A new report proposes measures for the sustainability of owners’ management companies and lays the foundation for a more structured approach to managing apartment complexes or managed estates. By David Rouse In a professional audit or reporting capacity, Chartered Accountants may encounter owners’ management companies (OMC). Readers living in an apartment complex or managed estate may even have been asked to serve as an OMC director. OMCs, while in form incorporated typically as companies limited by guarantee (CLG), are in substance hybrid entities. They sit at a corporate crossroads between not-for-profit companies, property management businesses and residents’ associations (see Figure 1). Many readers will be familiar with the legacy construction and financial issues facing these companies. High-profile cases such as Priory Hall and Longboat Quay, as well as other less prominent estates, have featured in the press in recent years while corporate governance failings in OMCs receive periodic attention in court reporting. The country’s largest OMCs have multi-million euro annual service charge budgets. And yet, the stewardship of these companies is entrusted to unpaid, untrained directors (the term “volunteer director” is deliberately avoided, as in law, there is no such thing – a director is a director). There is as yet no firm handle on the number of OMCs in the country. However, it is estimated that the upper limit is likely to be about 8,000 companies. New report A recent independent report titled Owners’ Management Companies – Sustainable Apartment Living for Ireland considers issues that will be familiar to those with even a passing knowledge of managed estates and OMCs. The report was jointly commissioned by the Housing Agency and Clúid Housing. The Housing Agency works with the Department of Housing, Planning and Local Government, local authorities, and approved housing bodies (AHB) in the delivery of housing and housing services. Clúid is the State’s largest AHB, managing  just over 7,000 homes across the country. The inadequacy of annual service charges, failure to provide for building maintenance (sinking) funds, and the persistent problem of mounting debtors are just some of the topics assessed. International best practice is examined, and Ontario and New South Wales are among the comparator jurisdictions featured. The future demand for high-density housing is signalled in the context of new Government policy, such as the National Planning Framework and the Climate Action Plan. To audit or not to audit? Recommendations for reform across a range of relevant regulatory systems are proposed. Of interest to the accountancy profession will be the recommendation for the removal of the audit exemption currently available to OMCs, most of which, as noted earlier, are incorporated as CLGs. Companies Act 2014 provides the audit exemption for CLGs. In this way, small not-for-profit companies without shareholders may benefit from a reduced financial and administrative burden. (It should be noted that under sections 334 and 1218 of the Companies Act, any one member of the CLG may in effect demand an audit.) However, while OMCs are not-for-profit, they are responsible for multi-million euro property assets in the form of estate common areas. Considering the centrality of OMCs to property values, good title, and quality of living spaces, the value of an audit to members in terms of assurance, transparency, and governance cannot be overstated. Finance and governance The creditworthiness of OMCs in the context of current under-funding is also considered. Regulation over and above corporate compliance enforced by the ODCE is recommended. Dispute resolution outside of the courts is advocated, as are more cost-effective avenues for service charge debt recovery. Personal insolvency practitioners will be aware that OMC service charge debt is an “excludable debt” under the Personal Insolvency Act 2012. Only with the consent of the creditor (i.e. the OMC) may management fee balances be reduced or written off in a Personal Insolvency Arrangement. The report’s other recommendations include mandatory training for OMC directors, the standardisation of accounts to a format prescribed for OMCs, and enhanced insurance obligations. Reform may be some way off. In the meantime, practitioners should be aware that the Institute’s practice toolkit, Owners’ Management Company PQAs, was updated in 2018. This replaces the 2011 version. As the Institute’s product catalogue notes, and as may be recognised from sectoral weaknesses highlighted in this commentary, although OMCs can be small in size, they may be higher-risk clients. Future regulation of the sector could mitigate a number of the risks identified.   David Rouse FCA is an advisor with the Housing Agency, a director of the Apartment Owners’ Network CLG, and a director of one of the country’s largest OMCs.

Three years after its commencement, Construction Contracts Act, 2013 continues to provide a pathway to cash flow in the construction sector. By Pat Breen TD This innovative and important legislation for the construction sector, which was commenced in 2016, regulates payments and particularly the timing of payments under construction contracts. While many businesses in the construction sector are aware of this legislation, some businesses may not be fully aware of the detailed statutory protections and obligations set out in the Construction Contracts Act, 2013. One of the key objectives of the legislation is to provide payment certainty for subcontractors, who were considered vulnerable in the payment cycle in the construction sector. As the construction sector continues to expand, cash flow is critical and it is cash flow that is at the core of the Construction Contracts Act, 2013. Therefore, construction businesses should ensure that their payment practices comply with the terms of this legislation. I consider that members of the accountancy profession are uniquely placed to encourage construction businesses across the country to review their payment practices to ensure that they comply with this legislation. I welcome the opportunity provided by Accountancy Ireland to highlight this legislation, and a brief summary of the main provisions of the Act is set out below. Further information on the Act is available on the website of my Department at www.dbei.gov.ie. Applicability of the Construction Contracts Act, 2013 to construction contracts The Construction Contracts Act, 2013 applies to certain construction contracts entered into after 25 July 2016, but not to all such contracts. For example, it excludes: Contracts of a value of not more than €10,000; or Contracts that relate only to a dwelling of not greater than 200 square metres where a party to such a contract occupies, or intends to occupy, the dwelling as his/her residence; or Contracts between a State authority and its partner in a public private partnership arrangement. All other construction contracts must comply with the provisions of the Act and the parties may not seek to exclude a contract from the legislation under any circumstances, whether the contract is an oral contract or a written contract. Construction contracts to which the Act applies must provide for the following contractual terms: The amount of each interim and final payment, or an adequate mechanism for determining those amounts; The payment claim date for each amount due, or an adequate mechanism for determining it; and The period between the payment claim date and the date on which the amount is due. Main contracts and subcontracts Main contractors are at liberty to agree their contractual terms with their clients, subject to adhering to the mandatory provisions required by the Act as outlined above. However, if a main contract fails to fully incorporate the mandatory provisions, then the Act imposes the applicable contractual term or terms set out in the Schedule to the Act, terms which are also applicable to subcontracts. The Act stipulates that all subcontracts must at least provide the following payment claim dates: 30 days after the commencement date of the construction contract; 30 days after the payment claim date referred to above and every 30 days thereafter up to the date of substantial completion; and 30 days after the date of final completion. The date on which payment is due in relation to an amount claimed under a subcontract shall be no later than 30 days after the payment claim date. The Act permits the parties to a subcontract to make more favourable provision for a subcontractor than the above contractual terms. Payment claims An executing party – the party which carries out the work under a construction contract – is required to submit a payment claim notice to the other party no later than five days after the relevant payment claim date. If the other party disputes the amount claimed by the executing party, that party is required to respond to the executing party in writing no later than 21 days after the payment claim date setting out the reason(s) why the amount claimed is disputed and the amount, if any, that it proposes to pay to the executing party. It may be possible for the parties to reach an agreement on the amount to be paid to the executing party. However, if no such agreement is reached by the payment due date, the other party is legally required to pay the executing party the amount, if any, which the other party proposed to pay in its response to the contested payment claim notice from the executing party. This payment shall be made no later than the payment due date in accordance with Section 4(3)(b) of the Construction Contracts Act, 2013. Statutory adjudication of payment disputes The Construction Contracts Act, 2013 also introduced, for the first time in Ireland, a statutory right to refer a payment dispute for adjudication. A ‘notice of intention’ to refer a payment dispute for adjudication must be served by one of the parties to the payment dispute. The parties may then jointly agree to appoint an adjudicator of their own choice, within a five-day period. However, if the parties cannot reach agreement on who to appoint, an application may be made after the five-day period to the Chair of the Construction Contracts Adjudication Panel, Dr Nael Bunni, to request the appointment of an adjudicator to the dispute. The appointed adjudicator, whether appointed by agreement of the parties or by the Chair, is required to reach a decision on the dispute within 28 days. This period may be extended in certain circumstances.   Pat Breen TD is Minister of State at the Department of Business, Enterprise and Innovation.

