Articles
Articles by Frank McGivney
I have written various articles about taxation
and accountancy and current affairs which I
will print below and which I will update and
add to on an ongoing basis
I have written various articles about taxation
and accountancy and current affairs which I
will print below and which I will update and
add to on an ongoing basis
 |  |  |  |  |
Government bonds explained and are they a good investment
When a country wants to raise debt finance it does so by way of issuing Government bonds. These
are Promissory notes to repay a certain amount of money at a specified date at a specified rate of
interest. If a bonds are issued as 10 year bonds in units of €100 at a 3% yield then the bonds state
that the government will pay the bond holder a return of 3% per year for ten years. The bonds are
traded then on the international markets at prices determined by the yield on the specific bonds
and on the movements in inflation rates and the interest rates pertaining at any time. Obviously at a
rate of 3% the variation in prices which can be occur are minimum. The higher the risk level
associated with a particular country the higher the yield it has to offer in order to attract investors to
buy its bonds. Currently Germany as a highly ranked and stable economy offers an average annual
bond yield of 3%. Riskier countries like Ireland, Greece and Portugal have to offer higher bond
yields in order to attract investors. So for example the annual bond yield on Greek bonds is 6%.
Historically the yield on bonds was much higher and in the region of 10% and higher. Of course this
was also reflected in higher interest rates available through out the world historically. The problem
with the current low yields is that if inflation rises, as is the goal of most of the economies of the
western world at present (in order to make the economies recover from recession) then the return
on the bonds will be nullified and may become negative in real terms. If this happens then you would
be better off spending the money now rather than investing it for ten years, as you would buy more
products or services per €100 now than you would in 10 years time with all the annual 3%’s added
on.
At present there is an abundance of Government Bonds been offered on the international financial
markets due to governments having to borrow to stimulate their economies and to shore up the
shortfalls in public expenditure created by lower tax takes This is all due to economies been in
recession.
As an investment, bonds have the big advantage of a guaranteed return and also of the safety of
being offered by governments who are considered to be blue chip borrowers. This means the
perceived risk of the bonds not being paid back is low. However in recent times the risk associated
with developed western countries has been called into question, with international rating agencies
lowering their risk assessment of many countries from the top tier. Certain countries ratings have
dropped so low as to be just above been classified as junk stock.
Considering the low return and the risk of inflation eventually eroding the yield on these bonds, in
my opinion this wouldn’t be the optimum time to enter the bond market. They are attractive as a very
low risk portion of a well diversified portfolio and they will act as a balancing asset against liabilities.
However in terms of actual real return from the investment they are not very attractive at present. It
all depends on what you are looking for and your attitude to risk. If you want to invest where your
money is secure, but which in return for this security offers you a low rate of return, then bonds are
the way to go. The Irish Government has plans to follow the lead of other countries and issue
national bonds which the public can buy in smaller quantities. The legislation is still being drawn up
for these and we await to see how attractive or otherwise they will be.
Posted by Frank McGivney
Labels: bonds, investment ireland, ireland, irish government bonds
When a country wants to raise debt finance it does so by way of issuing Government bonds. These
are Promissory notes to repay a certain amount of money at a specified date at a specified rate of
interest. If a bonds are issued as 10 year bonds in units of €100 at a 3% yield then the bonds state
that the government will pay the bond holder a return of 3% per year for ten years. The bonds are
traded then on the international markets at prices determined by the yield on the specific bonds
and on the movements in inflation rates and the interest rates pertaining at any time. Obviously at a
rate of 3% the variation in prices which can be occur are minimum. The higher the risk level
associated with a particular country the higher the yield it has to offer in order to attract investors to
buy its bonds. Currently Germany as a highly ranked and stable economy offers an average annual
bond yield of 3%. Riskier countries like Ireland, Greece and Portugal have to offer higher bond
yields in order to attract investors. So for example the annual bond yield on Greek bonds is 6%.
Historically the yield on bonds was much higher and in the region of 10% and higher. Of course this
was also reflected in higher interest rates available through out the world historically. The problem
with the current low yields is that if inflation rises, as is the goal of most of the economies of the
western world at present (in order to make the economies recover from recession) then the return
on the bonds will be nullified and may become negative in real terms. If this happens then you would
be better off spending the money now rather than investing it for ten years, as you would buy more
products or services per €100 now than you would in 10 years time with all the annual 3%’s added
on.
At present there is an abundance of Government Bonds been offered on the international financial
markets due to governments having to borrow to stimulate their economies and to shore up the
shortfalls in public expenditure created by lower tax takes This is all due to economies been in
recession.
As an investment, bonds have the big advantage of a guaranteed return and also of the safety of
being offered by governments who are considered to be blue chip borrowers. This means the
perceived risk of the bonds not being paid back is low. However in recent times the risk associated
with developed western countries has been called into question, with international rating agencies
lowering their risk assessment of many countries from the top tier. Certain countries ratings have
dropped so low as to be just above been classified as junk stock.
