Quarterly Newsletter Page 8

If you or your company spend good money promoting

yourself (through advertising or using the internet or what-

ever) then it’s important that you make sure you stand out

from the crowd. It never ceases to amaze me how many

competing companies look just like each other when they

set out their stall.

I remember working for a well-respected legal practice

that had just been through a change of leadership. A new

managing partner had been appointed and, as advertising

advisors, we were asked to present some ideas to

promote the new regime. The approach we suggested

was mildly challenging and the individual who was

responsible for marketing the practice said he would like

to run our ideas past the partners. They were not happy.

They didn’t like to be challenged.

The ad that eventually announced the change took the

very predictable “Tombstone format” and simply pictured

the new managing partner with the caption “new

managing partner at xxxxxx”. This certainly made himself

and his family proud and elicited a good number of

congratulatory messages from many of his existing clients

and friends!

Unfortunately it missed the real opportunity which was to

identify what the regime change meant. The ad failed to

promote the revitalised practice to its many different

markets.

The trouble with advertising is that many people think it is

easy and that any fool can do it. Regrettably, a lot of

today’s advertising in the mass media lends credence to

this idea. But the truth of the matter is very different.

Good advertising is challenging, both to the people who

create it and to the company that pays for it. But good

advertising should deliver results that justify the challenge

and the cost. It should be accountable.

Francis Brennan is one of Ireland’s leading hoteliers. In an

interview recently he said he didn’t do advertising for his

famous hotel, the Park in Kenmare. He said what he did

was marketing.

No advertising can be effective if it is not part of an overall

marketing campaign. And communication is at the heart

of all marketing. Over the years Francis has created an

exceptional customer experience at the Park. He never

missed an opportunity to nobble the journalists to promote

his pride and joy. But he also had a web site, a suite of

brochures to promote the various and many activities

at the Park, regular mailings to his existing base of

customers and constant communication of developments

at the hotel through many different channels.

He doesn’t do advertising!!! I seem to remember the odd

ad on the back page of the Irish Times also. Being

different from your competitors is important. Being heard

by your customers and potential customers is also vital to

the success of your marketing. In the present straitened

times the media appear to be bending over backwards to

attract business. Be wary. There are deals to be done. But

there are deals that should be left undone.

In Ireland, we have to be at or near the bottom of the

current economic cycle. Invest in marketing at the present

time and you will get remarkable value in whatever

marketing tools you purchase because the market itself is

so competitive.

You will notice that I am talking about “marketing” and not

advertising. There is much work to be done in getting

your marketing geared up before you embark on any

communication programme. And that preparation is the

most important and most valuable work which, in all

probability, will be the least expensive part of what you

have to do to win against your competitors

My company is working with a number of clients preparing

the ground for action in the coming months. Together we

recognise that a unique opportunity is coming up as

the country emerges out of this deep recession. The

companies that take the initiative early will get a serious

head-start over their competitors who are awaiting the

dawn. Come and join us, if you dare.

Des O’Meara is Chairman of Rubicon Advertising. For

over 30 years he ran his own agency Des O’Meara &

Partners which was voted Agency of the Year in the

inaugural event organised by Marketing magazine.

He worked with a wide diversity of clients such

as Quinnsworth/Tesco, Renault, Golden Pages,

Nivea, Esat, Ulster Bank, Wyeth and many others. He is a

Fellow of the Institute of Advertising Practitioners in

Ireland and a member of the Marketing Institute. Rubicon

provides marketing and advertising services to Hughes

Blake. Find out more about Rubicon at their web site

www.rubicon.ie.

The Hughes Blake “Business to Business”

Enterprise Network

Whisper or shout… Make sure you stand out!

Quarterly Newsletter

Issue 9 December 2010

CHARTERED ACCOUNTANTS

Con ta c t De ta i l s

Clonhaston

Enniscorthy

Co. Wexford

Joyce House

22/23 Holles Street

Dublin 2

www.examinership.ie www.hughesblake.ie

T: + 353 1 669 9999 / + 353 53 92 33333

F: +353 1 669 9777 / + 353 53 92 34403

E: info@hughesblake.ie

Following the recent announcement of the measures to be included in Budget 2011, you may wish to consider some of the urgent action points set out below before the year end:

Availing of tax free ex-gratia termination payments in

excess of €200,000 where possible a cap of €200,000 applies as and from 1 January 2011.

Exercising employee share options. Significant

changes to share awards have been introduced, some effective as and from 1 January 2011.

Maximising your personal pension contributions prior

to 31 December 2010. An earnings cap of €115,000 will apply for contributions made on or after 1 January 2011.