Large customers are good for business, but can stretch your cash flow.  By Peter Brady Have you recently received a ‘polite letter’ from your US multinational corporation (MNC) customer advising of a stretch in your credit terms from 30 days to 90 plus? Or, indeed, from any of your MNC customers? In recent years, the extension of MNC credit terms has become business as usual across the globe but for SMEs, it is anything but business as usual. Think about it. How would an extension of credit terms impact on your cash flow and projections this year? And what are the implications for your growth strategy in 2020 and beyond? Winning a contract with a large MNC is a measure of success for established SMEs. However, an extension of credit terms can feel like a double-edged sword as it puts excessive strain on cash flow. Why does it matter? A strain on your cash flow can have many implications, all of them negative. The first impact is on your suppliers – they expect payment in 30 days. There is an immediate gap in cash flow and you are unlikely to have sufficient sway with your suppliers to realign. This could mean: You are not in a position to fund the initial costs of fulfilling contracts; Pressure is placed on your existing supplier relationships in the form of increased risk around quality, timely delivery and higher prices; Capacity to deliver on-time to customers is affected; and Ability to grow the business at pace is limited. The lost opportunity  It may seem obvious, but having cash tied up in debtors with long credit terms is a fundamental challenge for most SMEs. If SMEs could access this cash early, it would give a distinct competitive advantage when negotiating terms with key suppliers. Think of what you could do if your invoices were paid on day one, not day 90. First, you could pay your suppliers early, enhance the relationship and ultimately secure better terms. Second, you could deploy funds into driving new customer acquisition and fund new business tenders with the comfort of cash flow certainty. So what do you do? You have two options: 1. You could try to negotiate: know where you stand in your customer’s eyes. Do your products or services play an important role in their success? Is your product or service critical to their delivery? Even so, unless you are the sole producer of a key strategic element, there’s another company out there to potentially replace you. Alternatively, your customer might offer softer credit terms in exchange for a pricing discount – but cutting margins is an extremely expensive source of finance and unlikely to be recovered. This course of action doesn’t make good business sense, as it is a race to the bottom. 2. Look at funding options to bridge the gap: the financial market is developing all the time to reflect the needs of business. For decades, when Ireland’s SMEs needed to fill the cash flow gap left by extended credit terms, they had limited choices – commercial overdrafts, short-term lending or an invoice discounting facility. That may have been adequate in the past but such is the success, ambition and global reach of Irish SMEs across all sectors today, this range of funding options falls short of their requirements. Commercial overdrafts are harder to secure and are generally seen as an unreliable method of funding, not directly aligned to the changing requirements of a business. Similarly, short-term lending is onerous to put in place and comes with significant levels of conditionality. An invoice discounting facility continues to plug the cash flow gap for many SMEs in Ireland. However, invoice discounting facilities are operationally clunky and carry significant fixed and hidden costs and limitations. They are therefore not really fit for purpose for today’s SMEs. Many SMEs often have a small number of key strategic customers in their sales mix. Supported by government bodies such as Enterprise Ireland, Ireland’s SMEs have a global footprint. Exporting is crucial to scalable business success, and not just to Western Europe. SMEs are securing contracts across the globe – US, Canada, EMEA and Asia. Invoice discounting facility For years, the invoice discounting facility has serviced working capital funding requirements. However, the facility comes with three major limitations: The facility limit; Geographical restrictions; and Debtor concentration risk limits. The facility limit At the outset, SMEs are subjected to a long and onerous process to get approval for the invoice discounting facility. Fair enough, you may say, as this is effectively a loan and it follows that the bank providing it decides how much the facility is for. SMEs must enter into a long-term commitment, often saddled with non-usage charges or exit fees. SMEs must also pay credit insurance and sign a personal guarantee – something entrepreneurs have grown to fear. Geographical restrictions Exporting to the UK? Great. Exporting to United States (US)? Not so great. Country risk and the law of the land plays a major role in how traditional lenders assess the risk and granting of facility limits. If the country in which your customer is located is outside of what is considered in banking terms to be palatable, funding limits and exclusions will apply. Debtor concentration risk limits The most common reason for restricting funding under an invoice discounting facility remains customer or debtor concentration. It applies when an SME becomes over-exposed to a single debtor. The debtor could be a large household brand name, but traditional lenders must impose facility limit restrictions. For SMEs, it is somewhat ironic that the more business you do with a key customer, the more your funding is limited. So, back to your US multinational extending its credit terms. You’ve worked tirelessly to win this business, but you can’t sustain 90 days’ credit and this customer accounts for over 60% of your debtor book. Your business needs: Consistent certainty of funding, without any limit relating to geography or debtors; Funders who recognise the strength of your business model and the substance of the underlying transactions; and Access to working capital to scale your business globally. Market and product innovation Invoice, purchase order and recurring revenue trading are collectively known as “receivables trading”. Receivables trading ticks all the boxes. It enables SMEs to leverage their customer relationships. By selling invoices and future invoices (purchase orders) to a pool of capital market funders, SMEs can access finance when they need it. What difference do capital market funders make? The funders are capital market institutional funders, pension funds, corporates and sophisticated investors – and there is a large pool of these funders. The fact that there is not just one entity, but a pool of funders purchasing the receivables (invoices or purchase orders) eliminates the requirement for imposing concentration or geographic limits on the SME. It extinguishes the need for any commitment, lock-ins or fixed costs. At no stage is there an ask for a personal guarantee. This funding solution puts control back into the hands of SMEs and allows them to decide when they need to access funding on their terms – a liberating benefit. How does it work? Receivables trading is available via an online platform. A pool of institutional funders (the buyers) are members of the platform. SMEs (the seller) uploads their invoice or purchase order and the buyers purchase them. The model is ideally suited to established SMEs with MNC or sovereign debtors. The SME can use the online platform in conjunction with their existing facility by carving out specific debtors from the invoice discounting facility. In conclusion Business is constantly changing and working capital funding has caught up. Alternative funding where sellers and buyers connect directly via an online platform is fast becoming the norm. With this funding solution, SMEs can tender for business of any scale globally – confident that they can fund the upfront costs. It’s a gamechanger for most. According to the Central Bank Survey of SMEs, which was published in January 2019, the top two reasons for credit applications were working capital, and growth and development. ISME’s quarterly business survey reveals that 70% of Ireland’s SMEs still rely solely on traditional bank funding. In Europe, it’s only 30%. Alternative funding is the future of funding. Peter Brady FCA is Co-Founder and CFO at InvoiceFair.