Considering the low return and the risk of inflation eventually eroding the yield on these bonds, in
my opinion this wouldn’t be the optimum time to enter the bond market. They are attractive as a very
low risk portion of a well diversified portfolio and they will act as a balancing asset against liabilities.
However in terms of actual real return from the investment they are not very attractive at present. It
all depends on what you are looking for and your attitude to risk. If you want to invest where your
money is secure, but which in return for this security offers you a low rate of return, then bonds are
the way to go. The Irish Government has plans to follow the lead of other countries and issue
national bonds which the public can buy in smaller quantities. The legislation is still being drawn up
for these and we await to see how attractive or otherwise they will be.
Posted by Frank McGivney
Labels: bonds, investment ireland, ireland, irish government bonds
How to do VAT Returns (basic)
If you are operating a business in Ireland, selling a vatable product or service and you exceed the turnover thresholds
as prescribed by the Consolidated Tax Acts in any one year, then you are obliged to register for vat. It is a legal
obligation to register if your turnover exceeds these thresholds. If you go above these thresholds and do not register
then if the Revenue Commissioners become aware that you haven’t registerd then they will register you themselves.
Then they will charge you vat on your sales on the basis that you should have been charging vat for the whole of the
year that you first exceeded the threshold onwards. If as is often the case in a recession you fall below the thresholds
then you can also deregister for vat.
The standard rate of vat in Ireland is at present 21% this applies to most vatable good and a lot of services. There is a
reduced rate of 13.5% of vat for some services especially those in the building industry. Some products have a zero vat
rate such as medical goods. The best aspect of the zero rate is that you charge no vat on your sales but you can still
claim back vat on your purchases. All other goods and services are then exempt from vat and these include schools and
banks. There is a special flat rate vat rate for farmers which will be the subject of a separate article. There is a
comprehensive list of the vat rates applicable to particular products and services on the Revenue commissioners site
www.revenue.ie.
Once you have been registered for vat you will be required to submit vat returns periodically. The periods will depend on
the expected turnover of your business as explained in the article on the fundamentals of vat. The basic structure of vat
returns is that the vat you pay on your purchases is taken away from the vat you charge on your sales to calculate your
vat liability or vat refund. If the vat on purchases is the greater then you are due a refund. This refund can be used to
offset against other tax liabilities or you can get the refund back into your bank account from the tax office. if all your tax
liabilities are paid. The name of the periodical return is a Vat3 form.
The records you need to keep are as follows:
(1) all of your sales invoices. Sales invoices need to show your name and address and vat number. It also need to give
a description of the goods or services been sold as well as the date of the sale. All invoices should be numbered in a
sequential order and must include the net amount of the sale before vat, the vat amount at each vat rate and the total
gross amount of the sale.
(2) Sales day book: which is essentially a list of all your sales broken down between date, invoice number and net, vat
and gross amounts. The total of these is then used as the sales vat in your vat 3 return.
(3) All your purchase invoices. In order to claim the vat on any purchase the Revenue Commissioners insist that you
have a valid invoice which meets the criteria for sales invoice as detailed above in (1). So it is important to keep invoice
for everything you buy relating to your business. Such receipts might relate to the following expenses:
(A) Telephone
(b) Diesel, petrol motor insurance and motor tax
( c) All goods and materials for resale or to be used in the manufacture of good for resale
(d) Computer Expenses including computers, printers, ink cartridges, USB disks etc
(e) Stationery
(f) Advertising
(g) heating and Lightening
(h) if you run your business from home then the revenue in their discretion allow domestic heating and electricity bills
to be claimed on a percentage basis usually one fifth of their total cost on the assumption that the business uses a room
as an office within the house.
(I) any other expenses you may incur in relation to the business. The rule is that the expense must be wholly and
exclusively incurred for the purposes of the business. The best policy is to hold on to all your receipts and allow your
accountant to decide are their claimable. If you don’t have the receipt then the accountant can’t claim the expense or
the vat for you.
(4) Purchases day book which is the same as the sales day book. The total of all purchase invoice vat is then claimed
against the total of sale vat.
(4) Cheque and direct debit Payment book. This is a list of all the payments you make to suppliers employees and
drawing etc. It can then be used to verify that you did indeed pay for all the purchases that you have claimed in your vat
return
(5) Lodgement book which should match up to the sales day book to show that all sales receipts have been accounted
for properly
The following are some guidelines for helping you do your vat returns
(1) if you are claiming expenses from your Principal private residence, for operating the business from it, then only claim
one fifth of the expense and one fifth of the applicable vat
(2) Although vat is charged on petrol and mobile phone top ups the Irish government has in its own wisdom decided to
not allow business’s to claim this vat in their vat returns. The same is true for any vat incurred on purchases bought for
clients or customers and also any travel or accommodation costs of the owner or directors
(3) you can claim the vat on diesel
(4) There is no vat on toll bridges, public parking charges, motor tax, insurance, air travel, etc or any items exempt from
vat or zero rated so don’t claim vat on them in error.