Withdrawing cash from your pension and availing of

higher tax free pension lump sums prior to 31 December 2010. With effect from 1 January 2011, the tax free lump sum that an individual can draw down in a lifetime is being reduced to €200,000.

Points to consider during 2011:

While Capital Gains Tax (CGT) and Capital

Acquisitions Tax (CAT) rates were not changed in Budget 2011, the National Recovery plan has indicated that the current single tax rate systems for these taxes will be replaced with systems of increasing rates in 2012.

In addition, reliefs and exemptions in relation to CGT

and CAT will be abolished or restricted. For example:

○ CGT Retirement Relief: Currently there is a full exemption from CGT where an individual, aged over 55 or more disposes of a business or farm to a child and certain conditions are satisfied. It has been indicated that this relief will be amended and restricted in 2012.

○ CAT Business Property Relief: Currently a partial relief from CAT (90% reduction in value of gift) can apply to gifts or inheritances of business assets. It has been indicated that this relief will be amended and restricted in 2012.

○ CAT Agricultural Relief: Currently relief from CAT applies to gifts or inheritances of a farm where certain conditions are met. It is likely that this relief will be amended and restricted in 2012.

In light of the above, you should consider your succession planning during 2011. Please also note that further changes to these capital taxes could be introduced in the Finance Bill and therefore we would recommend that for any transfers that you are planning, you should consider doing these early in the New Year.

Budget 2011 - Action Points

Summary of Headline Tax Changes

Introduced in Budget 2011 Alma O’Brien, Tax Director

Budget 2011 Special

Merry Christmas and best wishes for the New Year, from all at Hughes Blake

Quarterly Newsletter Page 2

We set out on the previous page a summary of the tax

changes introduced in the recent Budget. Some of the

other features of the Budget are set out below. Should

you require any specific advice in relation to how these

changes affect your personal tax situation, please do not

hesitate to contact us.

1. Property based tax reliefs to

be abolished Under the Budget provisions, many taxpayers who

invested in capital allowances schemes will lose some of

the benefits that they had been expecting. Often the

rental income is low and/ or borrowings high so there may

be little or no taxable income from such properties. The

ring fencing provisions as detailed below will therefore be

particularly onerous on such investors.

(a) Restriction of capital allowances on residential

accommodation (i.e. Section 23 type property relief)

From 1 January 2011, Section 23 type relief will only

be available for offset against income from the

property which gave rise to them i.e. against income

from the Section 23 property itself. Prior to this, the

relief was available against all rental income.

Any Section 23 type relief which is not used within the

10 year qualifying period will be automatically lost and

cannot be carried forward.

From 1 January 2011, the existing claw-back on sale

of such properties will continue to apply. However a

new owner will not be able to claim any of the relief on

purchase.

For Section 23 properties yet to be sold and for which

relief has yet to be claimed, the 10 year qualifying

period will start on 30 June 2011 regardless of the date

of the first qualifying lease. For example, this will

affect new unsold properties held by builders.

A guillotine provision will ensure that all unused/

unclaimed capital allowances are lost post 31

December 2014.

(b) Restriction of other capital allowances for on

property investments

From 1 January 2011, restricted allowances in respect

of a building used in a trade may only be offset against

the income of that trade.

Where the allowances arise in respect of a building

which has been let, the capital allowances will only be

available against income arising from the property to

which they relate i.e. ring fenced against that property

only.

The capital allowance period is to be curtailed as

follows:

- From Budget Day, any unused capital allownces

carried forward beyond the relevant 7 year or 10 year

period will be lost.

- If the accelerated capital allowance period is in

excess of 10 years, the allowance period will be

shortened to 7 years. If the period has already ended,

the reliefs will be lost. If the period has not yet ended

the remaining losses will be condensed into the

remaining period following a discount of 20%. Any

allowances unused beyond the 7 years will be lost.

2. Abolition of other allowances and reliefs A number of tax reliefs have been abolished or curtailed.

We set out below a summary of reliefs affected:

Approved Share Option schemes (from 24 November

2010)

Patent Royalty exemption (with effect from 24

November 2010)

Rent relief (on a phased basis)

Tax relief on loans to acquire interest in companies

Tax relief on trade union subscriptions

Tax relief on subscriptions to professional bodies

Benefit in Kind exemption on employer provided

childcare

Tax exemption for payments to National Co-operative

Farm Relief Services Ltd.

The accelerated allowance for capital expenditure on

farm buildings for pollution control.

Investment allowance for machinery and plan for

exploration expenditure.

Tax relief for new shares purchases by employees.

