Insurance issued day one and do not have the benefit earnings. in Northern Ireland will not be valid 7.12 What are typical payment/credit of the VAT registration thresholds in respect of services provided terms? that apply to an Irish trader. Where an NI employer has UK by them for you in ROI. Whereas Typical credit terms are 30 days. resident employees working in Employers Liability Insurance However, this can vary considerably Services relating to land are RoI for more than 60 days the NI (except for “one man” companies) in practice and depending on the deemed to take place where the 52 sector in which you operate. land is situated. However from 1 53
    • September 2008 rules relating to procedure and professional advice Customs (also available from the foreign exchange deal is subject to I am based in Northern Ireland and want to sell services into Ireland VAT and subcontractors within the should be sought in this regard. National Advice Service). a ‘spread’ (the difference between construction industry in ROI have the bank’s buying and selling prices) been simplified, i.e. after this date • Professional Services Prior approval does not need to thus the fewer deals you do the less if you are providing services to a Withholding Tax be sought from HM Revenue & ‘spread’ you pay. VAT registered principal contractor Irish Income Tax, at the standard Customs to use method B) above you will not need to charge VAT and rate, is deducted from payments but where you have adopted same Where there is considerable bias the principal contractor will account made for Professional Services by you cannot then subsequently towards payments or receipts, for the VAT via the reverse charge Government Departments, State change to another method of hence minimal netting, a euro mechanism. Bodies, Local Authorities etc. This conversion without prior approval of account will provide an excellent is known as Professional Services your local VAT business centre. audit trail and the ability to convert Please note that if an NI business in Withholding Tax (“PSWT”). currency in larger amounts which the construction sector is providing Your ROI client may prefer to agree are liable to attract a better rate of services to anyone other than a Services considered as a price in euro and pay you in euro, exchange. principal contractor, e.g. shop fitter Professional Services are medical, so that they are not exposed to installing shelves for a shopkeeper dental, veterinary, architectural, exchange rate fluctuations. If you 7.16 How do I open a euro account? in ROI, the NI business must engineering, accountancy, want to facilitate your client, you The most convenient way to register for and charge Irish VAT. consultancy, legal etc. could choose to raise your invoice open a euro account will be in euro with the sterling equivalent via your existing bankers as Please note that this is a highly Non-resident businesses supplying shown on same or agree a euro this will minimise the amount complex area and that you should “Professional Services” to equivalent as part of a separate of documentation that you will seek professional advice specific to Government Departments etc. will contract or agreement. The be required to produce to meet your own circumstances. be liable to PSWT. If no other Irish disadvantage of this is that you then legislative requirements. Your taxes (ie Income Tax or Corporation assume the exposure to exchange existing relationship manager will be 7.14 Will any tax be deducted from my Tax) are due then a refund of PSWT rate fluctuation. familiar with your needs and may payments? can be obtained on application to also be holding security or deeds to • Relevant Contracts Tax the Revenue Commissioners. Some firms will state on their facilitate overdraft or loan facilities Where you are engaged in the invoices that, should client which may be extendible to your construction, forestry and meat 7.14 Should I invoice in sterling or companies wish to settle the invoice new account. processing industries then a euro? in euro, they should contact their withholding tax known as Relevant The first point to note is that, from a accounts department on the day of That said there is nothing to stop Contracts Tax (“RCT”) at 35% technical point of view, VAT invoices settlement to agree a suitable rate you using another bank specifically applies. raised by an NI-based business of exchange on that day. for your foreign currency business can be issued in a foreign currency and some account holders prefer to Where “relevant operations” under but you must also convert not only Do not forget to consider your own shop around and form a secondary a “relevant contract” are carried out the value of the invoice but the VAT circumstances and whether or not it banking relationship. in Ireland, then RCT will apply. It amount into sterling on the invoice. would suit you to receive euro at a is important to note that RCT also certain point in time. Euro accounts can be domiciled in applies to non-resident businesses. If you choose to raise an invoice N.I. without the need to approach a Where no other Irish taxes are this way you must convert same 7.15 Is it worthwhile opening a euro bank in ROI. due then a refund of RCT can be into sterling by either: account? obtained on application to the Where you are making and 7.17 Can I protect myself against Revenue Commissioners. A) using the UK market selling rate at receiving euro payments it is often exchange rate fluctuation? the time of supply which can be advantageous to maintain a euro Exchange rate risk is an important A gross payments card (C2) found in National newspapers bank account. This provides the consideration and should always be can be obtained where an ability to net currency payments actively managed. This is best done application is made to the Revenue or against currency receipts, thus by netting payments and receipts. Commissioners. This can be a minimising the number of foreign However, amounts and timings B) use the period rate of exchange long and complicated application exchange deals that you do. Every rarely match exactly, so forward published by HM Revenue & 54 55
    • foreign exchange contracts can returns) following the end of the If you operate through the medium I am based in Northern Ireland and want to sell services into Ireland be used. tax year (5 April) under the self of a limited company in the UK assessment arrangements and and choose to open a branch in A forward foreign exchange contract pay any tax becoming due to the ROI, the branch profits will be is a binding contract between two Collector of Taxes. Tax is paid on liable to tax in ROI (as well as in parties to buy or sell a specified 31 January and 31 July of each UK with double taxation relief). If amount of foreign currency at year with January being the time you operate through the medium an agreed rate on or between a for paying the balance of tax for of a limited Company in ROI the specified future date or dates. the previous year and also the 1st payment date for corporation tax payment on account for the current has become more streamlined and These contracts are offered by all year. The July payment is the 2nd all small companies (where the the major banks and allow you to payment on account for that same company’s corporation tax liability guarantee a future value for your tax year. for the prior year was < €200,000) euro receipts, thus completely will be required to have paid either eliminating foreign exchange risk. If you choose to open a place of 90% of their expected corporation business in ROI you will be liable to tax liability for the current period It is prudent to compare the spot ROI tax on the profits of your ROI or they can opt to pay 100% of price (i.e. the exchange rate now) business. These profits are also the prior year liability by the 21st of and the forward market price (i.e. part of your UK self- assessment the month prior to the end of their the price that the bank will commit return but you will receive accounting date to the Collector to offering you at a point in the credit under the double taxation General. future) before agreeing any deal. agreement for the element of profits taxed twice. From the 14 October 2008 if the 7.18 How can I ensure I get paid? company is a large company (where It is preferable to insist on “cash If you operate through a Company the company’s corporation tax on delivery”. If you cannot get in NI, tax will have to be paid to liability for the prior year was > payment on provision of the the Collector of Taxes in Shipley, €200,000) then the payment is due service and the service receiver Bradford. UK Corporation tax is in instalments. The First Instalment subsequently defaults on payment generally payable 9 months and 1 should be 50% of Corporation Tax then it would be advisable to day after the Company’s year end, liability in preceding accounting retain the services of a Solicitor/ though special rules apply to large period or 45% of Corporation Debt Collection Agency within companies. Tax liability in current accounting the Republic of Ireland to collect period due by 21st date of the payment should your client default Payments on account for large sixth month prior to year end. The in payment in due course. While companies are made quarterly Second Instalment is due payable there are circumstances where with the first payment due 6 on the 21st date of the eleventh it would be possible to secure months 14 days after the start month of the accounting period. judgment in Northern Ireland (where of the accounting period. This An amount payable will bring the the contract may have been made), payment should equal 25% of the total preliminary tax paid to 90% it is advisable to secure judgment estimated profits at that date, the Corporation Tax liability for current in the Republic of Ireland as it will second quarterly payment should accounting period. in turn be easier to enforce an ROI be for 50% of the estimated profits Judgment against an ROI Debtor. and the third payment for 75% of The balancing payment of the estimated profits with a final Corporation Tax for all companies 7.19 Where do I pay my tax? payment due 3 months 14 days is due to be paid to the Collector If you are self employed in the UK, after the end of the accounting General by the 21st of the eighth you will be required to submit a tax period. month after the year end. return by 31 October (for manual returns) or 31 January (for online 56 57
