We all expected a slightly bumpy year for investments in 2022 as markets recovered from the impact of Covid-19. What we didn’t anticipate was the invasion of Ukraine by Russia and the resulting impact on energy markets, the rapid increase in inflation, and the marked effect on the global economy. These factors all resulted in both equities and bonds ending the year in a negative fashion.

A question we were asked many times during last year was whether an investment should be cashed in to minimise losses. With the negative end to the year for equities and bonds in particular, this concern has been raised again over the past few weeks.

The first point to note is that there had been a positive start to 2023 and markets certainly seem to be on the rebound. Energy prices, inflation and other pressures seem to have started to stabilise. The threat of recession is still with us but, should this happen, all pointers indicate this would be mild and short-lived.

However, the past 2 weeks have shown some significant events in the market which will once again impact conditions in the short-term. The initial reaction to the banking crisis in the US and in Switzerland saw financial conditions tighten. This did appear to make recessionary conditions more likely. However, the swift response by regulators to the emerging crisis conditions has diminished the negative impact. Interest rate expectations did drop back but as I write equities are rebounding.

This situation brings me to my second point. This situation very much demonstrates why investing is a long-term commitment. By their nature markets have ups and downs but over the course of an investment, these tend to level out. There are many factors that can affect the markets. Volatility is usually caused by political and economic factors, industry or sector changes, or even individual company news. While it can be difficult to witness any declines in your portfolio, it is important to apply logic and not act out of emotion.

History has shown that those who have stayed invested during previous periods of market volatility have achieved their original investment objectives. Investing in a diversified equity portfolio has been shown to provide the best return on investment over a long period. The greatest risk to investment return on equities for an investor was not from being in the market during the negative times but being out of it during the more frequent positive ones.

This brings us back to a key message we share with our clients. Once you have chosen a strategy that suits your needs and risk profile, returns may depend on time in the market rather than timing the markets. It is important to not act in haste. While we cannot predict exactly what markets will do, we can certainly draw on past experience. In answer to the question, it is down to what the objective of the investment is and how long the term is. These factors will dictate what action if any needs to be taken.

A well-balanced, diversified portfolio would be built to take into account the ups and downs of the market in achieving its objective. Volatility is a typical part of investing. But it’s not unusual to be concerned by periods of it, especially when this is sustained for a considerable period. If you have any questions or concerns in relation to your own investment, please don’t hesitate to get in touch with us at Quintas Wealth Management.

To date, our Indian-based team have been working closely with our head office in Cork, and we have now completed the process of establishing our presence on the ground in India.

Managing Partner Paul O' Connell, recently spent a week in Kochi to check out the new offices, get to know the team members and strategise over shared local cuisine!

We are delighted to share that we have been short-listed for the Employer of the Year and Medium Practice of the Year awards at this year's Irish Accountancy Awards!

our goal is to deliver our clients a best-in-class service in a work environment that provides opportunity and rewards in equal measure. Both of these nominations reflect the commitment shown by our team each day.

 We would like to wish all short-listed companies the best of luck and we are looking forward to seeing everyone on May 25th!

Quintas Capital was launched in Q4 2022 to provide corporate finance services to clients mainly in the form of investment opportunities. The team is led by Director, Kevin Canning.

It has been an exciting launch for Quintas Capital with the following milestones in Q4 2022 and Q1 2023:

The EIIS Innovation Fund

The EIIS Innovation Fund launched in Q4 2022 and raised €3.5m to invest into Irish SMEs. The capital will be invested into 4 or 5 innovative and growing Irish SMEs during 2023. Our team is engaged in detailed due diligence with a number of high profile Irish SMEs and hope to announce details of investments soon.

EIIS is a tax relief incentive scheme, previously the Business Expansion Scheme (BES) which provides income tax relief of up to 40% to individual investors for investments in small and medium-sized companies throughout Ireland.  The scheme offers one of the few remaining income tax reliefs.

The EIIS Innovation Fund will be fundraising in Q4 2023 again. If you are interested in learning more, please contact Kevin Canning (Kevin.canning@quintas.ie)

EIIS Fund Launch

Fundraising Partnership – SYS

The EIIS Innovation Fund entered a fundraising partnership with SYS during Q4 2022 (more details below):

Quintas Partner with SYS

Angel Investing

Our team is about to commence an equity based EIIS fundraise for 2 well-known scaling Irish technology companies from our extensive network of Angel Investors. If you would like to learn more about these or other opportunities like this, please contact Kevin Canning.