When it comes to finance process outsourcing, how do we keep up with industry trends? By Sinead Donovan Whether an organisation uses an in-house shared services centre (SSC) or external service provider, outsourcing has become a familiar concept to many of us in industry and professional services settings. It is no longer a new idea when it comes to finance and non-core process solutions. Long gone are the days when terms such as SSC and business process outsourcing (BPO) were treated as an innovation. Rather, it has become a finance strategy staple for most mature and growing multinationals. The first outsourced centre in Ireland opened its doors in 1995 – an SSC of a large US multinational. Others quickly followed suit and there was an explosion of SSCs across Ireland supporting multinational organisations globally. Many have since moved away from the Irish market, or made a complete turnaround by transforming their services in the last number of years. This is a natural progression in the lifecycle of outsourcing and service transformation. Coinciding with this evolution, a new era of outsourcing has emerged which is a very interesting and indicative trend. Traditionally outsourced services concentrated on high volume and low complexity, non-value-add processing tasks – be that booking of accounts payable invoices or entering pre-approved journal vouchers. A typical offering comprised of three main functions: accounts payable (AP), accounts receivable (AR) and general ledger (GL). While you may have occasionally found other support functions (think of master data management), this was not standard practice in the early days. Business partner Some 20 years on, the situation is rapidly changing. SSCs and BPOs are now expected to remain relevant while delivering valuable services to the parent company or clients they serve. With the increase of automation and technology, there is decreased need for support of high volume, low complexity tasks. Instead, there is an increased requirement for higher value-add analytical services. System transitions and implementations, process improvement and historical issue resolution are among the services now provided by BPO teams across professional services and SSCs alike. Additional value-add supports sought by the parent company or client now include financial planning and analysis, advice on enterprise resource planning (ERP) and business combinations. If we were to sum up this trend in one sentence, ‘a move from processor to business partner’ seems the most fitting. From a business perspective, what do companies look for when transforming their finance function? It seems that demands placed on service providers have evolved from what they would have been some 20 years ago, when the main consideration was which finance process could be outsourced using a straightforward ‘lift and shift’ model. Today, this approach has changed. Many businesses are undergoing systems and process transformation. Thus, shared services providers need to take that into account and adjust their solutions to add real value and innovation. This is often done by utilising technology, robotic process automation (RPA) or artificial intelligence (AI) to tackle all the repetitive and high volume tasks while allowing employees to concentrate on process improvement, in-depth analysis of big data, and key risk areas instead. Looking to the future With this trend, it is easy to see that the key to success for any SSC or BPO service provider – especially those in a professional services environment – is to remain relevant and to continue looking for new ways to improve efficiency, add value and innovate. Exactly how to stay relevant is, of course, a bigger question. It can be easy to get lost in multitudes of considerations, trying to keep up with changing attitudes and demands. While there is no doubt that continuous improvement and development is important to successful client-provider relationships, there is another more subtle – but equally important – aspect that should be given just as much attention. Indeed, it is especially relevant in the professional services setting. Mutual trust in the relationship between provider and client can be the deciding factor in the success or failure of a project. Both parties should be committed to the mutually beneficial collaboration that allows BPO providers to continue adding value and evolving to support clients or parent companies – all with a view to remaining relevant in this dynamic market. Sinead Donovan FCA is a Partner in Financial Accounting and Advisory Services at Grant Thornton.

Work-life balance can have enormous value in any organisation,  but meeting the needs of a broad spectrum of employees is more art than science. By Ed Heffernan For well over a decade now, work-life balance has been part of the conversation. The 2019 Leinster Society Salary Survey cited, perhaps unsurprisingly, that 86% of respondents said it was a key factor when considering an external move. Surprisingly, however, some 52% of respondents cited they would sacrifice up to 10% of their financial reward for better work-life balance. What is this mysterious, evasive thing that the majority of accountants would take a pay cut for? How is work-life balance defined? Sometimes things are more easily defined by what they are not, rather than what they are. Here’s an example: Work-life balance does not mean equality between work hours and non-work hours; Work-life balance does not necessarily mean working fewer hours than you are working now; Work-life balance is not a one-size-fits-all matter; it means different things to different people and will have a varied meaning over time for each individual; and Work-life balance means different things to different generations; for some, it’s a nice-to-have while for others, it’s an expectation. More often than not, work-life balance comes down to three things – flexibility, achievement and enjoyment. Flexibility is doing your job at the times that work for you. We all have different commutes and different responsibilities outside of work; the employers that recognise this as a fact of life are the ones who retain their people for longer and get more return for their people’s time. For example, some employers will: Allow some degree of flexibility on start and finish times to allow for commutes, family responsibilities, sports commitments or even to make sure that when someone needs to finish a little early, they feel that they can; Allow people to work from “not the office” and trust that they will. Numerous studies suggest that the worst possible place for employee productivity is the workplace – there are just too many distractions. Enabling certain types of work, especially the type of work that requires uninterrupted focused activity, to be conducted outside of the office can lead to substantial  increases in productivity; and Giving a little can mean gaining a lot. If one of your team has a medical appointment or another one-off event, allowing them the freedom to be away from the desk without deducting the time from their holidays, or stating that they have to make the time up, can have enormous reciprocal effects in the future. Small, random acts of kindness are more powerful than any policy. There is a catch, though. Even if a company does manage to create a flexible working environment, it is still not going to please all of the people all of the time. When it comes to flexibility, some people at certain stages in their life will need a little more; others a little less. Implicit to the flexibility component of work-life balance is that it means different things to different people at different stages. Companies that create a culture of flexibility as opposed to enforcement often get the best results. Achievement is the cornerstone of human ambition. Everyone needs to have a clear understanding of what they need to achieve in their role and to be recognised when this achievement occurs. This can be weekly, monthly or even annually. It must be measurable in some way and it must be recognised, either intrinsically (for example, a simple ‘thank you’ for a job well done) or extrinsically (for example, some type of financial reward – a token, an unexpected gesture, a bonus, or even a salary increase). Everyone needs to feel that they are achieving something in their role and it is ultimately up to their direct manager to ensure that achievements are recognised. Those who feel they are achieving something tend to feel like they have work-life balance and in many cases, they feel this way regardless of the hours they work. Enjoyment is a less tangible, but equally important, part of work-life balance. Enjoyment does not just mean having fun – that’s only part of it. Enjoyment has a much wider definition when it comes to work-life balance. It’s how you feel about what you do; it’s how it feels to work in your team; it’s feeling that you are working towards a shared goal; it’s respecting and learning from the people you work with; it’s celebrating success and learning from failure with your colleagues; it’s the opportunity to help others learn; it’s the opportunity to work in a business that you believe in for a cause you admire; and it’s a whole lot more. Flexibility and achievement are the easy ones to define and create a policy for – enjoyment is the piece that is really personal, and the piece that many managers often get wrong. Work-life balance can have enormous value in any organisation. Get the mix of flexibility, achievement and enjoyment right, and your people will work harder, be happier, be more productive and will stay longer. Get it wrong these days, and you will end up with the opposite. It’s that easy. Why authentic leaders listen For some people, it isn’t the work component that creates the imbalance; it’s the life component. At certain times, we all come under stresses that have nothing to do with work. Some people make work the escape from these stresses; other people bring these life stresses into the workplace with sometimes devastating consequences. People don’t change without reason. If someone on your team begins to submit work that isn’t up to their usual standard, uncharacteristically misses multiple deadlines or just seems ‘off form’ in the office, don’t get annoyed – get curious. Sometimes it might just be listening; sometimes it might be arranging some extra flexibility or a reduced workload on a temporary basis. Regardless of the situation, every time you engage and, where you can, offer to take action, you will not only make a difference for that person, but you will create longer lasting, deeper bonds between yourself and your team. You can create the space your people need when life causes an imbalance. And from experience, that’s where the real magic happens. It’s easy to ignore the problem, but it takes bravery to ask the question. Which type of leader are you?   Ed Heffernan is Managing Partner at Barden Accounting and Tax.