    • Section 08 I am based in Northern Ireland and want to buy products from Ireland
    • 8.1 Are there any Customs issues to The most secure payment method I am based in Northern Ireland and want to buy products from Ireland I am based in ROI and want to sell products into NI be aware of? is an electronic bank to bank There is free movement of goods transfer. Whilst normally more within the EU and the only goods expensive than the previous which need to be declared at methods it provides cleared funds Customs are excisable goods i.e. to the recipient at a known value tobacco, spirits, wines and beer. date and ensures safe receipt. This is especially useful where goods If imports from ROI exceed are dispatched upon receipt of £270,000 per annum you will be payment. required to complete UK Intrastat returns. 8.4 What currency should I pay my supplier in? 8.2 What are typical payment/credit There is no definitive answer to this terms? as individual circumstances differ. Typical credit terms are 30 days. However, you should endeavour to However, this can vary considerably pay in the currency most suitable in practice and depending on the to your needs and agree a payment sector in which you operate. currency with your supplier accordingly. 8.3 How do I pay my supplier? The simplest and most cost If you wish to sell on your effective way of effecting payment purchases, priced in sterling, then to suppliers is usually to write a buying in sterling would probably foreign currency cheque. This is be most suitable as this would where having a foreign currency eliminate your foreign exchange account really comes into its own risk all together. (The risk is passed as it avoids having to arrange back to the ROI supplier). electronic transfers or the purchase of a draft from your bank. The If you have a surplus of euro then foreign currency account can be you might wish to pay the ROI either funded by currency receipts supplier in euro. or periodic currency purchases from your bank. Currency purchases can In all cases it is important to get the usually be made by telephone or best value for money, so whilst it internet dealing. may be convenient to pay an ROI supplier in sterling, it is vital that this Whilst the simplest method of convenience is not out-weighted paying is by cheque writing, there by a price disadvantage. It could are other methods available for one be more cost efficient to manage off transactions or where additional the foreign exchange risk yourself if payment security is required. Banks the supplier has loaded his price to will sell foreign currency drafts to cover himself as is often the case. their clients, however these offer little advantage from the purchasers 8.5 Is it worthwhile opening a euro perspective other than an ability account? to make payment when no foreign Where you are making and currency account exists, i.e. for one receiving euro payments it is often off transactions. A fee is usually advantageous to maintain a euro payable for the purchase of a draft. bank account. This provides the 61
    • ability to net currency payments 8.7 Who is responsible for VAT? 8.9 What if the goods turn out to be I am based in Northern Ireland and want to buy products from Ireland against currency receipts, thus If you are VAT registered in the UK defective and the vendor will not minimising the number of foreign and you are purchasing goods from repair/replace? exchange deals that you do. Every an ROI VAT registered person and If the goods are defective, because foreign exchange deal is subject to the goods are to be exported to the sale will have occurred within a ‘spread’ (the difference between you in the UK, the supplier will take ROI, in the normal course the the bank’s buying and selling prices) a note of your VAT number and buyer will sue the seller in the thus the fewer deals you do the less business address and will then zero Republic of Ireland Courts; i.e. ‘spread’ you pay. rate the supply of goods to you. where the contract occurred. Even if the contract occurred in NI (e.g. Where there is considerable bias You will then account for the VAT where the seller from ROI sold the towards payments or receipts, on the goods under the reverse products in NI through a Sales hence minimal netting, a euro charge mechanism and, provided Agent in NI) it may still be more account will provide an excellent the goods you purchase are for the appropriate to sue the seller in ROI audit trail and the ability to convert purpose of your trade, you will be as it would be easier to enforce an currency in larger amounts which able to claim a deduction for the ROI judgment against an ROI seller. are liable to attract a better rate of VAT you have charged yourself. There are however circumstances exchange. where it may only be possible to 8.8 When do I assume the risk for the issue proceedings in NI where 8.6 How do I open a euro account? goods? witnesses in NI are not compellable The most convenient way to In the normal course where the to attend Courts in ROI to prove the open a euro account will be seller arranges delivery to the circumstances of the contract. via your existing bankers as purchaser risk will only pass on this will minimise the amount receipt of delivery of the goods. In of documentation that you will certain circumstances where the be required to produce to meet seller arranges delivery to the buyer legislative requirements. Your risk may only pass to the buyer existing relationship manager will be on receipt of delivery. In a cross familiar with your needs and may border sale, this may therefore also be holding security or deeds to mean that risk would only pass to facilitate overdraft or loan facilities the buyer when he receives the which may be extendible to your goods in NI. It would be to the new account. buyers benefit if risk only passed to him on receipt of the goods in That said there is nothing to stop NI. For example, if risk passed you using another bank specifically to the buyer on collection of the for your foreign currency business goods in ROI and the goods were and some account holders prefer to damaged in transit in ROI, then the shop around and form a secondary buyer would be obliged to ensure banking relationship. that he was properly insured for transit of those goods. Often, the Euro accounts can be domiciled in Contract will define at which point N.I. without the need to approach a risk passes. A seller (who generally bank in ROI. draws up the Contract) will however want to ensure that risk passes at the earliest point. Therefore, a buyer should ensure to read the Contract of Sale carefully. 62 63
    • Section 09 I am based in Northern Ireland and want to buy services from Ireland
    • 9.1 What are typical payment/credit 9.3 What currency should I pay my I am based in Northern Ireland and want to buy services from Ireland terms? supplier in? Typical credit terms are 30 days. There is no definitive answer to this However, this can vary considerably as individual circumstances differ. in practice and depending on the However, you should endeavour to sector in which you operate. pay in the currency most suitable to your needs and agree a payment 9.2 How do I pay my supplier? currency with your supplier The simplest and most cost accordingly. effective way of effecting payment to suppliers is usually to write a If you have a surplus of euro, then foreign currency cheque. This is you might wish to pay the ROI where having a foreign currency supplier in euro. account really comes into its own as it avoids having to arrange In all cases it is important to get the electronic transfers or the purchase best value for money, so whilst it of a draft from your bank. The may be convenient to pay an ROI foreign currency account can be supplier in sterling, it is vital that this either funded by currency receipts convenience is not out weighted or periodic currency purchases from by a price disadvantage. It could your bank. Currency purchases can be more cost efficient to manage usually be made by telephone or the foreign exchange risk yourself if internet dealing. the supplier has loaded his price to cover himself as is often the case. Whilst the simplest method of paying is by cheque writing, there 9.4 Is it worthwhile opening a euro are other methods available for one account? off transactions or where additional Where you are making and payment security is required. Banks receiving euro payments it is often will sell foreign currency drafts to advantageous to maintain a euro their clients, however these offer bank account. This provides the little advantage from the purchasers ability to net currency payments perspective other than an ability against currency receipts, thus to make payment when no foreign minimising the number of foreign currency account exists, i.e. for one exchange deals that you do. Every off transactions. A fee is usually foreign exchange deal is subject to payable for the purchase of a draft. a ‘spread’ (the difference between the bank’s buying and selling prices) The most secure payment method thus the fewer deals you do the less is an electronic bank to bank ‘spread’ you pay. transfer. Whilst normally more expensive than the previous Where there is considerable bias methods it provides cleared funds towards payments or receipts, to the recipient at a known value hence minimal netting, a euro date and ensures safe receipt. This account will provide an excellent is especially useful where goods audit trail and the ability to convert are dispatched upon receipt of currency in larger amounts which payment. are liable to attract a better rate of exchange. 67