Summary of Headline Tax Changes

Introduced in Budget 2011 (continued)

Cunningham, Managing Director of Bank of Ireland Business Banking. Research carried out by Hughes Blake among members of the association in advance of the confer-ence featured widely in the national media. 63% of delegates who attended believe the world economy is on the road to recovery, and a majority of delegates feel that the recovery would really take hold by late 2011. Of more importance to Ireland, 71.6% of delegates indicated that they would be happy to recommend Ireland as a location for their clients to invest. The most important factor for these global advisors in recommending Ireland

was a commitment to a low and stable tax system, followed by ease of doing business, driving competitive-ness and an educated workforce.

Commenting on the results of the

Hughes Blake survey, IDA Ireland

CEO Barry O’Leary said “I welcome

the findings of this survey as they

closely align with what IDA Ireland

and its clients have being saying in

recent times. In 2010 to date we have

made over s ixty investment

announcements from both new and

existing client companies. Ireland’s

improving competitiveness coupled

with the positive elements of talent,

technology, tax regime and our

excellent track record in attracting

foreign owned companies all bode

well for securing further investments

into Ireland. The findings of this

report are very encouraging in that

regard.”

Page 7 Issue 9

Tax Free Lump Sum Reduction From January 1st 2011 the maximum tax free lump sum that can be drawn from a pension fund at retirement will be

capped at €200,000. Anyone entitled to a tax free lump sum in excess of this should seriously consider

2010 Income in excess of €150,000

Age < 30 30-39 40-49 50-54 55-59 60 +

Payment made before December 31st 2010

Maximum Contribution 22,500 30,000 37,500 45,000 52,500 60,000

Tax Saved 9,225 12,300 15,375 18,450 21,525 24,600

Payment made after January 1st 2010

Maximum Contribution 17,250 23,000 28,750 34,500 40,250 46,000

Tax Saved 7,073 9,430 11,788 14,145 16,503 18,860

Additional tax saving by making

contribution before December 31st 2,153 2,870 3,588 4,305 5,023 5,740

Taxation changes in relation to Pensions – Act before December 31

st

Relevant Earnings Reduction From January 1st 2011 the maximum earnings on which employees and self employed people can claim tax relief for

pension contributions will reduce to €115,000 (currently €150,000). This change will also apply to pension contributions

made in 2011 in respect of 2010 income. Therefore clients with income in excess of €115,000 in 2010 who would

normally make their maximum pension contribution in October 2011 should seriously consider making their

contribution before December 31st 2010. The following examples illustrate the benefit of doing so:

Yes

No

Would you consider recommending

Ireland as a location for your clients to

invest?

exercising their retirement options before December 31st. This would include self-employed people and company

directors aged 50+ with pension funds in excess of €800,000 who can currently draw down 25% of their fund tax free.

Please contact Hughes Blake on (01) 669 999 with any queries in relation to pension planning.

C Hughes, Director, Private Client Wealth Management

Over 200 delegates from around the world returned home recently following the hugely successful Integra International global conference in Dublin. Hughes Blake are the Republic of I r e l a n d m e m b e r o f I n t e g r a International, the global association of accounting and consulting firms. Hughes Blake were awarded the hosting of the conference in 2008. With 105 members in 140 cities world-wide, Integra is one of the fastest growing accounting associations worldwide having recently added member firms in Morocco, Cincinnati, Girona and Ramallah. Following an opening reception at the Gravity Bar in the Guinness Brewery sponsored by Bank of Ireland and business sessions in the Shelbourne

Hotel, the conference culminated in a gala reception and dinner in the Convention Centre Dublin.

The social events included a Ryder Cup style tournament at the K Club between Europe and North America which perhaps somewhat predictably,

the Americans won in some style. A night at the Jameson Distillery “Irish Night” was also deemed to be hugely enjoyable by the international attendees. Commenting on the event Neil Hughes said: “We were delighted that so many people came together for what was the biggest global conference Integra has ever hosted. Taking into account the difficulties the economy is facing currently, we felt it was a tremendous opportunity to drive new business for Ireland.” Sponsored by Sage, the theme of the conference was “Driving Enterprise and Trade in a Larger Association” and speakers included the CEO of IDA Ireland Barry O’Leary, Anthuan Xavier who spoke about growing a firm from 2 to 500 people, and Mark

Integra International World Conference 2010 - “A Huge Success”

Quarterly Newsletter Page 6

The Business session at the Shelbourne Hotel, Dublin

Mark Saunders, Global Chairman Denis Bergin, Bank of Ireland,

Mark Saunders and Neil Hughes

Barry O’Leary, IDA

Neil Hughes, Hughes Blake

Chartered Accountants

Christian Gebhardt and Anise Brokstein

being taught how to pull the perfect pint of

Guinness by a staff member

Page 3 Issue 9

3. Income Tax/ PRSI/ DIRT Income tax credits and bands reduced:

The employee tax credit is being decreased from

€1,830 to €1,650. The personal tax credit is being

reduced from €1,830 to €1,650 for single persons and

from €3,660 to €3,300 for married persons.

