Tax Magic 2008

Alan Moore

www.alanmoore.ie

Cash flow quadrant

Employee
Self-employed
Business owner
Investor

Rich Dad Poor Dad

Rober Kiyosaki

Tax inefficiency tax is the largest controllable drain on your

wealth; get advice in time (not after the event)

www.alanmoore.ie

Tax consequences of where you are in

the cash flow quadrant

Investor

Lower tax, more room to manouvre

Investor 0% to 20%

Self-employed

Tax room to manouvre

Business owner

Low to zero tax, option to go nonresident

high tax, more room to manoevre,

long hours

Business owner 20% to 47%

Employee

high tax, little room to manouevre

Self-employed 47%

Employee 48%

www.alanmoore.ie

Your mission, should you choose to

accept it.

Move from employee to investor: Become financially independent

www.alanmoore.ie

As an employee, you can save tax by

Becoming a dual income couple

Taking a tax-free termination payment

Higher of: 10,160 + 765 for each year of service (+10,000) or SCSB
Average salary for the last three years of service
X number of complete years of service in the last 15 years
Less the relevant capital sum present value of your right to opt to take part
of your pension as a tax-free lump sum

Claiming seed capital relief

One income 44,400 at 20%; two incomes 2 x 35,400 at 20%

Employee, own business, certificate from CEB, Forbairt; 6 x 150,000

Receive tax-exempt income for childminding (15,000 p.a.)

Taking in lodgers (rent-a-room relief -10,000 p.a.)
Receiving tax-free travel and subsistence expenses

Travel: 78.32c per km record all journeys in diary

Subsistence: > 5 miles from base, > 5 hrs, 16.95 per day

www.alanmoore.ie

As an employee, you can save tax by

Realising a gain on the exercise of a Revenue approved share option

20% instead of 46.5%

Receiving a tax-exempt benefit in kind (BIK)

Employer pension contributions (but not salary sacrifice)

Bus/train/LUAS ticket (annual/monthly)
Subsidised on-site creche facilities
Mobile phone, computer, broadband access (private use incidental)
Relevant professional subscriptions

Pension contributions
Health/dental expenses
Employee share purchase
Film relief 25,400 p.a. ..BES relief 150,000 p.a.
Covenant to elderly or incapacitated relative 5% limit
Maintenance to ex-spouse (not to children)

Becoming self-employed.
www.alanmoore.ie

Becoming self-employed

Contract for services (independent contractor) v contract of service

(servant)
Must be your own boss can come and go as you please
Multiple customers
You take on business risk

www.alanmoore.ie

As self-employed, you can save tax by

Business expenses (cant claim entertainment)

Cant claim: private or non-business expenditure
Can claim interest relief on business borrowings
Capital allowances

12.5% per annum for plant and machinery/furniture and fittings

As regards cars bought or leased on or after 1 July 2008, the capital allowances, and leasing
deductions, are based on the level of carbon emissions. Cars with emissions above 190g/km get
no allowance
Up to 50% for commercial premises in renewal incentive area

Losses (e.g., buy a farm, offset farming losses)

Donations to Revenue-approved bodies (charities)

www.alanmoore.ie

As self-employed, you can save tax by

Self-administered pension scheme (SAPS) = tax-free growth (no

income tax or capital gains tax)

Age <30 15% of earnings

30-39 20% of earnings
40-49 25% of earnings
50-54 30% of earnings
55-59 35% of earnings
60+ 40% of earnings
Annual earnings limit 262,382 (254,000 indexed)
On retirement, 25% as tax-free lump sum, transfer balance to approved
retirement fund (ARF)
Max fund 5m, max 25% on retirement - 1,291,250 (1.25m indexed)

www.alanmoore.ie

As self-employed, you can save tax by

Creating your own pension-backed mortgage

Ideal if in your 40s (20 years of growth)

Buy property interest only
Invest what would have been the capital repayments in self-administered
pension fund
Tax-free growth
Pay off loan with 25% lump sum on retirement
Result:

1. tax-relief on interest
2. tax relief on capital payments (pension contributions)
3. balanced risk (equities v properties)
4. Can also get capital allowance on property if in renewal area

www.alanmoore.ie

Problems of being self-employed

PAY and FILE

31 October 2008 = 2008 tax + 2007 return

31 October 2007 = 2007 tax + 2006 return

Pay 90%, 100%, 105%

Late filing surcharge 5% then 10%

Interest 0.0322% a day

Prosecution
VAT
must register for VAT if turnover exceeds threshold, i.e. if

17 November for electronic filings

Turnover from supply of goods > 75,000 per annum

Turnover from supply of services > 37,500 per annum

Basis invoice/cash (<1,000,000 in year)

File VAT 3 return every two months
Issue VAT invoices
Records, audit

www.alanmoore.ie

Becoming a business (company) owner

Advantages 12.5%
Preliminary tax 90% of liability
Instalment one month before end of accounting period
Filing nine months after accounting period ends

Disadvantages double taxation (income and gains)

Putting property in a company AVOID
However, if you can sell the property with the company (e.g. pub, it
may make sense and allow faster pay down of debt)
Also, for UK property, company may make sense

But how do you get the money out?

www.alanmoore.ie

Extracting profits from a company

Salary, dividends 47%

Liquidate and transfer to New Co (but watch s 817 mirror
shareholdings) or partnership
Tax-free termination payment
Company funds pension
Rent premises to your company
Share buyback (must be to benefit the trade, and reduction to 75%
of previous holding)
Tax-free mileage/subsistence
Stamp duty on acquiring residence
Redeemable preference shares

www.alanmoore.ie

Investing (creating or extracting value)

Why invest? To provide for your future financial

independence
Assets that work while you are asleep; residual income
Income (positive cash flow)
+ Capital appreciation (increase in value)
Less cost (interest, stamp duty, maintenance, etc)
= Overall return
Investment is not speculation (buy in the hope of capital
appreciation)
Flipping buy off plans and sell on is speculation (unless
you have buyers already)
The Irish property market

Downturn
Strong capital appreciation for 10 years

Foreign markets

Economic fundamentals, higher yields, better capital appreciation

prospects
www.alanmoore.ie

Investing

Learning to spot a good deal (20%+ p.a. over 1-4 years)

Learning to quickly evaluate and dismiss opportunities that do not
meet your investment criteria those that get through are the
deals
Learning to finance a good deal (banking connections)

www.alanmoore.ie

Risk and reward

cash, bonds, shares

venture
capital

cash

bonds

quoted
shares

0-3.5%

2-4%

7-8%

private
shares

8-15%

lower risk
lower reward

0-100%+

higher risk
higher reward

property

Ireland

UK
Holland

France
Germany
US

0-3.5%

2-7%

7-8%

Hungary
Poland
Czech
Slovakia

8-15%

www.alanmoore.ie

Bulgaria
Romania
Croatia
Serbia
Ukraine

0-100%+

As an investor, you can save tax by

Gains (20%) instead of income (46.5%)

Shelter rental income with section 23

Shelter rental income with capital allowances, hotel schemes

Expenditure in 2007: 75% relief

Expenditure 2008: 50% relief
50% in year one (initial, accelerated)
4% per annum thereafter
Against non-rental income: max 31,750 in year (63,000 if both partners have rental
income)

If you are non-domiciled (or non-ordinarily resident), by not remitting

income/gains outside Ireland
Moving to Northern Ireland and being non-domiciled there
Realising gains while non-Irish resident

Resident if

>183 days in current year (2008)

>280 days in current + preceding year (2008 + 2007)

Ordinarily resident if

Resident for previous 3 years (2007, 2006, 2005)

www.alanmoore.ie

Passing assetstax-free

No CGT for transferor

Retirement relief, disposal of business or farm

To children no CGT
Outside family, 750,000 limit on proceeds

Site to child (500,000) - limit

Disposal of your principal private residence (can shift)

No CAT for recipient

Parent to child 521,208 exempt + 3,000 annual small gift
allowance
Sibling, nephew/niece, grandchild 52,121
Other 26,060
Transfer of private residence

Three years residence for recipient, no other residence at time of gift

Business relief (90% reduction)

Agricultural relief (90% reduction; can include cash used to
buy farm)

www.alanmoore.ie

Contacts

Alan Moore

+353 1 8728881
+363 87 2429109
alan@alanmoore.ie

www.alanmoore.ie