    • 9.5 How do I open a euro account? Services relating to land take place compulsory in either jurisdiction that I am based in Northern Ireland and want to buy services from Ireland The most convenient way to where the specific land is situated service providers have Professional open a euro account will be however there is an extension to the Indemnity/trade Insurance, it via your existing bankers as reverse charge rule if the supplier is generally a requirement of this will minimise the amount is based outside the UK and the membership of professional of documentation that you will customer receives the service for organisations that the service be required to produce to meet business purposes in the UK. provider has Professional/Trade legislative requirements. Your Indemnity Insurance. For example, existing relationship manager will be However you should seek just as a Solicitor in Northern Ireland familiar with your needs and may professional advice regarding (as a requirement of membership of also be holding security or deeds to the rate of VAT to be charged in the Northern Ireland Law Society) facilitate overdraft or loan facilities respect of the services you are is required to have Professional which may be extendible to your acquiring. Alternatively you can Indemnity Insurance within NI, a new account. contact HM Revenue & Customs Solicitor in ROI (as a requirement www.hmrc.gov.uk. of membership of the Law Society That said there is nothing to stop of Ireland) is obliged to have you using another bank specifically 9.7 What if the service is Professional Indemnity Insurance for your foreign currency business substandard? within ROI. If in doubt, you should and some account holders prefer to If the service is provided by request the service provider to shop around and form a secondary the ROI service provider in the confirm that he has Professional banking relationship. Republic of Ireland, you would issue Indemnity Insurance for his services proceedings against the service in the jurisdiction in which he Euro accounts can be domiciled in provider in the Republic of Ireland provides those services. If the ROI N.I. without the need to approach a e.g. an Architect draws up plans in service provider is providing those bank in ROI. his ROI office for your house in NI. services in NI, then it is important If the service is provided by the ROI to ascertain that the ROI service 9.6 Who is responsible for VAT? service provider in Northern Ireland provider has professional indemnity The rules relating to VAT on services (who is insured), you would issue to provide services in NI. are different (and more complex) proceedings against the ROI service than those relating to goods. provider in Northern Ireland e.g. the ROI builder constructs your house The charge to VAT will depend on in Northern Ireland. the type of service, the VAT status of the customer and the place of 9.8 Is it necessary for the service supply. In some instances, the VAT provider in ROI to have charge arises where the customer professional indemnity/trade is based and the customer must insurance? account for the VAT. However, for Professional/Trade indemnity other services, the place of supply insurance is an insurance policy is where the supplier is based, and which provides indemnity to you, the supplier must charge VAT on the the Service Provider, by your supply. Insurance Company for Breach of Contract. That is, in the event that Examples of services which are you, the service provider, provide a forth schedule services, i.e. services substandard service by which the which can be zero rated are Service Receiver sustains loss, then consultancy/data input services. the insurance company guarantees to pay any loss which the service receiver has suffered. While it is not 68 69
    • Section 10 I am based in Northern Ireland and want to establish a presence in Ireland
    • 10.1 Are there any advantages to my 10.2 Are there any disadvantages I am based in Northern Ireland and want to establish a presence in Ireland establishing a presence in ROI? to my establishing a presence Yes, the rate of corporation tax for in ROI? trading companies is an advantage An NI business person deciding and can produce a tax saving where to establish a presence in ROI you choose to form a subsidiary will go through almost the very or a separate limited company. same business start-up expenses Formation of a branch will not which he would have originally result in the same saving. However, encountered when establishing his pricing rules should be considered initial presence in NI. For example, when exploring tax-saving it will be necessary to take on opportunities. the expense of a lease/purchase of premises, building insurance, The issue of establishing a presence electricity, telephone supply, in the other jurisdiction is generally payment of commercial rates more relevant to service providers and other related expenses. For rather than to Sellers of goods. assistance to “start-ups” within the Sellers of goods can manufacture Republic of Ireland, contact a City/ or procure their products within NI County Enterprise Board or look at and establish a satisfactory means www.basis.ie. of delivery of those goods into ROI. The goods may be sold through As regards tax issues, the rates shops within ROI and therefore of tax for sole traders in ROI are the origin of the manufacture of slightly higher than in the UK. those goods is not that important. However, a service provider will It should also be noted that the be providing a personal service submission of late tax returns to the and, as such, his presence and Revenue Commissioners for both identity to the client are that more Companies and sole traders can important. The advantages of result in tax based penalties, which establishing a presence in ROI is vary depending on the degree of more direct access to that market. lateness. Where you don’t establish an actual presence, you are relying In addition, for companies which on the integrity of Sales Agents, have losses there are restrictions on Distributors and Couriers/Transport the set off of those losses where the Agent. It is difficult sometimes to return has been made late. convince buyers/clients that you are in a position to provide an effective New start-up companies which service within that jurisdiction where commence trading in 2009 will you do not actually have a presence be exempt from corporation tax, in that jurisdiction. including capital gains, in each of the first three years to the extent For general information on deciding that their tax liability in the year whether to lease or purchase, go to does not exceed €40,000. This Choosing a Business Premises. would effectively allow a trading company to earn €320,000 in profits tax free in each of the first three years of trading. This 73
    • measure was introduced in the Irish is facilitated under European owns all of NewCo. The important It is important to ensure that the I am based in Northern Ireland and want to establish a presence in Ireland Budget recently and currently is Law which requires that certain legal distinction is that the business Memorandum and Articles of being examined to ensure it is in filings must be made by the being conducted in the Republic of Association of the UK Company compliance with EU rules on State Northern Ireland Company with the Ireland is conducted by NewCo and are certified by a solicitor before Aid. Companies Office in the Republic if a legal dispute arose in respect submission to the CRO. of Ireland. It is important to bear in of the conduct of the business then Where you incorporate an Irish mind that a “branch” in legal terms it is NewCo that will be involved 10.5 Can we be taxed twice? company, you will need to only applies to Corporations e.g. in the legal proceedings, not For branches there is a tax charge comply with company secretarial limited liability companies. So, for Company A. Therefore, in terms where the branch is located and a requirements which can be quite instance, a Partnership or a sole of limiting the risk for the parent tax charge where the main company onerous and can lead to heavy fines trader would not in the legal sense company in establishing a new is located but double taxation relief for non-compliance (www.cro.ie). establish a “branch” across the business in a foreign jurisdiction, also comes into play. Border. Therefore, it is only in the there may well be practical reasons The key body in this respect context of Corporations that there is to use a subsidiary as opposed The formation of a separate limited of corporate governance is the a requirement for filing information to a branch. If a Company merely company or a subsidiary will avoid Office of the Director of Corporate and details with the Companies has a branch the Company itself