Paul Brady

Thursday 2nd September 2010, 3:48 pm

Private Equity Investments for SMEs

By Paul Brady

Many large businesses are trying to stave off insolvency by sourcing private equity investment (Aer Arann being the latest). It is important for small and medium sized enterprise owners to know that raising capital in this way is not the exclusive preserve of large publicly quoted companies. Many businesses in need of capital do not qualify for state funding and cannot secure bank finance. Private equity may be a lifeline.

However, if you are a business owner in need of capital, where do you start? The following may be of use:

  • Before approaching investors, get your house in order.
  • Ensure the business’ accounts are up-to-date and all necessary returns are filed.
  • Prepare a realistic business plan based on reasonable projections.
  • Determine how much capital is needed, what form it will take and what return you can offer investors. It may be the case that you want to enhance the offering by making it more tax efficient for investors (i.e. using pensions or the BES).
  • Next, confirm investor interest in your offering. Initial feedback may allow you to adjust your offering to make it more attractive to investors. Investors can come from your own contacts, financial advisers and/or investor networks. The Halo Business Angel Network is a government sponsored body charged with aligning investors and businesses (see www.hban.org).
  • Once all parties are ready to proceed, your professional advisers should produce formal documents. An offering document will ensure investors are clear about what they are investing in and what return they should expect. Transaction documents will govern the relationship between the investors and the business. Investors will normally conduct legal, financial and technical due diligence and you should be ready and willing to facilitate this.
  • Also, it would be sound governance practice to provide investors with information on the business’ performance on a regular basis during the lifetime of the investment.

Seeking to raise capital through private equity should not be seen as a last resort but rather an alternative to bank finance and government funding. Investors will be attracted by a sound business proposition, a good balance of risk and reward and, if available, tax breaks.

Paul Brady is a Registered Tax Consultant with TaxandLegal.ie. Visit: www.taxandlegal.ie

Simon Ball

Wednesday 1st September 2010, 12:39 pm

Income Tax Deadline Approaching Fast for 2009 Tax Returns - How to Reduce Your Tax?

By Simon Ball

The pensions levy was very much in the news in the winter of 2009, but since, the initial furore has been forgotten.

The income tax filing deadline of 31 October 2010 for 2009 tax returns will shortly be upon us. Now with the kids back to school once more, it is an opportune time for those who wish to claim additional tax relief to examine the options that are available to them.

Increasingly it is government policy to encourage people to provide for their retirement through generous tax breaks given to pension schemes which are approved by the Revenue Commissioners. Personal Retirement Savings Accounts (PRSAs) were recently introduced in an attempt to extend overall pensions coverage.

Here’s an outline of how these PRSAs work.

Retirement Annuity Contracts (RACs) {A.K.A. Tax Saving Pension Payments}

Subject to certain restrictions, tax relief is available on premiums paid by an individual under an approved annuity contract to secure a life annuity in his old age. Before Revenue will approve an RAC, there are many conditions that must be satisfied with regard to the provider of the RAC and the contract itself. Some of the main points are that:

  • The contract must be with a person lawfully carrying on an annuity business in Ireland; once non-Irish providers fulfil certain conditions then are also regarded as approved providers;
  • The contract must provide for only payment of sum by annuity to the individual;
  • The contract must pay the annuity between the ages of 60-75;

Relief for Premiums Paid

An RAC will be allowed from an individual’s ‘relevant earnings’ for the year of assessment in which the premium is paid.

Relevant earnings means:

  • Income arising in respect of remuneration from a non-pensionable office or employment;
  • Income from the carrying on of a trade or profession, i.e. self employed.

The maximum amount which can be deducted in any year of assessment depends on the age of the individual and can be summarised as follows:

Age                            Percentage

Up to 29                    15%
Age 30-39                  20%
Age 40-49                  25%
Age 50-54                  30%
Age 55-59                  35%
Age 60 and over       40%

In the case of certain ‘specified individuals’, (e.g. certain sportspeople and occupations of a limited duration) the 30% applies regardless of age.
Net relevant earnings means the amount of the individual’s relevant earnings (as defined above) less:

  • Losses and capital allowances
  • Charges on income

Net relevant earnings are capped at €150,000 per annum for 2009 and 2010 (the cap amount was €275,239 for 2008).

Topping Up – Additional Voluntary Contributions

One of the most efficient methods of reducing one’s tax bill for 2009 is by way of making an AVC to one’s pension scheme. Relief for the RAC is normally allowed in the year it is paid, however where a premium is paid before the tax filing deadline for that year it may be claimed as if it were paid in the earlier tax year.
Perhaps an example would help bring this to life:

Joseph is 54 years of age and has net relevant earnings for 2009 of €150,000. He made pension contributions to his approved scheme of €20,000 during 2009. The maximum he is allowed to claim tax relief on is 30% * €150,000 = €50,000. As the filing deadline for 2009 Income Tax returns is 31 October 2010, Joseph can make a ‘top-up’ payment before the deadline of €30,000 which will reduce his taxable income by €30,000, thus saving him tax of at the higher rate of 41% for 2009.

This not only reduces Joseph’s 2009 Income Tax liability but also his 2010 preliminary Income Tax liability. (Preliminary tax for 2010 must also be paid by 31 October 2010 and is based on 100% of an individual’s 2009 liability or 90% of their 2010 liability).

As you can see this is a very worthwhile tax saving and one which effectively transfers what would be paid as tax at the highest rate into a personal pension fund.

Simon is the Principal of SB Tax Consultants and specializes in the areas of corporate and personal tax planning work and the preparation and filing of returns for both companies and individuals.

simon@sbtaxconsultants.com
www.sbtaxconsultants.com

Tara Dalrymple

Tuesday 31st August 2010, 11:52 am

An Introduction to Pricing for your Business

By Tara Dalrymple

Pricing your product or service is one of the most important business decisions you’ll make.

You must offer your products for a price your target market is willing to pay-and one that produces a profit for your company-or you won’t be in business for long! There are many approaches to pricing, some scientific, some not. This article provides a framework for making pricing decisions that takes into account your costs, the effects of competition and the customer’s perception of value.

A quick note about how the terms “cost” and “price” are used in this article:

  • Cost is the total of the fixed and variable expenses (costs to you) to manufacturer or offer your product or service.
  • Price is the selling price per unit customers pay for your product or service.

So, when customers ask, “How much does it cost,” your answer is your price. Read the rest of this entry »

Emer @ O2 ideas room

Friday 27th August 2010, 2:09 pm

IRISH TWITTERSPHERE RESEARCH - HOW DO YOU USE TWITTER?

By Emer @ O2 ideas room

Spending time at BlogTalk2010 in Galway the past few days and there has been a lot interesting trends shared with regards to the way we communicate in the social space, online, on mobile, with apps, etc.

But what intrigued me most was the amount of people looking at social media from an academic perspective: doing research on the data that is shared across the streams in our social networks. One of the speakers, John Conroy of NUI Galway, has done his own research about the Twittersphere in Ireland, confirming a lot of the trends we may have suspected.

He’s featured in the Irish Examiner today below, so we thought we’d share the findings with the O2 ideas room community.

Click here to read the article

Have a read and let us know what you think. How do you like to use twitter?

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