Irish Tax Guide for Sole Traders, Partnerships & Companies | Case Study

Part (a) Case Study

5,000 words

Eileen is an accountant and following redundancy on 1 March 2024 she has decided she would like to be her own boss and to open her own practice.

Eileen will commence on 1 May 2024 and has projected the following profits during the first three years trading. She would like to understand how these profits will be taxed. If there are any reliefs available in these years to reduce the profits subject to tax, Eileen would like to understand the reliefs and know whether a claim must be submitted in respect of such a relief:

Projected profits (1 May 2024 to 30 November 2024) €52,000

Projected profits (1 December 2024 to 30 November 2025) €48,000

Projected profits (1 December 2025 to 30 November 2026) €30,000

Eileen also needs advice on when she needs to pay her taxes, the amount payable on each date and whether she needs to file an income tax return and if so when this should be completed for 2025 and 2026.

Eileen will employ a practice manager to help operate the practice. The manager will be paid on a monthly basis. Eileen would like to understand her payroll obligations as an employer including registration and the operation of the payroll system. Eileen would like to understand how the different payroll methods operate for example cumulative basis in the event of queries from the manager.

Eileen is also concerned about revenue audits and would like to understand the process of a revenue field audit from the time of notification to completion including the implications of underpayments of taxes. Should her business be subject to a Revenue intervention Eileen is adamant her business name is kept out of the papers should any underpayment arise and requests that you outline what options are available.

Eileen is aware that many accounting practices join forces and form partnerships and this is something that she may consider in the future in order to expand her practice. It would be Eileens intention to be the principal partner and to take a salary to compensate for the additional work involved in this role and a profit share of 70%.

If she forms a partnership with another partnership Eileen would like to understand the following:

• How are the overall taxable profits of the partnership calculated?
• The allocation of profits and capital allowances for tax purposes
• Whether any relief for partnership losses are available and if so, how can they be utilised
• Filing obligations for Eileen and the partnership

Eileen’s brother, Jason, has asked you to consider the following: Needy Ltd is an Italian incorporated manufacturing company that makes up its accounts to 30 June each year. The company has factories in Italy and Hungary. Needy Ltd previously had a factory workshop in Ireland which had an Irish manager and a number of Irish staff. The workshop exported goods to customers in Italy. Due to the economic downturn, on 1 July 2024, the directors of Needy Ltd decided to move the Irish operations to the factory in Hungary. The company leased out the Irish workshop on 1 July 2024 to a third party. Prior to 1 July 2024, the Irish operations had an Irish deposit account which Needy Ltd has continued to hold since the Irish operations ceased. All of the directors of Needy Ltd live in Italy and all director and shareholder meetings take place in Italy.

Giving reasons to Jason identify the Irish tax residence position of Needy Ltd for the accounts period ended 30 June 2024 and the extent to which an exposure (if any) to Irish tax arises. Giving reasons also explain to Jason if Needy Ltd.’s exposure to Irish tax changes from 1 July 2024 onwards and state the extent (if any) to which the company is within the charge to Irish tax. Marks will be awarded using case law where appropriate.

Requirement:

• In order to be able to advise in relation to the issues outlined above, research the tax issues arising and prepare a file note recording your research and advice. The file note should include reference to Case law, Revenue guidance, articles or other sources used and should fully support the advice provided. You should assume that the tax rules, rates and payment dates for all years are the same as in 2024. It is essential that case law is reviewed and considered before advice is given. (65 marks)
• Prepare a report which translates in simple terms the tax issues and advice covered in your file note. (25 marks)
• Presentation marks – logical structure, grammar and referencing. (10 marks)  

Total 100 marks