(5) To get the vat on the gross amount of a sale or purchase at 21% you divide the total amount by 1.21 and multiply by
.21. Therefore if you are basing you sales on your total lodgements, then add the total up then divide by 1.21 and
multiply by .21 to get the vat amount. To get the net amount (the sales price before vat ) take the above calculated vat
figure from the gross amount. The same applies to purchases.
This is a very simple guide to vat. Vat legislation is very complex and goes into very detailed and complex issues. Such
things such as inter community sales within the EU and the determination of the point of sale of goods or services can
be very complicated. However for a lot of small and medium size business a lot of the more complex issues will not affect
them.
The one item relating to foreign purchases or sales that does effect Irish business’s a lot is when you buy or sell to other
countries in the EU including Northern Ireland. If you buy something from another EU country and you are registered for
vat and what you buy is for your business then the business in the other country should request your Irish vat number
and not charge you vat on the sale. The same is true for an Irish company selling to a business registered for vat in
another EU country. You can ring the revenue commissioners to check the validity of any vat number you are given by
such a customer.
Overall the operation and collection of vat is a substantial cost to any business. However as it is open to scrutiny by the
revenue commissioners it is vital that all vat returns are done correctly in order to avoid potential additional interest and
penalty charges.
The thresholds for Vat Registration as at 14 April 2010 are as follows as per the Revenue Commissioners site:
The principal thresholds applicable are as follows:
* (a) €37,500 in the case of persons supplying services,
* (b) €37,500 for persons supplying goods liable at the 13.5% or 21.5% rates which they have manufactured or
produced from zero rated materials,
* (c) €37,500 for persons making mail-order or distance sales into the State,
* (d) €41,000 for persons making intra-Community acquisitions,
* (e) €75,000 for persons supplying goods,
* (f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is derived from
supplies of goods (other than of the kind referred to at (b) above) and
* (g) A non-established person supplying taxable goods or services in the State is obliged to register and account for
VAT irrespective of the level of turnover.
A taxable person established in the State is not required to register for VAT if his or her turnover does not reach the
appropriate threshold above. However, they may opt to register for VAT.
Posted by Frank McGivney
Labels: how to do vat returns, thresholds for vat registration, vat returns ireland
If you are operating a business in Ireland, selling a vatable product or service and you exceed the turnover thresholds
as prescribed by the Consolidated Tax Acts in any one year, then you are obliged to register for vat. It is a legal
obligation to register if your turnover exceeds these thresholds. If you go above these thresholds and do not register
then if the Revenue Commissioners become aware that you haven’t registerd then they will register you themselves.
Then they will charge you vat on your sales on the basis that you should have been charging vat for the whole of the
year that you first exceeded the threshold onwards. If as is often the case in a recession you fall below the thresholds
then you can also deregister for vat.
The standard rate of vat in Ireland is at present 21% this applies to most vatable good and a lot of services. There is a
reduced rate of 13.5% of vat for some services especially those in the building industry. Some products have a zero vat
rate such as medical goods. The best aspect of the zero rate is that you charge no vat on your sales but you can still
claim back vat on your purchases. All other goods and services are then exempt from vat and these include schools and
banks. There is a special flat rate vat rate for farmers which will be the subject of a separate article. There is a
comprehensive list of the vat rates applicable to particular products and services on the Revenue commissioners site
www.revenue.ie.
Once you have been registered for vat you will be required to submit vat returns periodically. The periods will depend on
the expected turnover of your business as explained in the article on the fundamentals of vat. The basic structure of vat
returns is that the vat you pay on your purchases is taken away from the vat you charge on your sales to calculate your
vat liability or vat refund. If the vat on purchases is the greater then you are due a refund. This refund can be used to
offset against other tax liabilities or you can get the refund back into your bank account from the tax office. if all your tax
liabilities are paid. The name of the periodical return is a Vat3 form.
The records you need to keep are as follows:
(1) all of your sales invoices. Sales invoices need to show your name and address and vat number. It also need to give
a description of the goods or services been sold as well as the date of the sale. All invoices should be numbered in a
sequential order and must include the net amount of the sale before vat, the vat amount at each vat rate and the total
gross amount of the sale.
(2) Sales day book: which is essentially a list of all your sales broken down between date, invoice number and net, vat
and gross amounts. The total of these is then used as the sales vat in your vat 3 return.
(3) All your purchase invoices. In order to claim the vat on any purchase the Revenue Commissioners insist that you
have a valid invoice which meets the criteria for sales invoice as detailed above in (1). So it is important to keep invoice
for everything you buy relating to your business. Such receipts might relate to the following expenses:
(A) Telephone
(b) Diesel, petrol motor insurance and motor tax
( c) All goods and materials for resale or to be used in the manufacture of good for resale
(d) Computer Expenses including computers, printers, ink cartridges, USB disks etc
(e) Stationery
(f) Advertising
(g) heating and Lightening
(h) if you run your business from home then the revenue in their discretion allow domestic heating and electricity bills
to be claimed on a percentage basis usually one fifth of their total cost on the assumption that the business uses a room
as an office within the house.