The standard rate income tax band is being decreased

from €36,400 to €32,800 for single persons, from

€45,400 to €41,800 for married persons with one

income and from €72,800 to €65,600 for married

persons with two incomes. The one parent/widowed

standard rate income tax band is being decreased

from €40,400 to €36,800.

The value of all other tax bands and tax credits will be

reduced by 10%. These changes are effective from

1 January 2011.

A new tax incentive scheme is to be introduced to

encourage taxpayers to invest in works that will

improve the energy efficiency of their homes. Relief

will be available at the standard tax rate for

expenditure up to a maximum of €10,000 on a list of

approved works. The tax relief will be available in the

year following the expenditure.

PRSI/ levies

The income levy and the health levy will be replaced

with a Universal Charge. This charge will apply as

follows:

○ 0% < €4,004

○ 2% €0 to €10,036

○ 4% €10,037 to €16,016

○ 7% > €16,016

The rate of PRSI for Class S (self employed) persons

is being increased from 3% to 4%. Modified PRSI

rates (relevant to certain public servants) will be

increased to 4% on income in excess of €75,036. A

PRSI charge of 4% is being introduced for certain

office holders. These changes will have effect from

1 January 2011.

The employee PRSI ceiling of €75,036 is being

abolished.

From 1 January 2011, employee contributions to

occupational pension schemes and other pension

arrangements will be subject to employee PRSI and

the Universal Social Charge.

The current employer PRSI exemption for employee

pension contributions to occupational pension

schemes and other pension arrangements will be

reduced by 50% from 1 January 2011.

DIRT DIRT rate to be increased from 25% to 27% on ordinary

deposit accounts, and from 28% to 30% on longer term

deposit accounts.

4. Business Taxation

It has been confirmed by the Minister of Finance that

there will be no change to the 12.5% Corporation Tax

rate.

The accelerated capital allowance scheme for Energy

Efficient Equipment will be extended for a further three

years.

The Business Expansion Scheme will be revamped

and renamed as the Employment and Investment

Incentive. Under the new incentive, the limit that can

be raised by companies will be increased from

€2 million to €10 million and the amount that can be

raised in any 12 month period will be increased from

€1.5 million to €2.5 million. In addition the certification

requirements will be simplified. The new scheme will

expire on 31 December 2013.

The three year exemption for start-up companies

is being extended to include start-up companies

commencing a new trade in 2011. The scheme is

being modified so that the value of the relief will be

linked to the amount of employers’ PRSI paid by a

company in an accounting period subject to a

maximum of €5,000 per employee. If the amount of

qualifying employers’ PRSI is lower than the reduction

in corporation tax liability otherwise applicable, relief

will be based on the lower amount.

The rate of Relevant Contract Tax (RCT) applied to

payments to subcontractors not holding a C2 etc is

being reduced to 20% where the subcontractor is reg-

istered for tax and has an established compliance

record. The rate for non registered subcontractors

remains at 35%.

The Employer Job (PRSI) Incentive Scheme will be

extended to the end of 2011.

Quarterly Newsletter Page 4

5. Capital Taxes The Capital Acquisitions Tax (CAT) free threshold on gifts

and inheritances has been reduced by 20%. This

reduction applies in respect of gifts and inheritances

taken from midnight on 07 December 2010. The new

thresholds are as follows:

6. Stamp Duty The Budget brought good news for any new house

buyers (including investors) as it reduced the rate of

stamp duty on residential property as follows:

However, all stamp duty reliefs and exemptions on

residential properties have been abolished in respect of

transfers on or after 8 December 2010.

The reliefs which have been abolished are:

First time buyer relief

Exemptions for new houses under 125 sq metre in size

Relief for new houses over 125 sq metre in size

The 50% relief for transfer of residential property

between relatives (Consanguinity relief)

Exemption for residential property transfers valued

over €127,000

Site to child relief

7. Indirect Taxes

The VRT relief for series production hybrid and flexible

fuel vehicles is being extended for 2 years until the end

of 2012. The rate of relief provided will be up to

€1,500. The VRT relief for plug in hybrid electric

vehicles will continue at up to €2,500 until 31

December 2012.

A review will be undertaken of the excise duty payable

for licenses for on-trade and off-licence sales of

alcohol products during 2011

The rate of excise is being increased by 4 cents per

litre of petrol.