With Budget 2020 fast approaching, what – if anything – could be on the table from a tax perspective? By Peter Vale & Oliver O'Connor At the time of writing, the Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, had already flagged that we can expect little by way of tax cuts in the upcoming Budget. So, from a tax perspective, are we looking at a damp squib or could there be a mix of tax cuts and increases that net to zero? And if so, who are the winners and losers likely to be? Income tax In the authors’ view, we will see some modest tax cuts next month benefiting primarily lower and middle income earners, with higher earners likely to see some of this cut back – perhaps via a restriction in tax credits. Depending on the scale of the adjustment for higher earners, this could mean they see a net decrease in take-home pay with all other taxpayers seeing a modest increase. So, in summary, we don’t expect to see much either way in terms of income tax adjustments, with lower and middle income earners likely to be the main beneficiaries of any cuts. We also don’t expect to see any longer term statement committing to a reduction in our high marginal tax rates of 52% and 55% for employees and self-employed respectively. Nor should we expect to see a broadening of the tax base; indeed, successive budgets have taken more and more people out of the tax net. The concept of broadening the tax base was a recommendation of the Commission on Taxation report almost 10 years ago, but it has not been embraced by governments since. While the idea of more people paying a little has merits, it is unlikely to be a vote winner. Pensions and investments On the investment side, we are all aware that deposit rates are derisory at present and unlikely to increase any time soon. We are also very keenly aware (as is the Government) that there is a potential pensions time-bomb in the coming decades. The auto-enrolment regime, planned for the early 2020s, is a step towards ensuring that people are more sufficiently funded from a pension perspective and thus, not as dependant on State support in their later years. To this end, it is crucial that the current pension rules are not adjusted (downwards) but rather, that all are maintained at a minimum. A possible concession, which would be of long-term benefit to all, would be to increase the net relevant earnings from the current €115,000 to even €125,000. Entrepreneurs Entrepreneurs would ideally like to be given an increase in the Entrepreneur Relief from €1,000,000 to a more substantial figure. As importantly, they would like to know that there is a roadmap over the coming three to five years to bring this relief more in line with our near neighbours, which is 10 times greater than our current level. We pride ourselves in being the best small country in which to do business, enabling this crucial economic grouping to thrive and create yet more economic prosperity for the country as a whole. Corporate tax We know for certain that new transfer pricing legislation will be introduced in October. The new provisions will implement 2017 OECD guidelines into Irish law and also make certain other changes. While the nature of the other changes is still uncertain, it is very likely that transfer pricing will be extended to non-trading transactions, in particular where tax is being avoided. Certain grandfathering provisions for arrangements in place in 2010 will be removed while it is also possible that transfer pricing will be extended in some form to SMEs. Ireland is also obliged under EU law to bring in anti-hybrid legislation on 1 January 2020, which broadly prevents deductions for payments that are not taxed elsewhere. A further change required under EU law is to restrict tax relief for interest to 30% of a company’s EBITA. At the time of writing, it is still unclear whether this legislation will be in place at 1 January 2020. It should be noted that there will be a de minimis limit (expected to be roughly €3 million), group provisions and certain other carve-outs from the scope of the new legislation. Other changes We don’t expect to see significant changes in the VAT space. There isn’t the fiscal space to provide a VAT reduction to a specific sector (similar to the lower rate previously provided to the hospitality sector), while our headline rate is already relatively high and hence not likely to be used as a revenue-raising measure. It would be positive to see some targeted tax reliefs introduced in the Budget, despite the negative press that some of these reliefs have received in the past. However, sensible tailored reliefs have a role. Improvements to some of the existing reliefs should also be considered. Overall, it is possible that this Budget will be seen as a damp squib. But the devil will be in the detail and there is an opportunity to make changes that will bolster key sectors of our economy. Peter Vale FCA is Tax Partner at Grant Thornton. Oliver O’Connor FCA is Partner, Private Client and Wealth Management at Grant Thornton.