is this double exposure to tax. Enforcement www.odce.ie which Office in the Republic of Ireland. exposed to all legal liability for the can strike off defaulting directors for From a legal viewpoint a branch actions of the foreign branch and You should be aware that the up to five years. is not a separate legal entity from losses accumulated by that branch. formation of a separate Irish the Company that established By having a separate Company company which is under the same The Companies Act 2009 which that branch. To take an example, (subsidiary) such risks and losses control as the UK company can was introduced on the 2 July 2009 we could have a Northern Ireland can be limited to that Subsidiary lead to an increase in the rate of tax has removed the requirement for incorporated Company with a and ordinarily the Parent Company charged on the UK company as the companies incorporated by UK branch Office in Dublin. The legal should be protected. It should be Irish company will be classed as an residents to take out a bond, where entity doing business in Dublin is noted, however, that the decision associated company. Professional they did not have an Irish resident the Northern Ireland Company. It whether to establish a branch or advice should be sought to director. This new Act amends just happens to have an office in a subsidiary tends to be primarily ascertain the impact on the UK this provision by replacing this Dublin. informed by the tax implications. company’s tax status. obligation with the requirement that at least one director of the company On the other hand a subsidiary is must be resident in a member state a completely separate legal entity 10.4 What formalities must we of the EEA. Further information from the parent company. Once undertake? is available on the website of the again, subsidiaries only apply It will be necessary to decide Companies Registration Office to Corporations, e.g. Limited whether you propose to trade as www.cro.ie. Liability Companies, as opposed a Sole Trader/Partnership or as a to sole traders or partnerships. Limited Liability Company. 10.3 What’s the difference between a To take an example, Company branch and a subsidiary? A is established and trades in Branches of a UK company must Whereas a branch is an extension Northern Ireland and decides to be registered on the external of a company, a subsidiary is a set up a new business in Dublin. companies register. The registration legal entity in its own right. In the Rather than merely establish a must take place within one month of UK the term branch has been branch, they decide to establish setting up the branch, by submitting superseded by the term “permanent a separate Republic of Ireland a Form 12 along with the necessary establishment” Company to conduct the business documentation. For more details on their behalf. In the normal please refer to information leaflet no A Limited Liability Company course the new Company, NewCo, 5 registration of external companies incorporated in Northern Ireland is incorporated in the Republic at www.cro.ie. may wish to establish a branch of Ireland but its shareholder is in the Republic of Ireland. This Company A. As such, Company A 74 75
    • Section 11 We are looking at cross-border distributorships or agencies
    • 11.1 What is the difference between a • A supplier will only need We are looking at cross-border distributorships or agencies distributor and an agent? to monitor accounts with a Distributor distributor. In a distributorship a supplier or • No compensation is manufacturer sells his products to automatically payable to a the distributor, who in turn sells distributor upon termination of the products on to his customers, the distributorship agreement. adding a margin to cover his own costs. Distributorships are used Disadvantages of a Distributorship as a low risk means of expanding • The supplier has limited control business into new markets or over activities of a distributor. territories. • Under an exclusive distributorship arrangement, the The distributor assumes liability for supplier’s entire credit risk in the products incurring a greater respect of sales in that territory is degree of risk than an agent in concentrated on the distributor. the course of his business. The • A distributorship arrangement distributor has no authority to create is likely to be governed by a contract between the supplier and domestic and European customer. The customer’s contract competition legislation. will be with the distributor. • Given the large degree of autonomy granted to a Agent distributor, it is critical that the A Sales Agent is a self employed selected distributor is financially intermediary who has continuing and commercially sound. authority to negotiate the sale of goods on behalf of another person Advantages of a Sales Agency “the principal” (or to negotiate and • Supplier has more control over conclude the sale of goods on the activities of a sales agent behalf of and in the name of that • The financial and commercial principal). background of the sale agent will not be as critically important 11.2 What are the advantages and to the principal; although the disadvantages of each? principal will want to ensure the Advantages of a Distributorship integrity of the sales agent since • A supplier is able to pass on risk the principal will in the normal associated with the products. course be bound by the actions • The distributor is motivated to of the sales agent. sell the stock purchased from the supplier. Disadvantages of Sales Agency • A supplier will not incur any • The principal is not able to pass liability as a result of the on risk associated with the distributor’s activities (although products to the sales agent. the supplier may remain liable for • The principal will incur liability as defective products). a result of the agent’s activities. • The appointment of a distributor • In most instances the principal will avoid the need for a supplier will be obliged to take on the requiring an established place of expense of training the sales business in the territory, reducing agent. administrative costs. 79
    • • The principal will still be obliged of Distributorships; namely an arrangements are perceived as • Consequences of termination – We are looking at cross-border distributorships or agencies to take on the expense of training Exclusive Distributorship, a Sole particularly suitable where the disposal of stock upon a sales agent. Distributorship, a Non-exclusive product requires an enhanced level termination • The principal will still be obliged Distributorship and a Selective of service or advice at the point • Additional obligations, such as to monitor the accounts of all Distributorship. of sale or where the supplier or after sales maintenance service. customers. manufacturer is required to provide • Under EU Commercial Agents An Exclusive Distributorship after sale support. 11.5 Are there any tax issues to look Regulations (enacted in both This is an arrangement whereby out for? ROI and NI) minimum notice a supplier agrees not to appoint Distributors generally agree only Specific professional advice provisions apply (from one month another distributor within a defined to sell products to end users or should be sought regarding your to three months) in the event of territory and also agrees not to sell to other approved distributors detailed circumstances as this termination of the agency and the products directly to customers and individual distributors are in a subject is much too complicated the agent may also be entitled to within that territory. Such an position to compete against each to be covered in the context of this compensation over and above arrangement is frequently used other. publication. this notice requirement. to exploit a product within a new territory. A distributor agrees to take The Contents of a Typical 11.3 What should we cover in an on the risk and cost associated with Distributorship Agreement agency contract? promoting the new product in the • Agreement to supply product • Duty of agent to comply with knowledge that he alone will benefit • Clear order and delivery reasonable instructions from his from his efforts. A supplier has procedures principal the advantage of knowing that the • Passing of risk • Duty of agent to communicate distributorship will be motivated to • Payment terms necessary information to his sell his products. • Imposition of specific obligations principal on pricing and other conditions • Duty of principal to provide his Sole Distributorship under which the distributor may agent with the information This is an arrangement whereby a sell the product to its customers necessary for the performance of supplier appoints a distributor as • Minimum sales targets the agency contract his only distributor within a defined • Inspection of records • Remuneration of agent – territory, but retains the right to • Reservation of intellectual entitlement to commission promote the products himself within property rights • Termination provisions the territory and to sell products • Competition and restraint of • Consequences of termination direct to customers in the territory trade – the supplier may wish • Agreement to supply product in direct competition with the to prevent the distributor from • Clear order and delivery distributor. manufacturing or distributing procedures products which compete with • Minimum sales and targets Non-exclusive Distributorship the contract products for a • Competition and restraint of A non-exclusive arrangement gives period after termination of the trade – the principal may wish a supplier complete freedom both agreement to prevent the sales agent to sell directly and to appoint other • Exclusion of liability – the from selling similar products distributors in a territory. principal may want to limit the on behalf of other competitors warranties which are given on which compete with the contract Selective Distributorship sale of the goods products for a period after A supplier appoints distributors • Product Liability – limiting the termination of the agreement. to establish a network provided circumstances/procedures in that additional distributors meet which the supplier will be liable 11.4 What should we cover in a certain criteria. This effectively to the distributor in the event of distributorship contract? limits the number of additional defective products It is probably helpful first to explain distributors who will be appointed • Length of agreement that there are different types within a defined territory. Such • Termination of agreement 80 81