(I) any other expenses you may incur in relation to the business. The rule is that the expense must be wholly and
exclusively incurred for the purposes of the business. The best policy is to hold on to all your receipts and allow your
accountant to decide are their claimable. If you don’t have the receipt then the accountant can’t claim the expense or
the vat for you.
(4) Purchases day book which is the same as the sales day book. The total of all purchase invoice vat is then claimed
against the total of sale vat.
(4) Cheque and direct debit Payment book. This is a list of all the payments you make to suppliers employees and
drawing etc. It can then be used to verify that you did indeed pay for all the purchases that you have claimed in your vat
return
(5) Lodgement book which should match up to the sales day book to show that all sales receipts have been accounted
for properly
The following are some guidelines for helping you do your vat returns
(1) if you are claiming expenses from your Principal private residence, for operating the business from it, then only claim
one fifth of the expense and one fifth of the applicable vat
(2) Although vat is charged on petrol and mobile phone top ups the Irish government has in its own wisdom decided to
not allow business’s to claim this vat in their vat returns. The same is true for any vat incurred on purchases bought for
clients or customers and also any travel or accommodation costs of the owner or directors
(3) you can claim the vat on diesel
(4) There is no vat on toll bridges, public parking charges, motor tax, insurance, air travel, etc or any items exempt from
vat or zero rated so don’t claim vat on them in error.
(5) To get the vat on the gross amount of a sale or purchase at 21% you divide the total amount by 1.21 and multiply by
.21. Therefore if you are basing you sales on your total lodgements, then add the total up then divide by 1.21 and
multiply by .21 to get the vat amount. To get the net amount (the sales price before vat ) take the above calculated vat
figure from the gross amount. The same applies to purchases.
This is a very simple guide to vat. Vat legislation is very complex and goes into very detailed and complex issues. Such
things such as inter community sales within the EU and the determination of the point of sale of goods or services can
be very complicated. However for a lot of small and medium size business a lot of the more complex issues will not affect
them.
The one item relating to foreign purchases or sales that does effect Irish business’s a lot is when you buy or sell to other
countries in the EU including Northern Ireland. If you buy something from another EU country and you are registered for
vat and what you buy is for your business then the business in the other country should request your Irish vat number
and not charge you vat on the sale. The same is true for an Irish company selling to a business registered for vat in
another EU country. You can ring the revenue commissioners to check the validity of any vat number you are given by
such a customer.
Overall the operation and collection of vat is a substantial cost to any business. However as it is open to scrutiny by the
revenue commissioners it is vital that all vat returns are done correctly in order to avoid potential additional interest and
penalty charges.
The thresholds for Vat Registration as at 14 April 2010 are as follows as per the Revenue Commissioners site:
The principal thresholds applicable are as follows:
* (a) €37,500 in the case of persons supplying services,
* (b) €37,500 for persons supplying goods liable at the 13.5% or 21.5% rates which they have manufactured or
produced from zero rated materials,
* (c) €37,500 for persons making mail-order or distance sales into the State,
* (d) €41,000 for persons making intra-Community acquisitions,
* (e) €75,000 for persons supplying goods,
* (f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is derived from
supplies of goods (other than of the kind referred to at (b) above) and
* (g) A non-established person supplying taxable goods or services in the State is obliged to register and account for
VAT irrespective of the level of turnover.
A taxable person established in the State is not required to register for VAT if his or her turnover does not reach the
appropriate threshold above. However, they may opt to register for VAT.
Posted by Frank McGivney
Labels: how to do vat returns, thresholds for vat registration, vat returns ireland
Fundamentals of Irish Vat System
Vat stands for Value Added Tax and is a tax on the supply of goods and services. Its basic structure
is such that the person who pays for the vat element of any product or service is the final consumer
and the person who collects the tax and sends it to the Revenue Commissioners is the business
that provides the good or service. As a product is sold through the chain of distribution up to the
final consumer each of the businesses in the chain can in turn claim the vat element that they have
paid for the product or service from the tax man. So if a manufacturer sells a chair to a distributor
the manufacturer charges vat and the distributor then claims this vat back from the Revenue
Commissioners. The distributor then sells the chair on to a retailer and charges the retailer vat on
the sale and the retailer claims this vat back. When the chair is sold to a private consumer the
retailer charges the consumer vat on the sale and the consumer can’t claim this back and the
retailer must pay the vat to the tax man. So up until the final consumer the vat position for the tax
man is nil. The manufacturer charges vat to the distributor and then pays this vat to the revenue
commissioners. The distributor however claims this vat back and so as the Revenue Commissioners
receive the vat in it also pays it back out again.
In the construction industry a major financial anomaly arose because the main principal contractors
who paid subcontractors claimed the vat that they were charged immediately however in some
cases the subcontractor who charged the vat didn’t submit and pay the corresponding vat until
much later, or may not have paid it at all. Therefore the revenue commissioners were at a huge
loss. As a result a Reverse charge system was put in to place as and from 01 September 2009
which meant that the subcontractors no longer accounted for vat at all but instead the principal
contractor accounted for both sides of the transaction in his vat return thus the net effect to the
Revenue Commissioners is nil.