Paul Duffy, Ding’s new Head of Finance, discusses his move from practice to industry and life in an entrepreneur-led environment. What enticed you to move from practice to industry? I spent 10 years at PwC. I worked in the audit practice in Dublin for five years, specialising in the technology and telecommunications industries. I then spent the next five years working in the deals practice in Boston, advising private equity and corporate clients on their M&A deal execution. Although I thoroughly enjoyed my time there, I felt a move to a new industry would provide a fresh challenge. I’ve always wanted to work for an entrepreneur-led company in the technology sector and, preferably, one going through a period of accelerated growth. Ding seemed like a good fit all round. What does your new role at Ding entail?  As head of finance, my role covers a wide remit. My colleagues in finance are much more than retrospective number-counters at Ding. The team is central to how Ding functions. It is a complicated machine, due in no small part to the number of jurisdictions in which it operates. I also oversee the financial operations function, which comprises a team of 15 employees in Dublin, London, Barcelona, Paris, New Jersey, Florida, Dubai and Dhaka. Our financial operations team acts as a business partner to our business development team, so the tasks can vary from on-boarding and negotiating with new mobile operators to implementing new systems to support business growth. What do you find most challenging about your role? It is probably the demands that come with having such an international business. Ding operates in more than 140 countries and works across multiple time zones, in over 100 currencies, and across a myriad of complex regulatory environments. This brings its challenges. It’s been an adjustment just getting used to the various time zones and holiday schedules alone. We sell operator airtime so we hold stock for over 500 operators around the world, which the finance team manages. To facilitate this, we buy and sell in multiple currencies every day, and we need to forecast demand to determine stock levels.  Describe your typical day. Given the international nature of our business and the demands that brings, no two work days are the same. I try to start off the day with a quick gym session, then to the office. I tend to catch up with our CFO mid-morning to discuss the status of ongoing finance projects and the latest business performance. Each day, I try to speak with our various teams around the world so I have to work within the time zones. Before lunch, I usually have a video call with Dubai to chat through any issues or ongoing projects. In Ding, we try to promote collaboration across different business functions. I’m a believer in doing things face-to-face where possible and we have an in-house barista and coffee bar, so it’s a nice place for regular meetings with colleagues. In the afternoon, I could be working through the key commercial terms of a new customer agreement with legal, or meeting with business development to discuss things like banking and tax requirements for a new region. In the evening, I usually log on to answer emails from our US team, who are often on the road meeting potential new customers. What traits do you value most in your colleagues? Intellectual curiosity, which isn’t always encouraged as people come up through the ranks in finance. In today’s business world, speed and efficiency are often a key focus but possessing an intellectual curiosity encourages critical thinking and ultimately yields better results for the business. Flexibility is another trait that I value. In a fast-paced environment such as Ding, deadlines and targets change frequently and having the ability to be flexible and agile is important. It makes for a better team player, and a better partner for customers. What is your best piece of business advice? Build a meaningful network.

Having lived and worked in six countries, I have realised that there is a price to be paid for being an average networker. By Kingsley Aikins At its core, networking is about taking three key actions: changing our attitudes, altering our behaviours and learning new skills. In a world where life is a game of inches, we need to see networking as the key difference- maker. One introduction or conversation can change your life, but they don’t happen when you are lying in bed or sitting at your desk – they happen when you are in motion, when you are out and about, when you develop a reputation and put your talents on display. Networking is the key to career progression – the future leadership of your organisation will not consist of unknown people. The challenges However, there are some real challenges with networking. First, most people say they hate it and it tends to get a pretty negative press. It is sometimes seen as an inelegant way of using people and is regarded as both insincere and manipulative. We tend to mix up networking and sociability, and assume that the most sociable person is the best networker. In fact, it can be the exact opposite. Shy, introvert types can be better at networking than extroverts because they do it with decency, authenticity and integrity – and that comes across. They ask questions and are better listeners. Second, networking is not taught at school and college. Companies don’t have strategies for it, yet everybody says that it’s really important. A third problem is that many people don’t realise that, as their career progresses, the skills and qualifications that enabled them to get their job in the first place become less important (because everyone has them and you can’t compete with what everyone else has). Relationships therefore become more important. Finally, people don’t ask themselves the brutal question – is my network good enough for where I want to be in the next five years? Give and take Key then is to put networking front and centre of your personal and professional life and to realise that there is a process to networking – a learned process which, if followed and implemented, will give you a better chance of success. The bedrock to this is to accept a key foundational concept which, at first glance, might appear counter-intuitive. Networking is all about giving rather than getting. Most people think they have to focus on networking because they want to get something for themselves such as a new job or a new sale. What I am saying is the exact opposite. Think first how you can help other people – how you can put your network at the disposal of others. This is based on a very simple and fundamental premise: in life, the more you give, the more you get. When you give consistently to individuals, it comes back from the network. Networking is not about any one big thing – it is about a lot of small behaviour changes which, when implemented on a daily basis, become habits and, eventually, rituals. They then become the way you lead your life.  A personal asset A harsh reality in life is that you can’t go it alone; you have to network your way to success. The way to opportunities you don’t know is through people you do. Networking can obviously have practical returns in terms of getting more business, staff and investors. However, research shows that people who build strong and diverse networks live longer, are stronger mentally and physically, earn more money and are happier. In a world where people are constantly changing jobs, networking is the way to get your next one – the vast majority of good jobs are not advertised. Also, companies want to ‘hire and wire’ – hire people and wire into their network. Now, when you are being interviewed, people want to know about your qualifications and experience, but they also want to know who you know. We live in a world where it is not what you know or who you know, but who knows you. Networking is the way to get out of your silo and get to know people from different backgrounds. Research shows that if your organisation doesn’t reflect the diversity of the economy in which you operate and the society in which you live, then you, as a company and as an individual, underperform. Also, your network is portable. You own it. It’s part of your personal asset base. When you move, it goes with you. Networking abroad Having lived and worked in six countries, I have found networking to be the glue that makes everything happen and I realised that there was a price to be paid for being an average networker. Having observed good networkers in action, I now realise that they have certain things in common. They work hard at it, they don’t brag about it, they don’t keep score. They are confident it works, even if they are not quite sure how. They understand the power of asking and referrals. They think like farmers who plant a seed in the spring, water and nurture it and look after it, confident that there will be a harvest.  They understand the importance and potential of technology in networking, but also realise the power of personal face-to-face connections. In that sense, they are hi-tech and hi-touch. They are curious and they ask questions. Great networkers are great salespeople because they create a vast and spreading sphere of goodwill around them and they constantly add value to the people they meet. There is a precise four-phase process to networking, which is about research, cultivation, solicitation and stewardship. If you follow this process, there is a greater chance of success than if you don’t. Kingsley Aikins is CEO at The Networking Institute.   