Debt Financing

Our debt financing team connects investors’ capital with suitable projects. These investments are generally secured by government-backed income or real estate. We have several ongoing projects now which we are assessing for suitable capital deployment.

Please get in contact if you are an investor looking for a return on your capital or a company seeking debt financing.

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Keep up to date on all our upcoming events and investments on our LinkedIn Pages including our series of seminars which are due to launch in Q2:

The EIIS Innovation Fund

Quintas Capital

This new requirement will be implemented by the Companies Registration Office (CRO) from 23rd April 2023.

The Companies (Corporate Enforcement Authority) Act 2021 contains a provision requiring all Directors of Irish companies to provide their personal public service number (PPSN), when:

• incorporating a new company (CRO Form A1),
• filing an annual return (CRO Form B1); or
• notifying a change of director (CRO Forms B10, B10A and B69).

This new requirement will be implemented by the Companies Registration Office (CRO) from 23^rd April 2023. Any of the above forms submitted without PPSNs (awaiting signature and payment) before 23^rd April 2023 must be signed and paid before 23^rd April 2023 as they will be rejected on or after 23^rd April 2023.

It is our understanding that the Directors details submitted to the CRO will need to be an exact match with the details held by the Department of Employment and Social Protection (DEASP) and the CRO may reject forms that contain a minor mismatch of information. The CRO will reject any of the above-mentioned forms where the date of birth on the form does not match the date of birth linked to that PPSN on the DEASP database.

A mismatch in the information may cause the company’s filing with the Companies Registration Office to be rejected and it may take some time to resolve the mismatch. If the company is unable to file its annual return on time due to a mismatch of information the company may lose its entitlement to claim audit exemption for two financial years and may incur substantial late filing fees imposed by the Companies Registration Office.

To avoid the CRO rejecting submissions made to it, all Directors are encouraged to review the information (including PPSN, name, address and date of birth) held by the Department of Employment Affairs and Social Protection for them. This can be found on your Public Services Card or correspondence you may have recently received from the Department in relation to, child benefit, state pension or illness benefit.  In the situation where the Department has not corresponded with you recently please contact the Department of Employment Affairs and Social Protection to verify the records which are held for you. Any out-dated information identified should be updated to ensure that the CRO record and DEASP record are matched.

In the case of a director who does not have a PPSN,  and does not have an identification number issued by the Register of Beneficial Ownership the Director will be required to apply to the CRO for a Verified Identification Number. Directors that have been allocated an identification number by the RBO can use that number for CRO filings.

The Companies Registration Office are developing their information systems to redact PPSNs from all forms submitted to ensure that PPSNs are not disclosed to the public.

Should you have any queries on the above, please do not hesitate to contact us.

Regards

Denis Healy

Senior Manager - Quintas

In response to the financial challenges being faced by companies located in the State the Corporate Enforcement Authority (CEA) published an information note in January 2023.

The purpose of this Information Note is to assist company directors in understanding certain aspects of the Regulations i.e., those aspects having a particular bearing on directors’ duties and responsibilities.

Early Warning Signs of Business Failure

One main area of focus would be if the directors are not maintaining adequate accounting records on a timely basis, they will not have a sufficient and up to date understanding of, amongst other things:

• whether the company is profitable (i.e., whether the business is actually generating profit),

• whether the company is generating cash and, if not, why not,

• the level of the company’s debts and whether the company can discharge those debts as they fall due.

In this regard it is advised that timely and accurate management information – including management accounts, budgets and cashflow projections - will allow company directors assess the current financial position of the company and then assist them to look to the future and to plan accordingly.

That, in turn, will allow directors to determine whether, for example:

• current lines of business should be discontinued, and others explored,

• short/medium/long term funding is likely to be necessary into the future, and if so to make the necessary arrangements,

• whether surplus cash is likely to accumulate in the business and, if so, to make appropriate investment decisions.

Indicators of Financial Difficulties

At the end of the guide under APPENDIX 1 the CEA have listed some of the INDICATORS OF FINANCIAL DIFFICULTIES, with specific examples under a number of different headings (sales, expenses, debtors, stock, creditors etc.)

Given the expected challenges facing businesses over the next 12/24 months this maybe a useful guide for the directors to refer to when reviewing the annual accounts and management accounts with the company accountant or external business advisor.

Business Rescue Scheme for SME’s (SCARP)

The guide also summarizes the restructuring options available to directors if the company runs into financial difficulties. i.e., examinership, SCARP etc.

This is even more important due to businesses ceasing to receive government subsidies post covid and at the same time they need to engage with both revenue, suppliers and financial institutions on debts that have built up over the last number of years. This would be very relevant to businesses that have warehoused significant amounts of tax debts with Revenue.

