PAYE Settlement Agreement for 2024
It is getting close to that time of year when employers need to consider whether they are required to make an application to Revenue in relation to a PAYE Settlement Agreement (PSA) for 2024.
Originally designed as a tax-neutral regime for the holding of mortgages, there have been numerous changes since its inception. This has expanded the types of assets they may hold and introduced certain anti-avoidance elements. Throughout these changes, maintaining tax neutrality has remained a fundamental objective.
The latest figures published by the Department of Finance indicate that 1,722 companies filed their 2021 corporation tax returns under the Section 110 designation.
There are five key reasons for the success of the regime:
Section 110 companies are entitled to hold qualifying assets which include financial assets (shares, bonds and other securities, futures, options, swaps, derivatives and similar instruments, invoices and all types of receivables, obligations evidencing debt (including loans and deposits), relevant receivables and loan and lease portfolios, hire purchase contracts, acceptance credits and all other documents of title relating to the movement of goods, bills of exchange, commercial paper, promissory notes and all other kinds of negotiable or transferable instruments, carbon offsets and contracts for insurance and reinsurance), commodities or plant and machinery.
Unlike other Irish investment holding companies, Section 110 companies are generally entitled to a deduction for any costs incurred ‘wholly and exclusively’ for the purposes of the business. In addition to this, subject to meeting certain anti-avoidance conditions, Section 110 companies are entitled to a deduction for profit participating interest or interest in excess of a reasonable commercial return which are usually reclassified as a distribution under Irish tax rules.
This allows Section 110 companies to sweep out profits in the form of profit participating interest leaving a minimal amount of retained profit which is subjected to tax at 25%.
Section 110 companies can be used for a wide range of transactions including:
At Mazars, we have a wealth of experience in advising clients on the setup of Section 110 companies and assisting them with any ongoing requirements. Our services include:
For more details on the Section 110 regime, please do not hesitate to contact our financial services tax team.
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