While Owners’ Management Companies (OMCs) do not trade for a gain they are required to register for corporation tax. A concession is available from Revenue and this concession will need to be applied for each year and confirmation received from Revenue. In some cases Revenue may provide the concession for several years on the basis they are notified if anything changes. If the concession is received the OMC is exempt from filing a CT1.
However, directors of OMCs should be aware that the concession provided by Revenue only relates to income earned from members in relation to services charges billed to cover the day to day running of the development.
There are a couple of cases where a CT1 may be required to be filed with Revenue and corporation tax may be due:
- Deposit interest – where funds of the OMC are held in a deposit account earning interest and the interest earned (gross) is greater than €128 i.e., tax charge is greater than €32 than they will be required to file a CT1
- Any 3rd party income may be subject to corporation tax, e.g., additional car park spaces rented to a local business. As this would not fall under the concession noted above the directors should ensure to obtain tax advice to ensure they are accounting for this correctly
Residential OMCs are not registered for VAT, however where you have a Mixed-Use Development, one that includes both residential and commercial members the OMC may be required to register for VAT.
The commercial member will want to reclaim the VAT on its element of the costs recharged to it through the OMC service charge budget. This is done through what is called the Landlords Vat Concession. As it is a concession the company will be required to notify Revenue that they are claiming it.
The OMC will then issue one VAT invoice to their commercial members once the year end financial statements have been completed and the total costs are known. In many cases the OMC will get a Cost Certification prepared that will outline the vat element of each expense line item relating to the commercial members.
Vat returns are required to be filed with Revenue with the Input and Output VAT offsetting leading to a nil liability for the OMC.
Directors of OMCs should be careful to ensure that if they employee someone directly that all the relevant payroll taxes are paid. The OMC needs to be clear if services such as caretaker or security are provided by a separate entity or an individual who could potentially be deemed an employee by Revenue.
Many OMCs require tax clearance certs to receive payment of service charges from Government bodies and if the above taxes are not accounted for correctly issues may arise.