In practice how vat works is that a business registered for vat calculates how much vat it has
charged on its sales for a certain period. It then calculates how much vat it has been paid on its
purchases for the same period. If the vat on sales is more than the vat on purchases then the
business owes the difference to the tax man and must pay it in a timely fashion or face interest and
collection charges. If the vat on purchases is greater than the vat on sales then the business is
owed vat from the tax man and will claim this back in its periodical vat return. Such refunds in Ireland
can be offset against other outstanding tax liabilities or can be refunded to the business’s bank
account if all its tax affairs are up to date.
In Ireland the periods for vat returns are every two months or four months or six months depending
on the size of the annual vat liability of a business. At the end of each year a business must also
submit a trading return showing the net values for vatable sales and purchases during the
preceding year i.e. this is the amount of total invoices before vat is charged.
Subject to approval by the revenue commissioners a business may also set up a monthly direct
debit for vat based on an estimated annual vat liability. The business then just puts in one annual
vat return and pays or reclaims the difference between the total yearly direct debits and the actual
return.
A further article will look in more depth at the actual procedures and processes of accounting for
Vat in Ireland.
The turnover thresholds for registering for vat in Ireland are as follows:
• a) €37,500 in the case of persons supplying services,
• (b) €37,500 for persons supplying goods liable at the 13.5% or 21.5% rates which they have
manufactured or produced from zero rated materials,
• (c) €37,500 for persons making mail-order or distance sales into the State,
• (d) €41,000 for persons making intra-Community acquisitions,
• (e) €75,000 for persons supplying goods,
• (f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is
derived from supplies of goods (other than of the kind referred to at (b) above) and
• (g) A non-established person supplying taxable goods or services in the State is obliged to
register and account for VAT irrespective of the level of turnover.
Posted by Frank McGivney at 3:19 AM 0 comments
Labels: company, corporation tax, limited liability, partnership, selfemployed, sole trader, thresholds
for vat registration, VAT, VAT ireland, vat registration
Vat stands for Value Added Tax and is a tax on the supply of goods and services. Its basic structure
is such that the person who pays for the vat element of any product or service is the final consumer
and the person who collects the tax and sends it to the Revenue Commissioners is the business
that provides the good or service. As a product is sold through the chain of distribution up to the
final consumer each of the businesses in the chain can in turn claim the vat element that they have
paid for the product or service from the tax man. So if a manufacturer sells a chair to a distributor
the manufacturer charges vat and the distributor then claims this vat back from the Revenue
Commissioners. The distributor then sells the chair on to a retailer and charges the retailer vat on
the sale and the retailer claims this vat back. When the chair is sold to a private consumer the
retailer charges the consumer vat on the sale and the consumer can’t claim this back and the
retailer must pay the vat to the tax man. So up until the final consumer the vat position for the tax
man is nil. The manufacturer charges vat to the distributor and then pays this vat to the revenue
commissioners. The distributor however claims this vat back and so as the Revenue Commissioners
receive the vat in it also pays it back out again.
In the construction industry a major financial anomaly arose because the main principal contractors
who paid subcontractors claimed the vat that they were charged immediately however in some
cases the subcontractor who charged the vat didn’t submit and pay the corresponding vat until
much later, or may not have paid it at all. Therefore the revenue commissioners were at a huge
loss. As a result a Reverse charge system was put in to place as and from 01 September 2009
which meant that the subcontractors no longer accounted for vat at all but instead the principal
contractor accounted for both sides of the transaction in his vat return thus the net effect to the
Revenue Commissioners is nil.
In practice how vat works is that a business registered for vat calculates how much vat it has
charged on its sales for a certain period. It then calculates how much vat it has been paid on its
purchases for the same period. If the vat on sales is more than the vat on purchases then the
business owes the difference to the tax man and must pay it in a timely fashion or face interest and
collection charges. If the vat on purchases is greater than the vat on sales then the business is
owed vat from the tax man and will claim this back in its periodical vat return. Such refunds in Ireland
can be offset against other outstanding tax liabilities or can be refunded to the business’s bank
account if all its tax affairs are up to date.
In Ireland the periods for vat returns are every two months or four months or six months depending
on the size of the annual vat liability of a business. At the end of each year a business must also
submit a trading return showing the net values for vatable sales and purchases during the
preceding year i.e. this is the amount of total invoices before vat is charged.
Subject to approval by the revenue commissioners a business may also set up a monthly direct
debit for vat based on an estimated annual vat liability. The business then just puts in one annual
vat return and pays or reclaims the difference between the total yearly direct debits and the actual
return.
A further article will look in more depth at the actual procedures and processes of accounting for
Vat in Ireland.
The turnover thresholds for registering for vat in Ireland are as follows:
• a) €37,500 in the case of persons supplying services,
• (b) €37,500 for persons supplying goods liable at the 13.5% or 21.5% rates which they have
manufactured or produced from zero rated materials,
• (c) €37,500 for persons making mail-order or distance sales into the State,
• (d) €41,000 for persons making intra-Community acquisitions,
• (e) €75,000 for persons supplying goods,
• (f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is
derived from supplies of goods (other than of the kind referred to at (b) above) and
• (g) A non-established person supplying taxable goods or services in the State is obliged to
register and account for VAT irrespective of the level of turnover.
