- Consider the appropriate end of Financial year for the Firm
Many Legal firms prepare the financial statements by reference to the period when the practice first commenced, and therefore have continued to prepare accounts to that anniversary date. This approach may no longer be appropriate and therefore consider a review of the impact of changing the firms reporting date. This can yield potentially significant savings for a practice where income and expenses of the practice might not be evenly spread over the year , or where a substantial amount of state work is carried out , (Legal Aid, Government bodies) and the practice is subject to deduction of tax at source , professional services withholding tax ( PSWT).
A detailed and critical review of the year end account receivables (Debtors) both in terms of outlays incurred and fees which remain unpaid will identify those which are in doubt as to payment. Provisions against such slow moving or Doubtful accounts represent prudent accounting treatment and should be considered. By including these amounts in the results of a practice for the year gives rise to a tax liability which might otherwise have been avoided.
Where practical, all professional practices should avail of the entitlement to pay tax free benefits to employees; these annual limits for small benefits were increased to €500 in respect of Non-cash benefits per employee per annum. These are not limited to just employees and can be paid to directors and officers of companies. So where you have a service company as part of the structure of your legal practice, be sure to avail of this relief. The effective benefit of the payment for top rate taxpayers is equal to a gross payment of over €1,000 and therefore not insignificant.
Again, there are various incentives to encourage the use of public transport for all employees which will again include the principals in an organisation where the service company structure for a practice is in place. Travel passes, bike to work scheme are valuable incentives and should be fully utilised where available. These schemes also apply to Directors and therefore open to all.
The re-imbursement for the cost of use of a private motor vehicle has always proven a difficulty for the self employed professional, especially where there are a number of Partners in a Legal office and claims will vary dependant on variances in the type of vehicles used. The cost of travelling to and from assignments and meetings with clients and other professional meetings are legitimate expenses and can be claimed as part of carrying out an engagement. Where a practice service company is engaged then revenue published rates can be applied both is respect of Mileage & Subsistence rates which can be paid at flat rates. Revenue will at all times require that records are maintained.
- Husband & Wife Partnerships
Many professional practices and other businesses are operated by Husband and Wife teams. Where this applies it is important that returns are compiled on a partnership basis which can result in tax savings arising from extended tax bands. This also provides for retirement reliefs to apply to both, thus resulting in significant tax savings as part of overall retirement planning. In addition this will ensure both partners in a business are potentially entitled to full claims for Contributory State Pensions.
- Covenants for certain individuals
The setting up of legal covenants paid to individuals had been a popular form of tax saving, particularly in respect of dependant children whilst attending third level college. Whilst this was abolished some years ago, covenants still apply for certain dependants by reference to old age or infirmity. The cost of maintaining or contributing to household costs of an elderly relative can be structured by way of covenant, thus reducing the overall cost of such contributions.
- Home Renovation Incentive Scheme
Whilst a little cumbersome to apply, and with certain limits in place as regards the sums to be claimed, this scheme can have the impact of reducing the cost of renovations . Important to note that this applies not only to homes, but also extends to rented properties and therefore significant. The scheme provides for a refund to compensate for the vat element of such works and therefore assists in reduction the overall costs to an individual of the expense incurred.
For further details or information on the range of advisors services provided by our Legal & Regulated Team please contact one of the team members directly.