    • Section 12 We are exploring a cross-border joint venture
    • 12.1 What are the options in terms of the parties to a Joint Venture may We are exploring a cross-border joint venture co-operation structures? wish to avoid the dangers of joint The type of co-operation structure and several liability that exists or joint venture vehicle that should in a partnership or sometimes be used in any set of circumstances they may wish to avoid certain will usually fall to be decided on tax implications that can arise in the basis of how much risk each partnership arrangements. As party is willing to assume for the such, they may wish to opt for a venture, the likely period of the joint Contractual Joint Venture. This is venture and whether the proposed best explained by an example. structure is tax efficient. The main types of joint venture vehicles are A small chemical manufacturer as follows:- on one side of the Border agrees to exclusively supply a The Joint Company “pharmaceutical company” on the The jointly owned Company has other side of the Border with certain often been the favourite vehicle “know how” and chemicals to for joint ventures, largely because allow the pharmaceutical company it is simple to set up, easily to develop a new pharmaceutical understood, and provides limited product e.g. a cold remedy. If the liability and possible accounting chemical manufacturer were to benefits. However the decision as be entitled to a future share in the to where to incorporate/establish profits of the cold remedy then the the Company i.e. in Northern Ireland arrangement between them would or the Republic of Ireland will fall to be treated as a Partnership. obviously be based on where the The parties decide that they do not joint venture business will operate want to form a partnership e.g. the and if this is not conclusive then chemical manufacturer may not in the most tax advantageous want to risk its money on a new jurisdiction. pharmaceutical product that may not be a success. As such, the Partnership chemical manufacturer agrees to Partnerships are becoming exclusively supply its “know how” increasingly popular vehicles for and the chemical raw material to their flexibility. From a taxation its joint venture partner in return viewpoint, partnerships can often for the pharmaceutical company be more straightforward than agreeing (a) to spend x amount of companies but, on the other hand, money to develop and market the the partners in a partnership have cold remedy, (b) to pay a set royalty joint and several liability. for a pre-determined time period to use the “know how” and (c) to Contractual Joint Ventures buy the necessary chemical raw Another mechanism for effecting material only from the chemical a joint venture is known as manufacturer at a pre-set price Contractual Joint Ventures. This is for the pre-determined period. In a contract that does not amount to this way if the cold remedy were a a partnership and this is probably success the chemical manufacturer the simplest form of Joint Venture as supplier of the “know how” and from a tax viewpoint. Very often raw material would be ensured of 85
    • strong demand at pre-agreed prices 12.4 Are there any tax issues we Section 13 under the contractual joint venture should be aware of? and the pharmaceutical company would not be entitled to threaten to source the raw material or “know As specified in answers 12.1 to 12.3, the choice of Joint Venture vehicle will hugely impact on The Debt Collection how” from some other competitor for the period of the contractual joint venture. In the current various taxes such as Corporation Tax, Income Tax and VAT. It is vital that tax advice is taken at the Legal Process - example the chemical manufacturer was not prepared to risk its own money in establishing a joint earliest possible opportunity. Before the Joint Venture arrangement is fully negotiated, detailed tax advice Republic of Ireland venture but in return for offering to supply their “know how” and raw materials on an exclusive basis they should have been taken by all parties. and Northern Ireland will, in turn, benefit from increased turnover provided its joint venture partner successfully launches the cold remedy on the market. 12.2 What contracts or documents are required? It is of fundamental importance to have a legal agreement put in place when there is a joint venture. It is absolutely critical to define at the outset the nature of the joint venture i.e. is it a Company, a Partnership or merely some form of Contractual Joint Venture. Obviously, this is critical from a tax viewpoint because each arrangement will be taxed differently. Of fundamental importance from a legal viewpoint is to provide for scenarios where there is a breakdown in the relationship between the Joint Venture parties or there is a dispute between them or how the Joint Venture is to be wound up in the future. 12.3 What law governs our contract? It would be normal for the Joint Venture Agreement to specify the law that will govern the agreement between the parties. It is a matter of negotiation between the parties to decide the law of which jurisdiction would be most appropriate to deal with matters of 86 interpretation and/or dispute.
    • Brian Morgan, Partner in Morgan of Ireland or Northern Ireland. The Debt Collection Legal Process - Republic of Ireland and Northern Ireland McManus Solicitors, who holds For instance, the Contract may Practising Certificates in both the have been made in the Republic Republic of Ireland and Northern of Ireland where the Creditor Ireland, outlines the steps which undertakes his business but the apply in the Debt Collection Debtor resides in Northern Ireland process in both Jurisdictions. and all his assets / income are based in Northern Ireland. Because we act for clients who have debtors in both the Republic As both the Republic of Ireland and of Ireland and Northern Ireland Northern Ireland are member states we are often asked to explain the of the European Union, Regulation different processes which apply (EC) No. 44/2001 on jurisdiction and in each Jurisdiction. The Debt the recognition and enforcement Collection process is, by reason of judgments in civil and of the fact that its bound to Court commercial matters (the “Brussels dates and time limits, slow and, 1 Regulation”) now governs the in the reasonable view of the location and nature of proceedings client Creditor (the person who is started in the member states of the owed the money), frustrating. This European Union (the “EU”). Under frustration is made worse where the the Brussels 1 Regulation, in the Creditor finds that he has reached normal course a plaintiff must sue a another stage in the process defendant in the jurisdiction where against the Debtor (the person the defendant resides. There are who owes the money) only to find however certain exceptions to this that there are a number of further rule. stages yet to be undertaken. Many of these stages involve payment of Article 5 (1) of the Regulation fees to the various state agencies relates to contractual disputes and where the Creditor is often left is one such exception. It provides worrying whether he is “throwing that when a person domiciled in a good money after bad”. Where a member state is sued in matters Creditor, familiar with the process in relating to a contract, he may be one Jurisdiction, comes for the first sued in the courts for the place time to collect money from a Debtor of performance of the obligation in another Jurisdiction, lack of in question. The place of the knowledge of the processes which performance of the obligation is: apply in that other Jurisdiction or, indeed, failure to issue Proceedings “ -in the case of the sale of goods, in the correct Jurisdiction can lead the place in the Member State, to costly mistakes. where, under the contract, the goods were delivered or should The Debtor can be sued where have been delivered.” the Debtor resides / carries on business or where the original “ -in the case of the provision of Contract occurred. This can often services, the place in the Member give a choice to the Creditor in State, where, under the contract, the Border area as to whether he the services were provided or issues proceedings in the Republic should have been provided.” 89