Initially we would suggest that this financial review could be as simple as discussing the current situation with a friend or trusted confident, in some cases it could be a discussion with your accountant if you are concerned.

Following this initial review, it may be advisable to seek the advice of an Insolvency Practitioner who will be in a position to review the current position of the business and set out the options available to the directors and shareholders of the company.

Early Intervention is critical.

It is essential that if the company directors are concerned then they need to ensure they assist and prepare the company to prepare for failure. As with anything of this nature early intervention is the critical part to ensuring the survival of any business.

Unfortunately, the statistics from the CRO indicate that this intervention is being sought too late and at that late stage there is no other option other than the liquidation of the company.

In most cases had the advice been sought 6 to 12 months previously then other options could have been available before it was too late.

SCARP Business Rescue Process

The SCARP scheme was introduced by The Companies (Rescue Process for Small and Micro Companies) Act 2021 to give help to certain companies who are viable, yet Insolvent.

The scheme applies to small and micro companies and:

• allows companies to restructure their debts.
• helps companies avoid liquidation.
• ensures creditors get a better outcome than they would under a liquidation.

SCARP should be considered by any company that believes they will have an issue in paying debt warehoused with Revenue. The only situation that Revenue can write off/down tax debts is through a Formal Insolvency Arrangement.

As a Process Advisor must make a request for Revenue to participate in a rescue plan it is essential that the directors would engage with Revenue well in advance of the due date for payment of any warehoused debt.

Regards

Mark Ryan 

Partner - Quintas

Are you a Non-Resident Landlord? Do you know any Non-Resident Landlords or are you part of a partnership with one, then the following update will be incredibly important on how that rental income is declared. A non-resident landlord is someone who is not resident in Ireland but receives rental income from the letting of an Irish property.

The requirements that are previously in place regarding the collection of rent payable to non-resident landlords have changed from a should to a must. What this means for the non-resident landlord is that rather than receiving 100% of the rent themselves and then returning to Revenue, which although technically incorrect, was in previous years accepted by Revenue or at least not challenged by Revenue. Non-resident landlords must now either engage the services of a collection agent or request that the tenant withholds 20% of the tax on the rent and pay that over to Revenue via an R185 Form.

Using a Collection Agent

As non-resident landlords must now use one of the approved methods for tax collection, we will look at the compliance requirements of a collection agent and how it works operationally.

A collection agent is a nominated Irish resident who collects the rent on the behalf of the non-resident landlord and is assessable to tax on the income of the non-resident landlord. While the assessment is in the name of the Irish collection agent the tax charged is the amount which would be charged if the non-resident landlord was assessed in their own right.

The collection agent will need to register as a collection agent, obtain a unique tax reference number for the service and pay over the tax due on the rent. A collection agent can be an estate agent, a management company, a solicitor or someone you have nominated to act on your behalf such as a family member or a friend. Operationally, it may make sense, especially if in a partnership for one of the resident landlords to become a collection agent on behalf of the non-resident landlord.

There are proposed changes coming from Finance Act 2022 which would see the collection agent no longer be subject to income tax on the landlord’s behalf where certain criteria are met. The collection agent would not be subject to income tax on the landlord’s behalf where they deduct withholding tax from payments made to the landlord and pay the tax over to Revenue. They must also provide certain information to Revenue relating to the non-resident landlord and the property such as the Eircode, local property tax reference number, the gross rent payment and taxes withheld etc. This change however is subject to a ministerial commencement order and so we don’t know when this amendment will come into force but will likely be effective from 2024.

Withholding 20% of the Tax

The alternative method is for the non-resident landlord to request that the tenant withhold 20% of the tax payable and pay that over to Revenue together with a completed R185 form. The non-resident landlord will then receive a tax credit for the rent withheld and can claim this when they complete their Income Tax return. The issue with this method is that it places compliance strain on the tenant.

As you can see from the above, the existing collection requirements create compliance burdens for landlords, collection agents and tenants depending on what method is opted for. We may however see an increase in estate agents implementing a new service in which they would bill to become collection agents especially if the new proposed amendment is introduced removing the requirement for the collection agent to file a return.

Regardless, it is clear to see that the collection & reporting obligations are yet another barrier for non-resident landlords and perhaps will be seen as another reason for them to exit the property rental market at a time when the state is so short on landlords and affordable rents.

If you have any questions on the above, please get in touch with your Quintas contact.

Regards

Kyle Baxter

Tax Trainee Quintas