Posted by Frank McGivney at 3:19 AM 0 comments
Labels: company, corporation tax, limited liability, partnership, selfemployed, sole trader, thresholds
for vat registration, VAT, VAT ireland, vat registration
Developments in Quinn Insurance and the financial regulator 2010
Since the financial regulator went to the High Court and successfully got two administrators
appointed to take over control of Quinn insurance the saga has developed quite quickly. The
administrators after an analysis of the business have ceased all insurance sales to the United
Kingdom and Northern Ireland. Presumably this is on the basis that these markets were loss making
for the company even though they represented 30% of it turnover. They also indicated the
withdrawal from the Solicitor personal injury insurance market which again was showing losses.
The reason the Financial Regulator stepped in was because of a lack of solvency in the group. This
refers to the amount of assets relative to liabilities in the company. The importance of this is that if
an insurance company hasn’t enough assets to cover all of it liabilities then it won’t be able to pay
for all the claims that may be made against it and the policyholders are compromised.
In the meantime these moves were meet with dismay and anger by the people of Cavan and
Fermanagh where the Quinn group is a major employer with over 5000 employees. Demonstrations
were held outside the Dail and in towns in the counties. The workforce was especially angry at been
told not to sell any UK or Northern Ireland business as this was such a large part of the company.
The administrators meet with representative of the workforce and management during the week to
discuss the plans but with no really positive outcome.
Sean Quinn and the Quinn group are heavily indebted to various banks and bond holders and in
particular it owes over 2.8 Billion to the troubled Anglo Irish Bank. Alot of this stems from a loss
made on the purchase of Anglo Irish bank Shares by members of the Quinn Family. Apart from the
huge loans given to Building Developers this represents the largest single amount owed to Anglo
Irish Bank by any individual or group. From the Quinn groups point of view the insurance company
is producing high profits which have been allowing it to meet its debt obligations through out the
group.
There have been over 20 expressions of interest made to the administrators to purchase the
company. Anglos Irish Bank and Quinn Insurance are trying to get the regulator to put a 30 day
stay on the High court application to make the appointment of the administrators permanent in
order to allow them to come to an agreement whereby the bank takes over the company for a
period. Anglo hopes to stabilize the solvency of the business with injected funds and then proposes
to sell it within three years. This would allow the bank to secure more of the debt that is owed to it.
Presently it is third in line behind other secured banks and bond holders for payment if the group
collapses.
The regulator has an obvious lack of confidence in the board of the company and is currently lack
luster about the Anglo deal. As a newly appointed regulator who has taken hard stances Mr
Elderfield does not want to be seen to back down so supporting the Anglo deal may allow him to
save the jobs in the company while also given some political relief to the government. The
Government doesn’t want to be seen to interfere with the running of the regulator however the
potential loss of 5000 jobs is also unpalatable to any government especially one in the middle of a
recession. They would presumably be very pleased if the problem could be solved in the quickest
fashion possible with minimum job losses.
Posted by Frank McGivney at 2:56 AM 0 comments
Labels: cavan, Financial Regulator, ireland, quinn direct, recession ireland, unemployment
Since the financial regulator went to the High Court and successfully got two administrators
appointed to take over control of Quinn insurance the saga has developed quite quickly. The
administrators after an analysis of the business have ceased all insurance sales to the United
Kingdom and Northern Ireland. Presumably this is on the basis that these markets were loss making
for the company even though they represented 30% of it turnover. They also indicated the
withdrawal from the Solicitor personal injury insurance market which again was showing losses.
The reason the Financial Regulator stepped in was because of a lack of solvency in the group. This
refers to the amount of assets relative to liabilities in the company. The importance of this is that if
an insurance company hasn’t enough assets to cover all of it liabilities then it won’t be able to pay
for all the claims that may be made against it and the policyholders are compromised.
In the meantime these moves were meet with dismay and anger by the people of Cavan and
Fermanagh where the Quinn group is a major employer with over 5000 employees. Demonstrations
were held outside the Dail and in towns in the counties. The workforce was especially angry at been
told not to sell any UK or Northern Ireland business as this was such a large part of the company.
The administrators meet with representative of the workforce and management during the week to
discuss the plans but with no really positive outcome.
Sean Quinn and the Quinn group are heavily indebted to various banks and bond holders and in
particular it owes over 2.8 Billion to the troubled Anglo Irish Bank. Alot of this stems from a loss
made on the purchase of Anglo Irish bank Shares by members of the Quinn Family. Apart from the
huge loans given to Building Developers this represents the largest single amount owed to Anglo
Irish Bank by any individual or group. From the Quinn groups point of view the insurance company
is producing high profits which have been allowing it to meet its debt obligations through out the
group.
