As well as receiving a much needed financial fillip, successful applicants also benefi t from ‘pooling their expertise and resources’ with another company, ensuring their innovative ideas are brought to market faster than if they were working alone.

There have been 652 insolvencies this year compared to 512 last year; with 263 coming in Dublin. The sectors worst affected were: construction (28 last month and 194 so far this year); hospitality (17 in May with 83 since the New Year); manufacturing (14 last month and 51 for the year); and motor and transport (10 in May with 32 for the year). High rents continue to cause problems for retailers, although, the car scrappage scheme is helping to sustain the motor industry.

Passing assets on to the next generation either on death or by gift can trigger the following taxes: Capital Acquisitions Tax (CAT), Capital Gains Tax (CGT) and Stamp Duty (SD). We will explore the tax implications of CAT in this issue and do a follow-up article covering CGT and SD matters in the next issue.

CAT is charged to the person receiving the benefit. It is calculated on the value of the benefit less any liabilities or costs paid by the beneficiary at a rate of 25%; therefore, transferring an asset while values are low will automatically trigger a reduced tax liability. Given the current difficult trading conditions the younger generation may benefit from having the asset sooner rather than later to generate an income or to help finance a new venture.

Depending on what assets are being transferred, the transaction may qualify for an exemption or relief from CAT. Under current Revenue legislation each individual has three lifetime class thresholds for CAT, dependent on their relationship with the donor. Where the benefit does not exceed the threshold, no CAT is charged. For example, children of a donor have a lifetime threshold of €414,799; to that end they can receive gifts or inheritances from their parents not exceeding €414,799 during their lifetime tax free. Also a parent can transfer a site with a market value of less than €500,000 to enable the child to build a principal private residence without triggering CAT.

Agricultural Relief, applicable to agricultural land and buildings, can reduce a CAT charge by 90%. A similar relief from CAT is available on the transfer of a business. The transfer of a dwelling house may be totally exempt from CAT provided that both the donor and the donee satisfy certain conditions.

While availing of the decreased values to reduce CAT will profit the beneficiaries, it is worthwhile noting that once the asset is transferred to them it is gone from your portfolio. Therefore, it is vital to assess your own cash flow for the future in order to protect your income in years to come. You could retain a life interest in the asset to ensure your future income and financial security is not jeopardised.

Passing on wealth is a complex issue and should not be driven solely by tax. The main concern is that the final result will service the overall needs of the family in the future.

Where a company is categorised as a close company (i.e. owned by five or fewer people) and where the director in question owns 5% or more of the company, any interest paid by the company to him or his associates could be treated as a distribution and taxed at his marginal rate of tax.

The interest will only be treated as a distribution where the interest payment exceeds the lower of 13% of the total of loans to the company from directors, or the nominal amount of issued share capital together with share premium.

Transitional measures are available from 1 January 2010 to 30 June 2010 whereby the dealer is entitled to claim
a residual amount of VAT on the fi rst purchase of the machine as follows:

1 January 2010 – 28 February 2010 40%
1 March 2010 – 30 April 2010 30%
1 May 2010 – 30 June 2010 20%

In This Issue

- Tax briefs
- Falling property values
- Business briefs
- Are we really a knowledge economy?
- Legal briefs
- Feeing black with the big red book

View of Irish Economy – Upbeat

Last month, as part of its twice-yearly Economic Outlook, the Organisation for Economic Co-operation and Development became the latest forecaster to raise its forecast for the Irish economy.

The latest projection from the Paris-based policy advice body envisages that the Irish economy will contract by 0.7% on average this year in Gross Domestic Product terms, much less than the 2.3% decline projected in its previous forecast round in November. Moreover, its forecast for next year was revised up by even more. The economy is now expected to grow by 3% in 2011, up considerably from the 1% it was pencilling in, in November.

The forecasters at the OECD are far from alone in taking a more upbeat view on Irish growth dynamics. Other prominent international observers who have been busy marking up their Irish forecasts recently include the IMF and European Commission.

Indeed, the forecasts of such large international institutions tend to mirror, and often lag behind, the pattern of changes in the views of the Irish economics community. One recent poll of a panel of domestic financial sector forecasters revealed that the consensus, or average, forecast is for real GDP to be unchanged this year (i.e. zero growth), which compares with an expected decline of over 1% in the same poll at the end of last year. The average GDP growth forecast for next year has also been marked up and is now at 3.2%, up from about 2.7% some six months ago. So it’s clearly not just overseas analysts who have become somewhat more optimistic lately.

What’s behind this pattern of upward growth revisions?