You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Lured by Ireland’s rudely healthy economy and the superior quality of life offered by their native land, an increasing number of Chartered Accountants are choosing to return home to Ireland. Barry O’Leary looks at some of the practicalities involved. Wanting to come home and actually making it happen are two very different things. Many people who yearn to bring up their families in Ireland and have also had the opportunity to do so, haven’t yet made it back. This is usually because of something quite simple, which could have been addressed with some advance planning. The best way to approach this life-changing move is to treat it as a project and plan accordingly. The first stage is to investigate the job market and assess the opportunities that may or may not be there. This is a relatively simple process and a routine scan of recruitment websites, as well as those of reputable recruitment specialists, will give a fair indication of the roles available. This should be backed up with further research to establish the quality of the opportunities. The Leinster Society Salary Survey will give an indication of salary scales, for example. Also, contact friends and reach out to LinkedIn contacts to hear what they have to say about the climate back home. Before you apply… If the results are positive, the next natural step is to start applying for roles. However, a few pieces of the jigsaw need to be put in place first. The first step is to figure out what you are going to do if you do get a job. Clearly, if you are going to start a job in Ireland, you are going to need a place to live, schools for children and so on. Of course, buying a house or even renting one back in Ireland while still living overseas and before you have even landed a new job is an expensive – and possibly unnecessary – step to take. Better to consult with family and friends first and establish if there is a possibility of staying somewhere temporarily, say for three months, while you get settled in the new job and make arrangements for your family to follow you back. That gives you the breathing space to sell up property and other assets overseas while going house-hunting in Ireland. Another essential early step is to speak to the banks about your prospects of getting a mortgage. Having preliminary approval in place will guide the house search. Next is to talk to estate agents and get them looking out for suitable homes. None of this costs money, but it can save a lot of time and heartache in the long run. The other issue to take care of at this point is insurance. Many Irish people returning home are surprised at how difficult, and expensive, it can be to get motor insurance. Shop around the insurance companies to get some prices to avoid nasty shocks later. That can also influence your job search as a company car can suddenly become a lot more alluring. Interview stage The next thing to think about is interview availability. People living in the UK might be able to hop on a Ryanair flight at fairly short notice to attend an interview and be there and back in a day but for those living further afield, more advanced planning is required. One option is to arrange to spend a week at home a month and inform prospective employers of your availability during that time window. Generally speaking, if they are sufficiently interested in you, they will do their best to accommodate you. Having gone through all of that, it’s time for the job hunt itself. This starts with updating your CV and your LinkedIn profile. It might be worth getting advice from a fellow professional or a recruiter back home at this stage. They can help with the design of the CV and what aspects to highlight in the context of the prevailing jobs market. After that, you’ve got to decide on the type of role you’re looking for, and where. Is it practice, industry, or the public sector? If it’s industry, what sector? And where? If it’s Dublin, can you afford housing and can you find schools for your children? You also have to consider your partner at this stage. Will they also be seeking a job when they return home? What area of the country and what sectors best suit them? Dealing with these questions probably requires the assistance of on an Ireland-based recruitment consultant who can help with the job search and move back home.  They can offer independent advice on the process and help ensure that you make the right decisions in all circumstances. The first job offer is not always the best one, and the best paid offer is not always the right one – an experienced consultant can help match the right role to the right person as well as assisting with some of the more practical aspects of the move, such as recommending insurance brokers, mortgage lenders and so on. If you follow this basic roadmap, you will give yourself a much better chance of making a successful move back to the auld sod. Barry O’Leary is the Co-Founder of ACCPRO. Taxing times One of the problems most frequently encountered by accountants returning home is personal taxation. If you want to avoid being subject to Emergency Tax of up to 41%, give your employer your PPS number (Irish people generally have one before returning home) so they can request a Revenue Payroll Notification (RPN) from Revenue. The RPN will show your total tax credits, tax rate band and USC rate band so your employer can make the correct tax deductions from your pay. If you are starting your first job in Ireland, you must register online though Revenue’s myAccount where you can view your personal tax record. You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

More and more people are returning to Ireland having worked abroad for a number of years. More often than not, this process also involves starting a new job and, inevitably, paying Irish tax. With that in mind, this article aims to provide a practical guide to some of the tax and pension issues our members should think about as they plan their return home. By Bríd Heffernan Back to basics First, let us briefly cover some of the basics of the Irish income tax system. Employees pay tax through the Pay As You Earn (PAYE) system which, since 1 January 2019, operates in real time. This means that income tax, pay-related social insurance (PRSI) and the universal social charge (USC) are deducted at source by your employer and subsequently paid to Revenue. As an employee, you can manage your taxes online through Revenue’s MyAccount system. If you have a new job, you will need to register your new role with Revenue in order to be taxed correctly. On your return to Ireland, one of the first practical steps to take is to apply for a Personal Public Service Number (PPSN). As a returner to Ireland, you should already have one but your children (if they were born abroad) or your partner (if he or she is not an Irish citizen) will require one. The PPSN will provide access to social welfare benefits, public services and information in Ireland. Tax residence  On returning home, your liability to Irish tax depends on your residence, ordinary residence and domicile position in Ireland. Residence for tax purposes depends on how many days you spend in the country. Even if you are not actually resident in a particular year, Ireland can still be your ordinary residence as this term refers to the country where you are usually resident over a number of years. The country that is your permanent home is known as your domicile. If you are tax resident in Ireland for a tax year, you pay Irish tax on your worldwide income and any gains you make in that year. Worldwide income is the total income that you earn anywhere in the world. Residence and domicile are taken into account for a number of taxes including income tax, deposit interest retention tax, capital acquisitions tax and capital gains tax. For more information on determining your residence status in any year, visit www.revenue.ie. Tax reliefs You may return to Ireland mid-way through a tax year and therefore, have income on which you may have to pay Irish and foreign tax. In this instance, it may be possible to claim relief from the foreign country if it has a double taxation agreement (DTA) with Ireland. Or, you can avail of a tax relief called “split-year treatment” for the year you return to Ireland. Split-year treatment has the benefit of taxing employment income for only part of a year (any foreign employment income earned before returning to Ireland and becoming tax resident again is not subject to Irish tax), while affording the full range of tax allowances and credits and rate bands of a resident. To avail of this treatment, you will need to contact Revenue in writing. Another relief available to individuals returning home is the Special Assignee Relief Programme (SARP). This provides income tax relief for certain people who are assigned to work in Ireland from abroad up to the year 2020. A number of conditions must be met in order to claim SARP and where you qualify, a proportion of your employment earnings are disregarded for income tax. To claim this relief, your employer must send Form SARP 1A to Revenue within 90 days of your return to Ireland. Social security and pension considerations There may be significant differences between the Irish social security system and the system in the country you are moving from. It is therefore worth familiarising yourself with these differences in order to protect your social security entitlements. In the EU, each country has its own social security laws. However, EU rules coordinate national systems to ensure that people moving to other EU countries do not lose security cover and can amalgamate their contributions from member states when applying for a pension. If you are returning to Ireland from a country within the EU or EEA, you should bring an E104 and U1 form back with you as it will provide details of the insurance contributions you made in that country. Ireland also has bilateral agreements with a number of countries outside the EU including the USA, Canada, Australia and New Zealand. Consequently, contributions paid in these countries can be added to your Irish social insurance contributions. When it comes to protecting your pension contributions made in Ireland or abroad, there are a number of things to consider. While working abroad, you may be able to claim Migrants Members