The rate of excise is being increased by 2 cents per

litre of diesel.

These changes are inclusive of VAT applied from

midnight on 7th December 2010.

7. Pension/Life assurance

The overall life-time limit on the amount of tax-free

retirement lump sums that an individual can draw

down is being reduced to €200,000. The excess of this

amount will be taxed at the standard income tax rate of

20% up to an amount of €575,000 (equal to 25% of the

new Standard Fund Threshold). The excess of

retirement lump sums over that amount will be taxed at

the tax payer’s marginal rate of income tax.

The annual earnings limit which determines the maxi-

mum tax-relievable contributions for pension purposes

is being reduced from €150,000 to €115,000 (subject

to the usual age-related percentage limits). As set out

further below (under pensions), contributions made in

2010 in respect of 2010 will be able to avail of the

higher cap whereas contributions made in 2011 in

respect of 2010 will be subject to the reduced limit of

€115,000.

The maximum allowable pension fund on retirement

for tax purposes (known as the Standard Fund

Threshold) is to be set a €2.3 million with effect from 7

December 2010. Certain transitional measures apply

which may permit a higher limit.

The effective tax rate on Approved Retirement Funds

will be increased by raising the deemed annual

distribution of assets in those Funds from 3% of end of

year assets to 5% per annum with that distribution

subject to full income tax each year.

Exit tax rates that apply to life assurance policies and

investment funds are to increase by 2% in each case

and will now be 27% for payments made annually or

more frequently and 30% for payments made less

frequently than annually.

8. Other measures – non tax

Working-age rates of social welfare payment will be

reduced by about 4%

The car scrappage scheme is being extended for a

further 6 months to 30 June 2011. VRT relief of up to

€1,250 will be provided where a car of 10 years or

older is scrapped in accordance with certain criteria

and a new car of emissions band A or B is purchased.

Child benefit is being reduced by €10 per child for the

first, second, fourth and subsequent children. A cut of

€20 will apply to benefit for the third child.

Pre Budget

Post 8

December

2010

Group A

(parent to child) €414,799 €331,839

Group B

(siblings, aunt, uncle etc) €41,481 €33,185

Group C

(non related people) €20,740 €16,592

Value of House Rate from 8 December 2010

0 - €1M 1%

Excess over €1M 2%

Page 5 Issue 9

PRSI Rates 2010 2011

Employer

Standard rate 10.75% 10.75%

Lower rate 8.50% 8.50%

Weekly lower rate limit €356 €356

Self-employed

PRSI 3% 4%

Minimum contribution €253 €253

Employee PRSI 4% 4%

Employee annual PRSI ceiling €75,036 Abolished

Pensions 2010 2011

Annual earnings cap €150,000 €115,000

Tax free lump sum limit n/a €200,000

Capital Acquisitions Tax 2010 2011

Thresholds

Class A €414,799 €331,839

Class B €41,481 €33,185

Class C €20,740 €16,592

Rates

Standard rates 25% 25%

Capital Gains Tax 2010 2011

Standard rates 25% 25%

Annual exemption €1,270 €1,270

Corporation Tax Rates 2010 2011

Standard rate 12.50% 12.50% Higher rate on passive income 25% 25%

VAT Rates 2010 2011

Standard rate 21% 21%

Reduced rate 13.50% 13.50%

Farmers flat rate 5.20% 5.20%

Budget 2011 - Tax Rates and Credits

Personal Income Tax Rates 2010 2011

Standard tax rate 20% 20%

Single Person €36,400 €32,800

Married couple (one earner) €45,400 €41,800

Married couple (two earners) €72,800 €65,600

One parent / widowed parent €40,400 €36,800

Higher tax rate 41% 41% Above standard tax rate

threshold Balance Balance

Exemption Limits 2010 2011 Age exemption limits

(65 years plus)

Single / Widowed €20,000 €18,000

Married €40,000 €36,000

Income Tax Credits 2010 2011

Single €1,830 €1,650

Married €3,660 €3,300

Widowed €1,830 €1,650

PAYE €1,830 €1,650

Age credit single / widowed €325 €245

Age credit married €650 €490

Carers credit €900 €810

Trade Union Subscriptions €70 Nil

Universal Social Charge 2010 2011

Income < €4,004 n/a 0%

Income €0 to €10,036 n/a 2%

Income €10,037 to €16,016 n/a 4%

Income > €16,016 n/a 4%

Income > €16,016 n/a 7%

DIRT Rates 2010 2011

Deposit accounts 25% 27%

Investment Funds 28% 30%