I met a prospective client recently and during our discussion around his Income Tax Return he casually and confidently told me that he estimated his tax liability at €1,000. How’s that I asked – Well I have €16k coming in from renting out rooms in my house, a friend told me I’m allowed the first €14k tax free so €2k @50% is €1k. I had to gently inform him that his advice was incorrect, there is indeed an exemption of €14k but once surpassed, he’s taxed on the full amount received and duly estimated his liability at €8k.

That’s far from the ideal initial conversation with a prospective client but it’s a fair representation of some of the issues we contend with when meeting or being introduced to people who’ve acted on advice from a “fella down the pub”.  A wise man once told me there are three professionals in life where you shouldn’t appoint the cheapest option, Heart Surgeon, Hot Air Balloonist and Accountant. I’m in business long enough to think I’ve heard it all, but I’m reminded regularly enough by the inaccurate and incorrect ramblings from The Bar Stool Accountant, that you really do learn something new every day, it just may not be right!  It’s not an urban myth, The Bar Stool Accountant does exist, and here’s some of his latest so called “advice”.

• My mother left my wife and I her house, I got it valued at €310k so it’s under the €320k threshold and I don’t have to pay tax. – Incorrect, you and your wife have each inherited €155k of value. While you are under the €320k threshold of mother\son, your wife is well in excess of the €16k threshold that applies to mother\daughter in law. Tax Bill c. €46k, ouch! (€139k @ 33%)
• I used my company to buy a Land Rover Jeep 5 seats, its commercially taxed so my BIK is charged at commercial vehicle rates, 5% of cost rather than the motor car rate, 30% of cost. – Not quite I’m afraid, with 5 seats it’s a passenger vehicle for BIK purposes, regardless of road tax, your BIK charge is 6 times greater than what you think it is.
• The deposit guarantee covers the first €100k of savings in any bank. – Not true if you have a joint account!
• While we are on banking…my loan was recently sold to a vulture fund. Word on the street has it that they bought it at a significant discount i.e. 10 cent in the €euro. I have been told to stop making repayments to the new loan owner to bring them to the table and then when I have their attention to offer them 10% of what is owed. - Not a good move. The Vulture fund (they like to be called investment funds) has purchased the original contract and loan value. Yes they are willing to listen to offers and negotiate the settlement of loans but this is done forensically and on a case by case basis.  They will accept less than value on the loan they have purchased but only when they see that it is in their interest to accept the offer.
• I bought a small Boat in the UK recently as exchange rates are great and I used the Vat number from my painting business to bring it in without Vat. – That won’t work I’m afraid, the boat isn’t related to your painting business and with the Intrastat information being shared across the EU, I reckon Revenue will be out to visit you in the next 6 months.  
• My wife and I are fortunately quite wealthy, my 4 children, all married,  have already used their gift\inheritance tax thresholds but I’m giving each of them a cash gift of €3,000 per annum to avail of the annual small gift allowance to pass as much cash as possible to my children while I can. – That makes sense of course, however you’re not optimising the situation, you can give each child €3,000 and your wife can also give each child €3,000, not only that, but you and your wife can do likewise with your sons or daughters in law. So, you and your wife can gift each family unit €12,000 per annum, 4 times greater than you are at present and that’s before we bring grandchildren into the equation. 

Here’s a genuine word from the wise - next time you take advice from The Bar Stool Accountant, get a second opinion from the professionals. Can you afford not to?

Regards

Fachtna O' Mahony