I will look at pre-year-end planning tips for you and your business. There will be some useful tips to consider between now and the end of the year. I’ll introduce you to Paul and Joanna Codd who have a “quare” successful company in Wexford. The focus will be on a company with a 31 December year-end. These planning tips will be relevant for other companies with different year-ends. The main points I’ll cover will include
- Introductions
- Salaries
- Pensions
- Small Benefit Exemption
- Asset purchases
- Company Capital Gains
Introductions
Paul Codd knows a lot about fishing. His father was a fisherman before him. Even his wife Joanna came from a family of fishermen from Fethard-on-Sea. It’s in the blood as they say. He and Joanna have a company that has a fishing business and two fish restaurants in the Southeast. He has a very popular fishing podcast called Tuna-In and the profits have grown in the last few years from that.
The company “A load of Pollocks Ltd” is profitable and made a profit of €250,000 in 2023 after their salaries. The company has a good chunk of cash in the bank. Paul and Joanna met with us for a pre-year end planning meeting. Paul is on a salary of €45,000 and Joanna is on €30,000. He has two rental properties on which he has a profit of €1,000 a month. The company makes a monthly pension contribution of €1,500 per month for each of them.
Salaries
The combined salaries of Paul and Joanne come to €75,000. The most a married couple can earn at the lower rate of 20% in 2024 is €84,000. So, they can take an extra €9,000 and pay tax on that at the lower rate. They could take €4,500 each or Paul could take an extra €6,000 and Joanne take €3,000 and vice-versa. One thing they shouldn’t do is for Paul to take the extra €9,000. The reason for that is that the most the higher income earning spouse can earn at the lower rate is €51,000 in 2024
If Paul took an extra €9,000 his salary increases to €54,000. The first €51,000 of that is at the lower rate and the balance of €3,000 is at the higher 40% rate. Paul decides to leave his salary as it is. His combined income for 2024 will come to €57,000 to include the rental profit from his two properties. By not increasing his salary he’ll pay tax at 20% on half the rental profit of €6,000. While he’ll pay tax at 40% on the balance.
They decide to increase Joanne’s salary by €3,000 to maximise her lower rate band. Her monthly salary will increase by €1,500 for November and December 2024. The company will get a tax deduction of 12.5% for this extra salary
Tax calculation 2024
| Paul Salary | €45,000 |
| Paul rental profit | €12,000 |
| Joanne Salary | €33,000 |
| Total Income | €90,000 |
| First €84,000 x 20% | €16,800 |
| Balance €6,000 x 40% | €2,400 |
| Total Tax | €19,200 |
| Less Tax Credits | (€7,500) |
| Tax liability | €11,700 |
| PAYE paid on salaries | (€8,100) |
| Balance Due | €3,600 |
Paul could have decided to take an extra €6,000 salary for 2024. If he did, he’d pay tax at the 40% rate on all his rental profit. You can see the balance due is €6,000 at 20% and €6,000 at 40%
Pensions
As mentioned, the company contributes €1,500 per month to both their pensions. That’s an annual contribution of €18,000 each. Assuming funding levels permit the company could contribute a further €18,000 each. There is no backdating with company pension contributions like with personal pensions. The company should make this lump-sum contribution before the year-end so it will get a tax deduction for it.
The top-up contribution doesn’t exceed the amount of the ordinary annual contribution. As a result, both will have a contribution of €36,000, to their pensions in 2024. Plus, the company will get a tax deduction for the cost in the 2024 accounts. Joanne will contact the man from Aviva to get this sorted.
Small Benefits Exemption
Back in the days before the small benefits exemption the Codds used to give the staff a hamper of fish. Needless to say, the staff were a lot happier when they replaced the hampers with vouchers. When discussing this with them they know that they can take a voucher of €1,000 each. This is on the basis that they didn’t get one already in 2024. Both confirmed they hadn’t.
Their daughter Hannah, who is in UCC, does some part-time work at weekends and during the summer. They want to give her a voucher for €1,000 but already gave her a Ryanair voucher of €500 in the Summer for her Ibiza trip. They know the amount changed in the budget to €1,500 so they think they are ok with this. Not so. The budget changes come in on the 1st of January 2025. The most they can give her in 2024 is another €500. Combined she will get €1,000 in 2024. They will also give her a €500 voucher in January 2025.
If they give Hannah a €1,000 voucher in 2024 the combined value of her vouchers is greater than €1,000. As such, the second voucher is taxable in full and must go through payroll. Hannah would pay tax on the value of the voucher. Plus, the company would pay employer’s PRSI at over 11%.
Reporting requirements
From 1 January 2024, the company has reporting requirements so it must report the vouchers to Revenue. Where the small benefit exemption applies the company must report the benefit on or before the date the benefit goes to the employee. As we look after the payroll for the company, Joanne confirmed she’ll send Izabela the details of all vouchers.