Relief. This provides relief on pension contributions paid to a pre-existing qualifying pension scheme. If you have made contributions to a foreign pension fund while living abroad, it is important to note that the rules for transferring or accessing the pension’s funds when you return to Ireland are usually determined by the foreign country. Each country will have different rules for such transfers, and you should contact your pension administrator in the foreign jurisdiction to discuss the options available to you. In general, Revenue will allow foreign pensions to be transferred to an approved occupational pension scheme or Personal Retirement Savings Account (PRSA) provided a number of conditions are met. Conclusion These are just some of the tax, social security and pension considerations to think about on your return to Ireland. It’s important to be familiar with these issues to avoid situations where you could end up paying double tax and to ensure that you protect your social security and pension contributions. Bríd Heffernan is a Tax Manager at Chartered Accountants Ireland. You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Caroline McGroary went to Riyadh for four months, but stayed for six years – and her adventure isn’t over yet. How did you end up volunteering to go overseas? In August 2013, while working for Dublin City University (DCU) as a Lecturer in Accounting, I had the opportunity to travel to Riyadh in Saudi Arabia after DCU signed a partnership with Princess Norah Bint Abdulrahman University (PNU). PNU is the country’s foremost female educational institution and the largest women’s-only university in the world, with capacity for 60,000 students. DCU established a division of DCU Business School within PNU, delivering two undergraduate degree programmes in Finance and Marketing and one postgraduate degree programme in Business Administration. Eager to be part of this project, I volunteered as a member of an initial team of four DCU staff who relocated to Riyadh to initiate the collaboration. What did the role entail? My initial four-month appointment was as Programme Director at PNU and I also held the position of Lecturer in Accounting, Finance and Business Strategy. The task of establishing a women’s business school in a foreign country was in many ways similar to a start-up business venture. Leaving the cultural differences and language barrier aside, we assumed responsibility for all business school operations as well as lecturing responsibilities. We were required to train our Saudi academic colleagues and to liaise with the senior management of PNU, on behalf of DCU, on a regular basis. Navigating the challenges of the first semester required immense teamwork and organisation. At the end of the term, I took the decision to extend my contract for the remainder of the academic year. Six years on, having overseen the graduation of over 500 students with DCU degrees, I am still living in Riyadh and embracing the opportunities and experiences that this collaboration continues to offer. What in particular struck you about life in Saudi Arabia? Saudi Arabia is routinely portrayed in mainstream Western media in a negative light, primarily due to its strict legal, religious, cultural and societal norms. However, the experience of living in Riyadh at a time when the country is undergoing dramatic economic and societal change has given me a very different perspective on life here. Through my position, I’ve both educated and worked alongside Saudi women and I’ve witnessed first-hand my Saudi students and colleagues undergo increased empowerment and social participation, contributing fully to the development of their country. How did you benefit as a result? While there are many highlights from my time here so far, there are a number of key experiences that have benefited me both professionally and personally. First, the most notable has been educating young, bright, tenacious Saudi women, which is an extremely rewarding experience. Second, participating in initiatives such as setting up the Irish Business Network in Saudi Arabia (IBN-SA) in partnership with the Irish Ambassador, His Excellency Tony Cotter has served as an important platform for my professional engagement with the Irish business community, the Saudi business community and other communities in the Kingdom. This has led to many other opportunities, such as working with high-profile companies and governmental bodies on projects that have had educational, economic and social impact, with much of this work achieving international recognition. You took up some non-profit work while in Riyadh. What was your experience of volunteering overseas? Since moving to Saudi Arabia, I have actively sought out ways to give back to the local Saudi and Irish communities. I am one of the founding members of the IBN-SA and I volunteer with the local Gaelic Athletic Association (GAA) club (Naomh Alee), teach Irish dance classes, engage in charity events – including the ‘Riyadh Darkness into Light’ event which raised funds for Pieta House in Ireland – and regularly create opportunities for my students to engage in local community events, such as the promotion of physical activity among their local communities and engaging with local charities. What advice would you give someone who is considering moving overseas? The prospect of moving overseas can be very daunting. However, my time in Riyadh has taught me to be open-minded about new experiences and to use challenges as a platform for growth and development. Personally, my time living in Saudi Arabia – one of the most conservative countries in the world – has been the experience of a lifetime. Not only has it allowed me be part of a historical movement centred around the empowerment of women through education, it has also afforded me the opportunity to immerse myself in a new culture, contribute to the local community and to travel extensively. The experience has enabled me to meet people from so many different backgrounds and cultures, which has been an incredible personal as well as professional journey. For these reasons, I’m a strong advocate of gaining international experience and I actively encourage anyone who has this opportunity to embrace it.   You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Chartered Accountants considering a career abroad can benefit from a number of mutual reciprocity agreements with fellow Institutes worldwide. Chartered Accountants Ireland, through the Common Content Project (CCP), has been working with leading European Institutes to develop a new education benchmark for professional accountants that is fully EU and IFAC compliant and which supports auditor mobility within the EU. Following the agreement of the new benchmark, the Institute’s own education and assessment processes were assessed, confirming compliance with the CCP requirements. If you are a registered auditor in Ireland, you can gain audit rights (and depending on the country, membership rights) through the passing of a local law and tax examination. Further details are available about the project at www.commoncontent.com.   Other agreements include: Access to membership Chartered Accountants Ireland has mutual reciprocity agreements (MRAs) with a number of other leading global Institutes, which allow Chartered Accountants Ireland members to apply for membership of those bodies and allow members of those Institutes to apply to Chartered Accountants Ireland for membership. Applicants to Chartered Accountants Ireland will usually have access to membership without examination. To do so, you will need to contact the relevant reciprocal body and provide evidence of good standing and pay the requisite fee. Retention of membership is a requirement of this process. Practice rights Access to practice rights is not automatic and will normally require the passing of local company law and taxation (or similar) exams. Should you wish to gain practice rights, it is suggested that you should preferably gain rights in Ireland before seeking rights overseas. In those jurisdictions where practice rights and membership are synonymous, an examination must be passed. Audit rights are not automatically covered by these agreements as there can be specific local requirements in some cases.  Irish Chartered Accountants who are planning on gaining audit practice rights should gain Irish audit rights first before leaving home.   Chartered Accountants Ireland has MRAs with the following Institutes: The American Institute of Certified Public Accountants (AICPA)/National Association of State Boards of Accountancy (NASBA). This agreement provides access to membership, practice rights and audit rights subject to members meeting the specific entry criteria and the passing of the IQEX examination. NASBA administers the IQEX and issues the AICPA license; Chartered Accountants Australia and New Zealand (CAANZ, formerly the Institute of Chartered Accountants of Australia and the New Zealand Institute of Chartered Accountants); Chartered Professional Accountants Canada (CPA Canada, formerly the Canadian Institute of Chartered Accountants); The Hong Kong Institute of Certified Public Accountants (HKICPA); The Institute of Chartered Accountants of Scotland (ICAS). No examination is required to gain practice rights); The Institute of Chartered Accountants in England & Wales (ICAEW). No examination is required to gain practice rights; The Institute of Chartered Accountants of Zimbabwe (ICAZ); The Institute of Singapore Chartered Accountants (ISCA); and The South African Institute of Chartered Accountants (SAICA). For more information, contact Paula Dreelan on +353 1 637 7216 or email registry@charteredaccountants.ie. For any technical queries, contact Ronan O’Loughlin, Director of Education and Training at ronan.oloughlin@charteredaccountants.ie or 01 637 7329. You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Blockchain represents both an end and a