Well, the simple fact is that a range of Irish economic indicators have provided evidence of earlier-than-expected recovery. The latest trade numbers, for example, show that following a very strong pick-up in the early months of the year, Irish goods exports surged by over 12% in the first quarter of this year compared with the final quarter of last year.

Timely data on the performance of the private services sector is thin on the ground, which is very unfortunate given that services account for more than half of total GDP (and over half of all Irish exports). But we do have the monthly Purchasing Managers’ Index that does provide a timely steer. Significantly, this signalled a return to expansion in the April survey after a period of contraction, which lasted for well over two years and showed a further pick-up in May.

Elsewhere, underlying retail sales (excluding cars) enjoyed their first positive quarter in Q1 since the end of 2007, while the unemployment rate was steady at 13.4% for the first four months of the year before rising to 13.7% last month. Such indicators point to some signs of stability in areas which had seen enormous weakness during the depths of the recession.

In the case of both manufacturing and services, the key driver of a more positive trend emerging is the clear improvement in the international environment. Ireland is a very open economy, with exports amounting to some 90% of our GDP, so the global growth dynamic plays a very important role in shaping the Irish outlook.

Broadly speaking, the incoming news on the performance of Ireland’s key trading partners, the euro zone, UK and US has confirmed that recovery is ongoing, especially in the US where the recovery has been gaining in strength. And the recent weakness of the euro is also helpful, with a 20% fall vs. the dollar and a 12% decline vs. sterling since late last year giving a timely boost to the competitiveness of the Irish export sector.

Overall, the upward revisions to Irish growth forecasts recently have had solid foundations in the form of a much improved international picture and some stronger than expected domestic economic news.

However, while the turn in the global cycle has boosted Ireland’s growth performance and outlook, our openness also leaves us vulnerable in the event that the global recovery falters. That is a risk which investors have been more worried about lately. Concerns about the implications of the sovereign debt crisis have begun to cast a shadow over global growth prospects. This has been reflected in downward pressure on global stock markets over the past couple of months for example, implying that the adjective ‘cautious’ is very much appropriate in describing the greater optimism among analysts of the Irish economy lately.

Simon Barry is Chief Economist, Republic of Ireland with Ulster Bank Capital Markets

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Register Judgement Mortgage
This is useful where the Debtor has property. It ensures Creditor priority above unsecured creditors, but is ineffective where Debtor already has fully secured property with a lender.

Execution Orders/Fieri Facias Sheriff
Once an Execution Order is obtained it is sent to the sheriff to enforce. This is of no use unless the Debtor has viable goods that the sheriff can get his hands on and sell.

Instalment and Committai Orders
If the Creditor gets an Instalment Order and the Debtor fails to pay, the Creditor can apply to the District Court for a Committal Order. Since the Enforcement of Court Orders (Amendment) Act 2009 a Creditor must show the Debtor willfully refuses to pay and has no goods before a judge can order committal.

Attachment of Debts (Garnishee Orders)
Where a Debtor has no assets to pay, but is owed by a third party, then Judgment Creditors can apply to court for an order directing the third party to bypass the Debtor and pay the Creditor directly.

Receiver by Way of Equitable Execution
An expensive process whereby a Judgment Creditor applies to the court for an order appointing them Receiver over the Debtor ’s assets. This allows them to collect money due to the Debtor from a third party. However, the Receiver has no power to pursue the third party and must seek further directions from the court upon receiving the payment.

Order Charging Stocks and Shares
Allows Creditor to apply to the court for an order charging the stocks and shares owned by the Debtor.

Order Charging a Partner’s Interest
Under the Partnership Act this allows the Creditor to obtain an order to charge the partners interest in the business to the payment of the debt due.

Bankruptcy
Very much a last resort, as it gives the Creditor no priority over other creditors, with rules of preference being similar to Liquidation or Receiverships. A court will not grant a Bankruptcy Order until it is shown that all other methods were unsuccessful.

Private Arrangements by Debtor Under Court Control
Debtors can apply themselves to court to halt various enforcements and seek individual protection. The Debtor must present a scheme to the court and the Creditors must vote to pass it.

Winding Up Companies
Once a Creditor can prove insolvency, orders for Liquidation or Receivership can be obtained. Usually this is preceded by an examinership application by the company. This is also a last resort for a Creditor, as it gains no priority for the Creditor and cannot guarantee payment in the long run.

Software as a Service (SaaS) is giving businesses the flexibility to pick and choose applications – from basic email to whole disk encryption – without requiring an extensive IT department, and the option to roll out more services as and when needed. What’s more, with services hosted offsite there is no need for additional hardware investment, and maintenance fees are low to nonexistent.