There have been over 20 expressions of interest made to the administrators to purchase the
company. Anglos Irish Bank and Quinn Insurance are trying to get the regulator to put a 30 day
stay on the High court application to make the appointment of the administrators permanent in
order to allow them to come to an agreement whereby the bank takes over the company for a
period. Anglo hopes to stabilize the solvency of the business with injected funds and then proposes
to sell it within three years. This would allow the bank to secure more of the debt that is owed to it.
Presently it is third in line behind other secured banks and bond holders for payment if the group
collapses.
The regulator has an obvious lack of confidence in the board of the company and is currently lack
luster about the Anglo deal. As a newly appointed regulator who has taken hard stances Mr
Elderfield does not want to be seen to back down so supporting the Anglo deal may allow him to
save the jobs in the company while also given some political relief to the government. The
Government doesn’t want to be seen to interfere with the running of the regulator however the
potential loss of 5000 jobs is also unpalatable to any government especially one in the middle of a
recession. They would presumably be very pleased if the problem could be solved in the quickest
fashion possible with minimum job losses.
Posted by Frank McGivney at 2:56 AM 0 comments
Labels: cavan, Financial Regulator, ireland, quinn direct, recession ireland, unemployment
Should you operate your business as a sole trader or as a company
You have decided to take control of your destiny and start up your own business. The route of self
employment is a long and sometimes difficult one with a lot of benefits and potential pitfalls. Once you
have decided upon what business you are going to run, you will have presumably loads of marketing ideas
and financial aspirations and so forth. However the first practical step to starting up your business is to
decide how the business will operate. The main choices are as a Sole Trader/Partnership or as an
incorporated company. A sole trader and partnership are both similar in that the business is operated by
the owners as self employed people in their own right. The main difference between sole traders and
partnerships is whether there is one owner or more than one owner of the business. I am currently writing
an in-depth article about the consequences of going into a partnership with someone. This current article
is dealing with the fundamental choice of been self employed in your own right or in starting a company.
A company is a separate legal entity to the people who own it. It can trade, own and operate a bank
account, be sued, liquidate (cease trading), etc on its own behalf. The big advantages of a company
structure is that it offers limited liability and a low corporation tax rate. Limited liability means that a
company can only be sued for whatever it owns itself so that the shareholders (owners) private assets are
protected. Companies are taxed on their profits by way of corporation tax. The taxable profits are
calculated after the director’s wages have been paid. In Ireland the current corporation tax rate is
approximately a fifth of the marginal highest income tax rate. However in return for these benefit’s the
administration and accounting requirements for a company are more stringent and involve a greater cost
and consume more time than a sole trader's. Also any money that a director takes out of a company is
taxed at income tax rates and therefore the corporation tax rate is only availed of if the company makes
more money than the directors are paid as wages
A sole trader is a person who operates a business in their own right. As such they are solely the ones
taking the risk of the business failing they are also the ones who benefit fully if the business is a success
and makes a profit. A sole trader does not have limited liability and thus his/her own assets such as the
family home can be under threat if the business is sued or it fails to pay all its creditors or debts. However
a sole trader is a simpler way of running a business. The returns to the Revenue Commissioners are less
arduous than the returns for a company. If the business has a small turnover with relatively low risk of
been sued or if such risk can be insured against then this is a good choice.
All the advantages and disadvantages of both options should be weighed against each other based on the
specific business been proposed and then an informed decision made. The assistance of a trained
professional advisor such as a solicitor or accountant is recommended to ensure the best outcome.
You have decided to take control of your destiny and start up your own business. The route of self
employment is a long and sometimes difficult one with a lot of benefits and potential pitfalls. Once you
have decided upon what business you are going to run, you will have presumably loads of marketing ideas
and financial aspirations and so forth. However the first practical step to starting up your business is to
decide how the business will operate. The main choices are as a Sole Trader/Partnership or as an
incorporated company. A sole trader and partnership are both similar in that the business is operated by
the owners as self employed people in their own right. The main difference between sole traders and
partnerships is whether there is one owner or more than one owner of the business. I am currently writing
an in-depth article about the consequences of going into a partnership with someone. This current article
is dealing with the fundamental choice of been self employed in your own right or in starting a company.
A company is a separate legal entity to the people who own it. It can trade, own and operate a bank
account, be sued, liquidate (cease trading), etc on its own behalf. The big advantages of a company
structure is that it offers limited liability and a low corporation tax rate. Limited liability means that a
company can only be sued for whatever it owns itself so that the shareholders (owners) private assets are
protected. Companies are taxed on their profits by way of corporation tax. The taxable profits are
calculated after the director’s wages have been paid. In Ireland the current corporation tax rate is
approximately a fifth of the marginal highest income tax rate. However in return for these benefit’s the
administration and accounting requirements for a company are more stringent and involve a greater cost
and consume more time than a sole trader's. Also any money that a director takes out of a company is
taxed at income tax rates and therefore the corporation tax rate is only availed of if the company makes
more money than the directors are paid as wages
A sole trader is a person who operates a business in their own right. As such they are solely the ones
taking the risk of the business failing they are also the ones who benefit fully if the business is a success
and makes a profit. A sole trader does not have limited liability and thus his/her own assets such as the
family home can be under threat if the business is sued or it fails to pay all its creditors or debts. However
a sole trader is a simpler way of running a business. The returns to the Revenue Commissioners are less
arduous than the returns for a company. If the business has a small turnover with relatively low risk of
been sued or if such risk can be insured against then this is a good choice.
