CACM Accountants — Certified Public Accountants

Dear Reader

Welcome to our May Ezine. Many business owners are not thinking beyond the immediate future and it is quite common for me to hear business owners say that the priority for them at the moment is to get through this difficult time and then “see what happens”. However, there are also opportunities in this market to set up your own business or purchase an existing business.

Thorough due diligence needs to be carried out when considering purchasing an existing business. This month I will discuss some points that should be considered carefully should you decide to take the plunge and find yourself considering the purchase of an existing business.If you have any queries or require further information or assistance with any of the topics below, please do not hesitate to contact me to arrange your free initial consultation on 021 421 7474 or e-mail: info@CACMaccountants.ie

Don’t forget, you can follow CACM Accountants on LinkedIn, Twitter and become a fan on facebook by clicking the links to the left of the page.

As always, please feel free to pass this e-zine onto anyone you feel may benefit from any of the articles.

Carla Manning ADCA, CPA 
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PROTECTING YOUR BUSINESS SERIES

Purchasing a Business

When considering the purchase of a business, it must first be established whether it is to be a share purchase or an asset purchase. In the case of the purchase of the shares of a private limited company, first off, a valuation of the shares will need to be established and agreed between both parties. The main disadvantage of purchasing the shares in a private limited company is the potential exposure with regards to hidden liabilities such as potential lawsuits as well as any historic tax issues.
In the case of the sale of shares in a private company for cash, the purchaser will usually be financing all or a part of the purchase price with a financial institution. It is not unusual, particularly these days, for the financial institute to look for security, generally against the assets of the company being purchased as well as personal guarantees. Now, at the time of getting the finance, the purchaser does not have any entitlement to the assets of the company and so cannot give the assets as security. As a general rule, the providing of any such security or guarantee by the Seller of the company in favour of the purchaser's lenders is prohibited.
Stamp duty is payable on the market value of the shares being purchased and may also be incurred in respect of the transfer of debtor balances, as well as the potential for bad debts to be incurred once you have purchased the shares. In respect of trade creditors, once satisfied with the quantification and verification of the seller’s trade creditors, there is not a stamp duty issue and there are generally not the same issues as taking on debtors. It does need to be verified that there are no personal guarantees or other hidden clauses.

When purchasing all the shares in a company, you essentially buy the good, the bad and the ugly. Some of the bad can be quantified and appropriate actions taken to safeguard against potential exposures, however one can never get a 100% clean bill guarantee.
So, how does one purchase a business while trying to minimise the many potential minefields? Consider an asset purchase. An asset purchase is more common and it allows the purchaser to leave behind any undisclosed hidden liabilities which may exist in the target company. You basically pick and choose the assets that are of value to you and leave behind the liabilities.
There are numerous areas that need to be considered when purchasing a business and these will depend on what is being purchased. Some of the more common areas include leases, employees, charges over assets, VAT and other taxes. Always get professional advise sooner rather than later in order to make sure that you cross the t’s and dot the i’s otherwise, you may inadvertently end up paying far more than you had bargained for.
For further information or for assistance please contact CACM Accountants on 021 421 7474 or e-mail info@CACMaccountants.ie

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KBC Ireland/ESRI Consumer Sentiment Index improves again in April.

The overall KBC Ireland/ESRI Consumer Sentiment Index rose in April to 65.6. This compares to a figure of 61.9 in March and at its all time low in July 2008 when the index was at 39.6. Commenting on the results David Duffy, ESRI, said
· “The results for the consumer sentiment indicate further improvement in April as consumers became more optimistic about the outlook for the labour market and their future household finances.” “The overall improvement hides divergence in the sub indices. The index of current economic conditions weakened to 83.4 from 87.6 in March, while the expectations index rose from 44.5 in March to 53.7 in April.”
· ”The decline in the current conditions index primarily reflects consumers concerns about their current household finances.”


In addition, Austin Hughes, KBC Ireland, noted:

· “The improving trend in consumer sentiment of late suggests consumers sense the Irish economy has reached a turning point. They don’t expect any dramatic near term improvement but if fears continue to fade we should see a slightly healthier trend in household spending as the year progresses.”
· “While the downturn was sharp, severe and widely felt across virtually all households, any recovery is likely to be quite different. The details of the sentiment survey of late point to significant differences in the circumstances of individual consumers as the Irish economy begins to turn. For many, conditions are likely to remain tough for some considerable time but there is a sense that a significant number feel the worst is over and some are already seeing an improvement in their circumstances.”