The long-running debate around cloud computing has recently been reinvigorated, with many organisations starting to seriously consider the pros and cons of accessing applications through a web browser as opposed to having to host software on their own PCs. It comes as little surprise that cost has emerged as the most promising draw for SMEs when considering this model, but with increasingly complex business software becoming available there could be other benefits to be had in the cloud.

However, some SMEs feel there are downsides to SaaS. Security is a key concern of organisations that may feel uncomfortable having sensitive corporate data held at an undisclosed location, with concerns over access policies remaining a stumbling block. Other perceived issues include loss of control over downtime or outages and latency-related performance problems in the cloud. This all leads to a significant cost-benefit trade-off that organisations must consider before going down the SaaS route.

As a result of these concerns organisations have taken a somewhat cautious approach to cloud computing during the past year – selecting just a few nonessential applications to test the service against their individual needs. However, with the recent improvements to SaaS delivery models, online collaboration technology has rapidly evolved and become available to smaller organisations that previously couldn’t afford the financial burden of licensing and maintaining this increasingly valuable technology.

Recent postal strikes in the UK served to further highlight the issue, demonstrating the importance of organisations being able to interact with customers and clients through online channels. In addition, the rising cost of online payment processing, ongoing fears over the security of sensitive data transferred via email or snail mail, and difficulties keeping up with the revision process (on contracts or other rolling documents) have all contributed to the popularity of collaborative technology.

For too long now, SMEs have been frightened or unable to change the terms of how they deal with their clients, but if they wish to remain competitive in this market then they need to embrace new technology as a way to level the playing field – and they need to do it now. The provision of collaboration technology for the SME market would once have been financially unviable – but by utilising the power of enterprise cloud computing, businesses can now bypass the need for ever more complex IT systems, while revolutionising the way in which they operate and interact with customers on the web in a simple, cost-effective way.

Increasing your site profi le is the way to start. Getting on page one of Google can be as simple as signing up your existing website for a business optimisation service, or as complex as having a dedicated web marketing expert give your website a complete overhaul. For many businesses in this economic climate it comes down to what can you afford and when can you afford it. There are a few approaches to consider:

Directories such as CityLocal.ie and MyTown.ie give your business a platform on page one of Google without having to optimise your existing website. This basic optimisation works by creating a profi le for your business within the directory that is picked up by Google in your area of the country. By doing a keyword analysis and selecting actual keywords that work for your business, the directory ensures your most effective words show up in every search. The process is performed for hundreds of businesses throughout Ireland, giving the businesses economies of scale and providing every business with a page-one presence in a cost effective manner.

Pay-off
Purchasing Google Adwords is the only way to guarantee a page-one presence for specifi c search terms (keywords). Google Adwords, otherwise known as sponsored links, appear at the top of and/or down the right-hand side of the Google page to ensure your website and services appear exactly where you want them. It is still a good idea to have a comprehensive website for potential customers and clients to click through to; getting them to your site is only half the battle – selling your service is the fi nal hurdle.

Take-off
If your business is growing and expanding then you may consider a complete site overhaul. Good Search Engine Optimisation (SEO) will successfully build and re-structure your website so that it appears on all major search engines. Hiring a web marketing expert to look at the site from an optimisation perspective and re-do the site structure and content accordingly can be highly effective. It can be time consuming and therefore costly, but the benefi ts of exposure can outweigh the cost. The following are points to consider when optimising your site:

1. Domain Name –
   If the website name includes a product or service it will increase the search engine ranking of the website, e.g. www.joebloggsplumbing.ie.
2. Site Structure –
   Home page and top-line menu pages are given more authority by Google so ensure these contain strong references to your key products and services.
3. Page structure/content -
   • Keywords – It is important to have effective keywords throughout your site.
   • image vs. text – Google searches from the top lefthand side down so place text at the top of the page.
   • Alt tags – This allows every image to have a keyword (phrase is visible when the cursor hovers over the image).
   • headings/bullets – Google gives priority to headings and bullet points that contain keywords.
   • Site maps – A site map makes it easy for a search engine to index your site.
     • meta tags – Meta elements provide information about a given Web page, most often to help search engines categorise them correctly.
     • Title – Words to the left take precedence to those on the right.
     • description – The brief two-line description that Google displays when searched (needs to contain your keywords).
   • Internal links using keywords – Create hyperlinks around important keywords within the site.
   • backlinks – Each website is given an overall ranking by Google of between 1 (poor) and 10. When another website contains a link to your website this is called a backlink.

Successful businesses need a mixture of all of the above. Increasing your online profi le for a short time is benefi cial but the best course of action for every business is to build an online profi le that will last. Optimisation isn’t a once-off job: it’s a continual process. As you improve, so will your competitors; therefore, it pays to set your sights high from day one.

Information on optimisation and directory services available on www.citylocal.ie