All the advantages and disadvantages of both options should be weighed against each other based on the
specific business been proposed and then an informed decision made. The assistance of a trained
professional advisor such as a solicitor or accountant is recommended to ensure the best outcome.
Nama. The financial Regulator and the shame of the Irish banking establishment
When Mr Brian Lenihan the Irish Minister for Finance made his speech in the Irish parliament (the Dail) on 30 March
2010 he set out the huge debts which the Irish taxpayer would have to finance in order to put the Irish banks back into
a stable position. After his discussion of the loans that would be taken over by the new state agency Nama and the
discounts to be applied to each individual bank, he then set out how much of additional recapitalisation funds would
be needed in order for each individual bank to meet the new capital requirement of 8% reserves as set out by the new
financial regulator.
~The new Financial regulator is Mr Matthew Elderfield who had been the former head of regulation in Bermuda. He is
the first head of either the Financial Regulatory Service or the central bank of Ireland who has not come from internal
appointment within these organisations.
The new governor of the Central Bank is Mr Patrick Honohan who was a former head of international monetary
economics at Trinity College
The lack of independence in these institutions was a commonly perceived weakness and as external appointments
they presumably have no allegiances or history with any of the players in the Irish banking system. This has been a
breath of fresh air for the country which will hopefully mean a far more independent control of the banking sector.
Already he has made his mark by imposing the newer tighter 8% capital reserve on the banks. This has been based
on research and on emerging international best practise
This new capital reserve will help ensure that the current fiasco of huge impairments to the loan books of Irish banks
is not repeated and they will in future have reserves to fall back on to cover any losses that may arise in the future.
The main objective of the Central bank and financial regulators appointments is to reinstill confidence among the
foreign banks and lenders that supply funds to the Irish banking system. By setting in place strong financial
regulations potential lenders and investors in Irish banks will hopefully once again see fit to lend and invest in these
banks.
This trend of taking a harder more proactive approach has also been seen Mr Elderfield appointing two
administrators to Quinn Insurance due to a worry that the insurance company has not got the reserves to cover all
potential claims. For the future of the economy to be secured and for business to recover within Ireland it is necessary
to have a strong banking system which has enough funds and capital to be able to start lending again. Of course
these new tighter controls are only what should have been in place all the time. Although the realisation that we need
to run our financial system properly has come too late to save us from huge government debts hopefully it will prevent
a reoccurrence of the mistakes of the past.
Posted by Frank McGivney
Labels: Banks, Central Bank, Direct, Financial Regulator, Insurance, Investors, Irish, Nama, Quinn
When Mr Brian Lenihan the Irish Minister for Finance made his speech in the Irish parliament (the Dail) on 30 March
2010 he set out the huge debts which the Irish taxpayer would have to finance in order to put the Irish banks back into
a stable position. After his discussion of the loans that would be taken over by the new state agency Nama and the
discounts to be applied to each individual bank, he then set out how much of additional recapitalisation funds would
be needed in order for each individual bank to meet the new capital requirement of 8% reserves as set out by the new
financial regulator.
~The new Financial regulator is Mr Matthew Elderfield who had been the former head of regulation in Bermuda. He is
the first head of either the Financial Regulatory Service or the central bank of Ireland who has not come from internal
appointment within these organisations.
The new governor of the Central Bank is Mr Patrick Honohan who was a former head of international monetary
economics at Trinity College
The lack of independence in these institutions was a commonly perceived weakness and as external appointments
they presumably have no allegiances or history with any of the players in the Irish banking system. This has been a
breath of fresh air for the country which will hopefully mean a far more independent control of the banking sector.
Already he has made his mark by imposing the newer tighter 8% capital reserve on the banks. This has been based
on research and on emerging international best practise
This new capital reserve will help ensure that the current fiasco of huge impairments to the loan books of Irish banks
is not repeated and they will in future have reserves to fall back on to cover any losses that may arise in the future.
The main objective of the Central bank and financial regulators appointments is to reinstill confidence among the
foreign banks and lenders that supply funds to the Irish banking system. By setting in place strong financial
regulations potential lenders and investors in Irish banks will hopefully once again see fit to lend and invest in these
banks.
This trend of taking a harder more proactive approach has also been seen Mr Elderfield appointing two
administrators to Quinn Insurance due to a worry that the insurance company has not got the reserves to cover all
potential claims. For the future of the economy to be secured and for business to recover within Ireland it is necessary
to have a strong banking system which has enough funds and capital to be able to start lending again. Of course
these new tighter controls are only what should have been in place all the time. Although the realisation that we need
to run our financial system properly has come too late to save us from huge government debts hopefully it will prevent
a reoccurrence of the mistakes of the past.
Posted by Frank McGivney
Labels: Banks, Central Bank, Direct, Financial Regulator, Insurance, Investors, Irish, Nama, Quinn