    • This generally therefore means (“EEO”) which can now be sought Initial demand letter to debtor ordering that Third Party to pay the The Debt Collection Legal Process - Republic of Ireland and Northern Ireland that the debtor can be sued by the by way of a more simple application This letter to the Debtor will threaten Creditor out of that money. creditor either where the debtor made ex-parte to a judge who legal proceedings unless payment is resides or where the contract was issues the “EEO” which can in received within ten days. Judgment Mortgage performed. What is important in turn be enforced in the foreign This Judgment can be registered consideration of where to issue Jurisdiction. Issuing legal proceedings as a mortgage over any land or proceedings is whether the debtor If a satisfactory response hasn’t property owned or part owned by is likely to dispute liability and the These are issues which must be been received from the Debtor in the Debtor. It prevents the property proofs which will be required by the considered by the Creditor before that period, proceedings are issued being sold and the Creditor has the creditor in obtaining judgment. For issuing Proceedings and not after in the Republic of Ireland in the right to have the property sold off instance, if the Creditor chooses to he has obtained Judgment against Small Claims Court, the District, and the proceeds used to pay the issue proceedings against a debtor the Debtor. At Morgan McManus, Circuit or High Court, depending debt. in Northern Ireland but where the because of our knowledge and on the amount of the debt which contract was performed in the experience of the systems which is due. Proceedings are issued Lodgement of Judgement with Republic of Ireland, there is every apply in both Jurisdictions, we in Northern Ireland in the Small Sheriff likelihood that the Creditor will run ensure to advise the Creditor on Claims Court, the County Court or The Sheriff will attempt to seize into difficulty in proving his case in whether his Proceedings should be the High Court, likewise depending debtor’s assets. Proceeds from the Northern Ireland because he will not issued in the Republic of Ireland or on the amount of the debt which sale of assets to cover the money be able to secure the attendance Northern Ireland. Where that client is due. The Debtor has more time owed will go to the Creditor via his of witnesses in Northern Ireland at least understands the processes to respond and will either pay up, solicitor. where those witnesses refuse to which apply on either side of the ignore the notice or decide to fight attend from the Republic of Ireland. Border that understanding can the case. Bankruptcy There are some limited instances assist the client in coming to some This applies only when the Debtor where a Northern Ireland Court can assessment at the start as to how Judgement is an individual and the debt is very compel a witness from the Republic he should proceed. To assist in that If no response is given either large. It usually means that the of Ireland to attend the Northern understanding, I have set out below way, then a Judgment (a sworn Debtor will lose everything he/she Ireland Court but this could not the various steps which apply in statement outlining the debt owed owns. always be guaranteed at the both Jurisdictions. and by whom) against the debtor is commencement of the Proceedings. issued. Liquidation / Winding Up This applies where the Debtor is The temptation in the past would There are several options for a limited liability company leading have been to issue proceedings enforcing this Judgment: to the assets of the company in the jurisdiction where the becoming vested in the Receiver/ judgment is likely to be enforced. Republic of Ireland Liquidator who is required to This was because it was more sell the same and pay off all the difficult and onerous to enforce Instalment Order Creditors. a foreign judgment in another Depending on the financial Jurisdiction. This was because it circumstances of the Debtor a Court Some of these procedures are was necessary to apply to the court Order can rule that a debt may be described in greater detail in the in that Jurisdiction for recognition paid off in instalments. Procedures next section on enforcement of of the foreign decree. Such a involved are the Examination Order, judgements in Northern Ireland. court application is however no the Instalment Order and in turn longer necessary in view of the the Order for Imprisonment of the introduction of regulation number Debtor. 805/2004 by the European Parliament both in the Republic A Garnishee Order of Ireland and Northern Ireland. This is an Order against a third There is now a document known party who holds money owed to as “European Enforcement Order” or belonging to the Debtor and 90 91
    • Northern Ireland (b) A Charging Order on land Bankruptcy Proceedings (or (3) Does the Debtor have a job? The Debt Collection Legal Process - Republic of Ireland and Northern Ireland followed by an Order for Sale liquidation of a company) (4) Does the Debtor have any other Once the Creditor has obtained This is a two-stage process. Stage All assets become vested in the assets? Judgment, he has two options. 1 - obtaining a Charging Order - is Receiver/liquidator who is required (5) What would be the impact on They are: an end in itself, because it virtually to sell the same and pay off all the their business (and consequently guarantees payment of the debt at Creditors. Bankruptcy proceedings their ability to pay you) if the (1) Enforcement of the Judgment some time in the future. A Charging against an individual or winding up Creditor obtained a garnishee through the Judgments Order is an order that the land is proceedings against a company order against their bank? Enforcement Office charged is like a mortgage. The are class actions and so there is no (2) Bankruptcy proceedings Charging Order will not take priority priority given to the Creditor who The advantage of using the EJO over an existing mortgage or charge makes a Debtor bankrupt. If the is that this office makes that What the Enforcement of but will take priority over any later debts, after receiver’s commission investigation for the Creditor. Judgments Office does charges. The house or land cannot etc, exceed assets, then a dividend Unfortunately however, the EJO The Enforcement of Judgments be sold with a good title until the is made of so much in the pound does not have the resources to Office (the EJO) is a branch of charge is paid. A solicitor acting and the creditor gets a proportion act as swiftly as the Creditor might the Courts Service responsible for a buyer would find out about of his money back. Bankruptcy / expect and the Creditor might, in for enforcing all judgments in the Charging Order by making a Winding Up proceedings are a that instance, consider using a Northern Ireland in all ways Registry of Deeds or Land Registry powerful weapon because a Debtor private detective / credit agency to except through Bankruptcy search during the conveyancing has no choice but to pay off the gather information. Occasionally, proceedings. Once a Judgment process. Stage 2 - obtaining an debt to save him/itself. Bankruptcy proceedings are the is registered with the EJO, an Order for Sale is not guaranteed. better option. For example, if the officer is specifically assigned to This is at the discretion of the court How fast is each method of Creditor discovers that the Debtor enforce the debt. Initially, that and does not always succeed. It enforcement? previously owned property and officer will make an investigation usually depends very much on If you are issuing Bankruptcy transferred all of it to his/her spouse into the Debtor’s means. As part the size of the debt as compared proceedings, it usually takes about of children, Bankruptcy proceedings of their investigatory powers, the to the value of the house or land 5 months from the time that a are the better option because the EJO can summons a Debtor to and whether there is a family living statutory demand is served until a Receiver can claw the gift back into the Magistrates’ Court to provide there. If there are children living final Bankruptcy Order. the Bankrupt’s estate. evidence about his means. Failure there, there is less likelihood of an order for sale. In the case of enforcement through Before either method of to answer that summons can result the EJO, it can be very slow. Some enforcement is chosen, it is in the debtor going to prison. (c) A Garnishee Order cases can take more than one year recommended that the Creditor This is an Order against a third to reach a conclusion. firstly carries out a Bankruptcy Once the officer has enough party who holds money which is search against the Debtor to see information about the Debtor, he will owed to or belonging to the Debtor Which method of enforcement if any Bankruptcy / Winding Up decide which method of enforcing and ordering that person to pay should be used? proceedings have already been the Judgment is appropriate. He the Creditor out of that money. Before the Creditor makes a instituted. can do any of the following: Garnishee Orders are usually made decision as to which way he wants against banks or building societies. to enforce the Judgment, it is A lot of these considerations also (a) Warrant of Execution recommended that the Creditor apply to the enforcement process By this method, a Bailiff is ordered (d) An Attachment of Earnings gathers as much information about in the Republic of Ireland. It is to seize all goods and chattels Order the Debtor as he can. In particular, however important to bear in mind belonging to the Debtor. The Bailiff This is an order against an Employer attempts should be made to that, whereas in Northern Ireland then sells them and the proceeds of the Debtor to make payments of ascertain the following: the enforcement process remains are applied towards the Judgment a certain amount out of the salary of under the control of the EJO, in the debt. The only items, which his employee and pay this direct to (1) Whether the Debtor owns Republic of Ireland the Creditor, cannot be seized, are the tools of the Creditor. their own house and what, if through his Solicitor, must be more a person`s trade and their bedding any, mortgages are on it? actively involved in commencing and clothing. (2) How financially viable is their / pursuing each stage of the business? enforcement process. 92 93