Asset Purchases
The company made some asset purchases in 2024. In September 2024 Paul agreed to buy solar panels for the fish storage unit. The cost is €30,000 ex VAT and they are coming to install them next week. He expects them to be in use by early December. As this is an asset for the business the company can claim Capital allowances at 12.5% on the ex-VAT cost. Effectively, the company writes off the asset over 8 years.
This is a deductible expense, and the profits reduce by the amount of capital allowances claimed. To get the write-off the company must own the asset, and the asset must be in use in the business before the year end. Paul and Joanne need to make sure the equipment is working and in use for the business before the end of December. If there is a delay with the provider and the panels are not installed until 2025 then they won’t get the tax relief until next year.
A company can claim 100% of the cost of the asset in year one for the purchase of specific equipment. Included is energy-efficient equipment that includes electric and alternative fuel vehicles. Solar Panels should qualify for a 100% write-off in year 1. The 100% deduction is called accelerated capital allowances [ACA]
| Profits of A Load of Pollocks Ltd | €250,000 |
| Less ACA – Solar Panels | (€30,000) |
| Taxable Profits | €220,000 |
| Tax Payable x 12.5% | €27,500 |
By claiming the full cost in year 1 the company will save €3,750 [€30,000 x 12.5%]
Electric Cars
For electric cars, there’s a cap on the amount of capital allowances you can claim. The cap called the “specified limit” is €24,000 and it has been that number for a very long time! An electric car isn’t a hybrid as it must be 100% electric. There are two ways to claim the maximum specified limit
- Claim based on the emissions of the car or
- Claim based on the accelerated allowances scheme.
The emissions basis is an annual wear & tear allowance at a rate of 12.5% of the car based on the specified amount of €24,000. If the car costs less than €24,000 it doesn’t matter. You get the 12.5% write-off provided the car has low CO2 emissions of less than 141g/km.
The accelerated allowance is to claim the cost of the car in full. The max claim is the lower of the cost of the car or the specified amount.
The company bought a new EV6 for Joanne in November 2024. The car cost €50,000. As the car is 100% electric it will qualify for capital allowances under the emissions scheme. In that case, the company will get a capital allowance of
| Car Cost | €50,000 |
| Max claim – specified amount | €24,000 |
| Wear & Tear x 12.5% | €3,000 |
But a claim under the accelerated allowance scheme is better.
| Car cost | €50,000 |
| Specified amount | €24,000 |
| Wear & Tear 100% ACA | €24,000 |
By claiming the 100% accelerated allowance in 2024 the company will save €3,000 [€24,000 x 12.5%]
Company Capital Gains
Beware of the payment dates for Company Capital Gains. A company is liable to CGT rules and payment dates on the sale of development land. Paul & Joanne’s company sold a site next to their storage unit for €250,000 in May 2024. The company bought the site in March 2010 for €150,000 including stamp duty and legal fees. Legal, auctioneering, and accountancy fees on the sale came to €10,000. The CGT computation looks like this
| Sales Proceeds | €250,000 |
| Less Costs of Sale | (€10,000 |
| Net Sales Proceeds | €240,000 |
| Less Purchase Cost | (€150,000) |
| Gain | €90,000 |
| CGT x 33% | €29,700 |
The company needs to pay the CGT liability by the 15th of December 2024. If they sold the site in December 2024 then the CGT payment date would be the 31st of January 2025.
On asset sales of non-development land, the corporation tax [CT] return and payment dates apply. Say the company sells CRH shares for €150,000 in the summer of 2024. The shares cost them €30,000 so there’s a gain of €120,000
| Gain | €120,000 |
| Gain recalculated for corporation tax | €316,800 |
| CT payable x 12.5% | €39,600 |
That gain will form part of the 2024 Corporation Tax return. The balance of tax for 2024 will become payable on the 21st of September 2025.
Preliminary Corporation Tax
Preliminary Corporation Tax for the year ended 31 December 2024 is due on the 23rd of November 2024. Tomorrow. It’s important to pay the right amount to avoid interest charges. You either pay
- 100% of your 2023 liability or
- 90% of your current year liability.
The final CT liability for the company in 2023 was €31,250. As we know this number then the company should pay the same again by the 23rd of November 2024. Once they pay this amount any balance doesn’t become due until the 21st of September 2025. If the company doesn’t pay the correct amount the balance becomes due at the time of filing the CT return which could be much earlier than the 21st of September 2025.
The key point is to ensure you have enough preliminary CT paid to avoid interest charges. It’s a pain to get caught for unnecessary interest charges when you have funds to pay the tax when it is due.
Joanne said to Paul on leaving our office “Ah Lord Jesus hun, that was a great pre year-end meeting”
Want to make sure you and your company are well looked after? If so, start here