Note:- Since May 2008 the KBC Ireland/ESRI Irish consumer sentiment survey was prepared using a slightly different methodology. While this may have a minor impact on the precise numerical estimates of various survey components, it should not have any significant effect on the broad trend reported.
 

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RETURN AND PAYMENT DATES FOR THE MONTH OF June 2010

14th June 2010
PAYE/PRSI: P30 monthly return and payment for May 2010
 

• DWT: Return and payment of DWT for May 2010
• PSWT: F30 monthly return and payment for May 2010
• RCT: RCT30 monthly return and payment for May 2010

Corporation Tax:

Preliminary Tax for Accounting Periods ending between 1st July 2010 -31st July 2010

21st June 2010
Returns for Accounting Periods ending between 1st September 2010 – 30th September 2009
 

• Pay balance due on Accounting Periods ending between 1st September 2010 – 30th September 2009 30th June 2010
• Returns of Third Party Information for Accounting Periods ending between 1st September – 30th September 2009

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 Stamp duty - ATM Cards, Debit Cards, Credit Cards.

Stamp duty is collected in arrears. It is usually collected in December for ATM cards, laser cards and combined ATM and laser cards.
For credit cards and charge cards, it is usually collected in April. The current stamp duty payable per annum on bank and credit cards is as follows:
€2.50 per year per ATM card (also known as cash card)

• €2.50 per year per debit (Laser) card
• €5 per combined (ATM & debit) card
• €30 per year per credit card account
• €30 per year per charge card

Given the closure of Halifax of its current account business, a number of people will be faced with switching their bank accounts to other Financial Institutions. This may also entail the issue of new laser cards and credit or charge cards.
There is an exemption from a second or subsequent charge to stamp duty when switching accounts within an institution, or from one institution to another within any one year, provided you close your old account.

Details of Switching arrangements.

If you switch accounts you should pay the stamp duty to the old Bank/Card Issuer on closing the account. It will be requested in your final statement. Your old Bank/Card Issuer will then issue you with a Letter of Closure. This letter will confirm that you have paid the stamp duty for the period in question. You should present this letter to your new Bank/Card Issuer, who will not bill you for stamp duty for that period. No matter how many times you switch your account in a period, you will still only be charged tax on the original account, provided you obtain a Letter of Closure each time you close the account. The second and subsequent bank/card issuer will issue a Letter of Closure once it has proof that the duty has been paid on the first account.

The Letter of Closure is an important document as the Bank is only in a position to issue one original letter. On receipt of the letter the cardholder should store it in a secure place and pass it to their new bank as quickly as possible to ensure they receive the exemption from double stamp duty.

ROS customers affected by Halifax closing its current account business from 18 June 2010 should also ensure that they their ROS Debit Instructions have been amended to reflect their new current account details prior to that date.

If you want to make sure you that your books and records are complying with statutory requirements, please do not hesitate to contact CACM Accountants on 021 421 7474 or e-mail: info@CACMaccountants.ie

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Student Grants

Students that are planning to go to college in the September/October 2010 can now apply to see if they are eligible for maintenance grants. The application process has been brought forward by about 2 months this year, which will be welcomed by those that have previously gone through the process. If you are self employed, a notice of assessment for the last tax year is usually required to be included (as well as other documentation) as part of the application process.

In order to make sure that the grant application process is not delayed, you should ensure that your accounts and tax returns are prepared and submitted to Revenue as soon as possible.

Remember, if you are due a tax refund for 2009, once approved by Revenue it will be processed and issued to you before the due date of 31st October 2010.

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SERVICES CACM Accountants PROVIDE

• Taxation Service & Advice
• Accounts Preparation
• Audit
• Payroll Services
• New Business Start Up
• Company Secretarial
• Outsourced Accounting Services
• Management and Business Advisory Service
• Litigation & Forensic Accounting

CACM Accountants strive to offer the best possible service for its clients. With vast business experience, across many business sectors, we will always keep our clients at the heart of our firm.

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