    • Other methods of Enforcement applying in both Jurisdictions: Judgment registered in the Registry of Judgements All judgements will then appear accordingly in the Gazettes of the Dun & Bradstreet (Stubb’s) and Experian Ireland (previously the ITPA). An informed Creditor can make a better assessment as to how to proceed where he understands the processes which apply. The Creditor should take a more active part in deciding which means of enforcement is applied against the Debtor. This Article will at least have gone some way in increasing the Creditor’s understanding. Brian Morgan Morgan McManus Solicitors email: bmorgan@morganmcmanus.ie 94
    • Useful Topics
    • INSURANCE Useful Topics If you are in business, you will need insurance. You need to insure your buildings and contents and also to provide for goods in transit and business interruption. You will need to take out Employers Liability Insurance and Public Liability Insurance. In Ireland and Northern Ireland, every person is legally obliged to have insurance to cover legal liability for injury to others and damage to their property arising from the use of vehicles on the road - third party insurance. While it does not specifically deal with Ireland, we recommend that you visit the Association of British Insurers web site which gives a lot of good advice on Insurance needs. Bear in mind that, whereas it advises that Employers Liability Insurance is compulsory, it is not compulsory in Ireland. Of major concern to any business intending to set up business or trade on the other side of the border is whether its goods and services will be covered by its existing Insurance Policy for the provision of its goods and services on the other side of the border. Generally, insurance companies which provide insurance cover in Northern Ireland (United Kingdom) will not automatically provide such cover in Ireland and it will be necessary to check with your insurance company or broker to ascertain exact details of cover for the services which you intend to provide outside your existing jurisdiction. CHOOSING A BUSINESS PREMISES Introduction Making the right choice of business premises is likely to be one of the most crucial decisions which determines viability of the business. Before making that decision, you will need to carefully consider your business needs and the implications for taking on any particular premises. Should I work from home? Many successful businesses started their life in the home and consideration should be given to starting a new business from home. It is likely to save you considerably on business expense and will save time travelling to another place of work. While practical implications such as disruption of family life may arise there are implications on legal and financial levels which will require some thought. The following points should be considered: • Will there be any objections from neighbours? • Would your business or part of it’s operation (such as an advertising sign) infringe planning law? If so, would you be able to get planning permission? • If you have a mortgage, would you be in breach of its terms by running the business from home? • Are there any restrictive covenants or conditions in the title to your property which would preclude you from running a business from home? • How will your rates liability be affected? • Would you be able to get any tax relief on any of the facilities you use at home to run your business? 101
    • • Would you be in breach of any condition on your insurance policy? Other outgoings on the property Useful Topics • Will working from home make it more difficult to obtain business? Rates and the cost of services do vary in different areas, although these will also be in • How will it affect the usual exemption from Capital Gains Tax if you sell your home proportion to the size of the premises. in the future? Size Should the business be moved to another location? This is a key element in determining whether the premises meets the needs of the The need to move should be considered very carefully. The following points should be business but it is also a key ingredient in working out comparisons (see square footage considered: value below). • Has your existing business premises enough space to fulfil its current needs Square footage value or future needs? If not, is there any alternative - such as extending or renting By dividing the total of the annual rent by the number of square feet inside the additional nearby premises for storage space - other than moving? premises, it is possible to get an idea of the market rental value of the premises and • Has the business got too much space? If so, will a move to smaller premises, make comparisons with other premises which are not the same size. Although this is with its consequential saving in costs, be better for the business after taking into likely to be the most important factor determining value, it is only a starting point. All account the negative aspects of moving? Would you be in a position to rent out the factors listed here should be taken into consideration. your spare space to another business? • Is the layout of the existing premises inadequate for your needs? If so, will a Planning Permission move be better for the business than other alternatives such as carrying out It is important to establish that the particular premises has planning permission for your improvements? intended use. If not, you will need planning permission before you could commence • Consider all the changes in overheads associated with changing premises, business. including the cost of rent, rates light and heat. • Consider all the capital expenditure in moving including removal, refurbishment, Condition installation, legal and other professional costs. The condition of the property may have a bearing on the rent currently being paid. If the premises are in poor condition, it is worth finding out why. It may be an indication Buying or Renting? of a prior business failure. If you are contemplating taking over an existing lease, the Sometimes the decision to buy or rent is based on tax implications and specific current tenant may well be in breach of an obligation to repair the premises. If you tax advice should always be sought. A decision to buy is usually only taken by an are interested in the premises, this is one reason why you would need to have the established business with a proven track record. Therefore the rental option is the refurbishing work costed out, if you are to be liable for that expense. most realistic for start up businesses. Use restrictions in the lease Below, we set out the main features of most types of rented commercial property. A “user clause” is a covenant imposed by the landlord restricting the tenant to using the premises for a particular purpose or class of purposes. The object of such a user Rent clause is usually to protect either the landlord himself or other tenants from adverse For the person not considering purchasing premises outright, this is likely to be a competition. If you are looking to pass on or sell the lease in the future, a user clause crucial part of the equation. However, there is more to rent than just the amount being could hamper your ability to do that. paid annually. Enquiries should be made also about the next rent review date (the date on which the landlord is allowed to review the rent and increase it) and the history of Tenure rent increases during the term of the lease. Also, there maybe VAT payable on the rent. This term is usually used to distinguish leasehold and freehold property. Short-term This would be very important if you were not registered for VAT and thus unable to leases tend to be between a year and not exceeding 5 years and may or may not reclaim the VAT element. contain a Rent Review Clause. It is common practice for leases to be of 35 years duration with Rent Reviews every 5 years. Landlords tend to avoid giving tenants the Service Charges right to terminate their lease prior to the full term. Therefore signing a lease tends to be Many commercial leases carry with them a service charge liability. That liability is an irrevocable financial commitment which must not be undertaken lightly. Even if you an amount payable for the provision of services to the property. If the premises are cease trading from a premises this does not mean that you do not have to continue part of a building, this will include the cost of maintaining and repairing the structure paying the rent required under the lease for the remainder of the term. Often the only and common parts of the property and shared amenities with other tenants. As well way of getting out of a lease is to sell on the remaining number of years in your lease as finding out the service charge it is very important to find out what “services” you to some third party. This is called an “assignment” and the landlord’s permission must are getting. Only then can you determine whether the service charge is excessive or usually be obtained. whether the services are genuinely beneficial to the property. Normally, you will not get 102 the full picture about service charges until your solicitor has reported back to you on 103 the replies to his enquires.
    • BUSINESS START UP AND REGISTRATION The structures which enterprises may decide to use in any particular joint venture Useful Topics Businesses can trade under the following business types: situation will vary greatly depending on a number of considerations. The first consideration for joint venturers is whether to operate their venture through (a) a a) Sole Trader company in which each will hold shares and have a degree of control over the A Sole Trader is an individual who is self employed. If you trade under a name company’s activities or (b) through a partnership agreement or (c) by means of a different than your own, then you must display your name and address at your trading agreement. business premises and on all stationery. The best legal structure for the joint venture will depend on the nature and b) Partnership purpose of the venture, the number of persons or firms who wish to be involved If your business is a Partnership between two or more people, you should in the venture, the tax considerations affecting each participant, the size of capital consider a formal Deed of Partnership although this is not a legal requirement. investment and other similar matters. If you do choose to have a formal Deed of Partnership you will need to consult a Solicitor. The Solicitor can draw up a formal Partnership Agreement, called For small operations, where only two persons are involved, a partnership or a “Deed of Partnership”. This will cover ownership of the Partnership assets, simple trading agreement may be more favourable. In larger scale activities, it is how you will share the profits, liabilities, leases and other responsibilities. It is often more practicable and more efficient to operate the joint venture through the important to get these sorted out at the start. If the Partnership is trading under medium of a separate company. In common language this company is referred a name other than that of the owner you must display the name and address of to as a Joint Venture Company. If a Joint Venture Company is the chosen the owner and an address for each Partner at which documents can be served. vehicle, then a shareholder’s agreement will be required to regulate the decision In certain instances you must register the trade name with the Department of making processes within the company and to provide a framework for resolving Economic Development as required by the Business Names (Northern Ireland ) any disputes which may arise. Such a shareholder’s agreement might also Order 1986. contain a clause providing an exit mechanism for each of the joint venturers. c) Limited Company APPENDIX OF TERMS To form a Limited Company you can buy an “off-the-shelf” Company or create Breach of Contract your own new company. If you create a new Company you must agree and Failing to perform any term of a contract, written or oral, without a legitimate legal register its name and address with the Registrar of Companies at the Companies excuse. This may include not completing a job, not paying in full or on time, failure to Registry Office, Belfast. A Limited Company must display its full corporate name deliver all goods, substituting inferior or significantly different goods, not providing a outside all places of business and on all stationary. Registration details must bond when required, being late without excuse, or any act which shows the party will be shown on business letters and order forms. Directors must file statutory not complete the work (“anticipatory breach”). documents, such as Accounts and Annual Returns. Contract There are various benefits to forming a Company, such as better Pension Planning An agreement with specific terms between two or more persons or entities in opportunities, ability to obtain Bank or Grant Finance, the passing of Shares by which there is a promise to do something return for a valuable benefit, known as Gift or Inheritance in a family and more particularly the benefit of Limited Liability “consideration”. In some cases, a contract can consist of several documents, such as Protection. Limited liability also provides protection to the Directors personally a series of letters, orders, offers and counter offers. against financial liabilities such as trade creditors in the event that the company’s business venture proves to be unsuccessful. There are however disadvantages Double Taxation Relief to the formation of a company related particularly to potential double tax charges Where credit is given for the lower of the two taxes. and additional accounting and auditing requirements. You should consult us and your Accountant for advice in respect of the Tax consequences of forming a Enforce company in advance of taking this route. To enforce Judgment means to obtain monies or compensation which were awarded by the Judgment of a Court. It can also cover what means are used to ensure payment d) Joint Ventures of monies due. For example, to seize property under Court Order from the person who The impact of specialization in commercial activities has lead to a situation where owes money under that Court Order. parties may need to co-operate in order to develop new products, services and markets. Some enterprises find themselves in the situation where they Indemnity lack particular resources, skill or capital and there are obvious advantages in The act of reimbursing to someone any losses which they have incurred or will incur co-operating with someone who has the missing resources, skill or capital. “indemnify”: to guarantee against any loss which another might suffer. Example: two parties settle a dispute over a contract and one of them may agree to pay any claims 104 which may arise from that contract, holding the other harmless. 105
    • Jurisdiction Secure Judgment Useful Topics The authority given by law to a court to try cases and rule on legal matters within A judgment is the final decision by a Court in a lawsuit. The word “decree” is a particular geographic area and/or over certain types of legal cases. It is vital to sometimes used as synonymous with judgment. The “securing” of a judgment is determine before a lawsuit is filed which court has jurisdiction. In the specific context obtained by either obtaining judgment in the Court Office (where the defendant does of Northern Ireland and the Republic of Ireland, it is important to ascertain whether the not attend Court) or obtaining the final decision of the Court after the hearing of Courts in Northern Ireland or the Republic of Ireland are entitled to try the case. the issues by a Trial Judge. Once Judgments is “secured”, a Court Order (written document) issues which records the decision of the Court. Liability Liability means legal responsibly for one’s acts or omissions. Failure of a person Transfer Pricing or entity to meet that responsibility leaves him open to a law suit for any resulting The price at which goods or services are transferred between one country and another damages or loss which may occur to the other party. within the same organisation. Negligence Witnesses Failure to exercise care towards others which a reasonable or prudent person would A person who testifies under Oath in a Trial with first-hand or expert evidence in a law do in the circumstances or taking action which such a reasonable persona would suit. It is generally only possible to issue a witness subpoena (to compel attendance not. Negligence is accidental, as distinguished from “intentional torts” (assault or at Court) on a witness who resides in the jurisdiction where the Trial is occurring. For trespass, for example) or from crimes. Negligence can result in all types of accidents example, if a Trial were held in County Fermanagh it would not generally be possible for causing physical and/or property damage, but can also include business errors and the Court in Northern Ireland to issue a witness subpoena on a witness residing in the miscalculations. Republic of Ireland to compel his attendance in the Northern Ireland Court. Therefore, for instance, where you anticipate that liability for payment will be disputed by your Passing of Risk customer and your customer resides in the other jurisdiction it would be advisable to Risk, in terms of loss, is the responsibility that a carrier, borrower, user/purchaser of issue proceedings in the jurisdiction where the relevant witnesses reside – so that you property or goods assumes if there is damage or loss. Passing of Risk means the will know that you will be able to compel their attendance in Court. point at which the buyer will be responsible for the goods. For example, if goods are delivered by lorry, who bears the loss if the goods are stolen in transit before they Zero Rated reach the purchaser? Where VAT is charged at 0%. Permanent Establishment For detailed information on this, see Article 5 of the Tax Treaty between UK and Ireland – see www.revenue.ie and conduct a search by ‘UK Tax Treaty’. REDS Agent A REDS (Registered Excise Dealer and Shipper) Agent – used for the import and export of excisable goods. http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp. portal?_nfpb=true&_pageLabel=pageExcise_InfoGuides&propertyType=document &id=HMCE_CL_000221 Reverse Charge Mechanism Under the Reverse Charge Mechanism it is the customer or purchaser that accounts for the VAT on a purchase rather than the vendor (as is normally the case). Risk Risk, in terms of loss, is the responsibility that a carrier, borrower, user/purchaser of property or goods assumes if there is damage or loss. 106 107
    • A Simple Guide to Cross Border Business has been developed as part of the InterTradeIreland/First Stop Shop initiative. The partners would like to acknowledge the work of the following in compiling A Simple Guide to Cross Border Business: FPM Chartered Accountants; Morgan McManus Solicitors; and Northern Bank’s Treasury Market Services. This publication is available on request in alternative formats including Irish language, Ulster Scots, Braille, disk and audio cassette. For more information, please contact: Communications Department Telephone: 028 3083 4100 (048 from Ireland) Textphone: 028 3083 4169 (048 from Ireland) Email: equality@intertradeireland.com InterTradeIreland are confident that the information and opinions contained in this document have been compiled or arrived at by the authors from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made to their accuracy completeness or correctness. All opinions and estimates contained in this document constitute the authors judgement as of the date of this document and are subject to change without notice. This publication is intended to provide general information to its readers concerning the subject matter of the publication. It is not intended to provide a comprehensive statement of the subject matter of the publication and does not necessarily reflect the views of InterTradeIreland. While care has been taken in the production of the publication, no responsibility is accepted by InterTradeIreland for any errors or omissions herein. 108
    • The Trade and Business Development Body The Old Gasworks Business Park Kilmorey Street Newry Co Down BT34 2DE Telephone: 028 3083 4100 (048 from Ireland) Fax: 028 3083 4155 (048 from Ireland) Textphone: 028 3083 4164 (048 from Ireland) Email: info@intertradeireland.com Web: www.intertradeireland.com Publication: October 2009