beginning for the accountancy profession. By Fearghal McHugh and Dr Trevor Clohessy Transparency can be considered the holy grail of governance best practice. The codes, acts and markets demand it as it enhances the view of corporate transactions, which has in turn affected issues such as environmental and sustainability reporting. Transparency is the core of blockchain, which will affect accountancy while satisfying this core principle and driver of good corporate governance. The difference is that it will not take the blockchain elements outlined below as long to become mainstream as it has taken to impact on environment and sustainability concerns. The consensus is that blockchain and its technologies will change the people skills, the processes, the systems and the structure of accounting practice currently applied to any transactions involved in the recording of any information. This has big implications for those in the sector but, significantly, gives a market opportunity to those who are not. Indeed, this opportunity is further enhanced when artificial intelligence integrates with blockchain. Scale of disruption The potential disruption is on the same scale as Amazon, which competes with all retail shops in the country. The first to market with the ‘Accountazon’ brand, named here first, will dent the current position of large or small practices. Accountazon requires accountants, but the ability to scale, integrate and generate output based on fully transparent and rules-based decision-making at the lower level of processing while, at the upper level, having the decision-making and knowledge base of a collective of highly-paid accountants will affect the accounting industry. This can drive the accounting industry to build on specialisation and value proposition offerings at a higher level than those currently generating income. In other words, intelligent computer systems will do what accountants currently do. The impact will force the industry to seek a new place away from rudimentary transaction-type roles of fundamental audit and tax processes. This will require in-depth knowledge (which artificial intelligence can replace) to pure decision-making; in essence, the better the decision-making, the higher one’s revenue and reputation. The purpose and role of accountants will remain, but will be implemented at a higher knowledge application and analysis level and further away from the current operations position and perspective. A personal approach There is no need for panic yet. As with Amazon, retail shops have continued in business but the pricing, delivery, support, convenience and speed we enjoy from the online retailer may also need to be addressed in the accountancy industry; we need to make accountancy accessible, friendly, convenient, productive and transparent. Either the market or the technology will drive the change, or the accountancy industry will embrace it first and deliver value. A Ryanair approach, encouraging a more direct business model using technology, could be applied in the accountancy industry and is more likely now with blockchain and artificial intelligence. The middleman remains the accountant, however, and if it is deemed that a lot of processes don’t add value, the middleman needs to present a value proposition that cannot be offered by the system itself in order to add future value. In the Ryanair model context, so many travel agents adjusted and seem to have found that personal service, customisation and the time taken to provide a tailored travel package for customers is what many consumers want. The drive for digitisation An example of a driver of this type of change arose earlier this year when the then-head of the IMF, Christine Lagarde, urged central banks to launch digital currencies to satisfy public policy, financial inclusion, security, consumer protection and privacy in payments. While blockchain is mostly linked with cryptocurrencies, digitisation policies embraced by companies like Nestlé, Guinness and Glanbia are being encouraged by stakeholders but embraced in a controlled manner. Blockchain technology is part of the cryptocurrency system that actually worked. It is becoming embedded in many industries from manufacturing to web-based services, facilitating faster and more secure transactions on a growing scale. When companies and consumers have a better, easier, faster and more transparent way to do business, they will select it as time is a critical factor in corporate life. The practical elements and approaches to blockchain, as highlighted below, will be seen by clients as having the potential to reduce charges and the time involved in accountant reviews and advice, which Revenue could see as a means of speeding up returns. Public versus private Blockchain is not a mobile application, a company or a cryptocurrency. In its simplest terms, blockchain is a ledger that records transactions digitally and records details about the transaction. These details are recorded in multiple places on the same network. Blockchain comes in two flavours: public and private. A public blockchain allows anybody on the network to input transactions and data onto the blockchain. No single entity controls the network. A public blockchain operates like Wikipedia in that users have a composite view that’s constantly changing. Bitcoin, the tradename used to represent the familiar digital currency along with another called Ethereum are examples of public blockchains. Private blockchains work in a similar fashion to public blockchains, but with access restrictions that control who has access to the network. One or multiple entities control the network. Think of this in terms of a traditional database system that can only be accessed by specific authorised employees. Two features differentiate blockchain digital ledgers from traditional ledgers. First, the assets and transactions recorded in these digital ledgers are secured through cryptography. As an example, in season four of the Netflix drama, Narcos, Guillermo Pallomari’s financial ledgers records are taken as evidence by the Drug Enforcement Authority (DEA). However, due to the complicated coding system deployed by Pallomari within these financial ledgers, the DEA is unable to decipher the transactions and/or assets in order to use them as evidence. Pallomari holds the encryption key, which would enable the DEA to crack the code. In terms of blockchain, this also holds true. Due to sophisticated encryption keys, the transactions and assets are secure, immutable and unforgeable. Second, blockchain encompasses the disintermediation of traditional financial intermediaries (e.g. banks, brokerages, mutual funds). This disintermediation is made possible by smart contracts, which are complex algorithms that execute the terms and conditions of a traditional contract without the need for human intervention. This leads to a superior ability to prove custodianship and ownership of assets, which could potentially improve efficiency and enhance transparency while also reducing costs and income in the accountancy profession. Complexity and novelty Today, a number of multinational technology organisations enable businesses to implement blockchain practically. For instance, Microsoft currently offers a blockchain development solution that combines the advantages of cloud computing (e.g. virtualisation, scalability, pay-as-you-go pricing model) and blockchain. This service is called Blockchain-as-a-Service (BaaS) and comes with a set of development templates (e.g. smart contract development and integration) that users can deploy and configure with minimal blockchain knowledge. However, prior to diving into the blockchain sea, accountancy organisations should adopt a caveat emptor mantra. History suggests that two dimensions impact on how a new technological trend and its business use can evolve. The first is complexity, which is represented by the level of coordination required by the organisation to produce value with the new technology. The second dimension is novelty, which describes the level of effort a user requires to understand the problems that the new technological trend can solve. The more novel a concept is, the greater the learning curve. Accountancy organisations can develop adoption strategies that map possible blockchain implementations against these two dimensions. Complexity and novelty can vary from low to high in terms of the stage of technology development. For instance, accountancy organisations that are new to the blockchain concept may want to introduce a pilot initiative that is low in novelty and low in complexity. One such initiative could encompass the inclusion of cryptocurrency transactions in a firm’s transactions processes. New skills While blockchain is spread across many systems, it is not public. It protects transactions because they are shared and copied on many parts of storage devices, and would require all parts and copies of the transaction to be amended and/or deleted to have an effect. Deleting a transaction in one place is easy, deleting it from several locations and tracking each one – while not impossible – would require some work. This capability could potentially scare some in that transactions cannot suddenly be erased, but it is encouraging for others. Apply this concept first to the level of payments and receipts and build that up to management reporting, budgets and strategic reports to ensure a higher level of accuracy and clarity. This will eventually lead to a sense of integrity, another governance ideal. With reference to speed, this can move business from reliance on past information to live analysis and if it’s faster, it will be cheaper in the long-run to produce. While a positive for business, it will not require the skill of a finance professional but a computing-finance professional. In a 2018 Irish industry report, one of the authors, Trevor Clohessy, identified that IT/education providers must do more to demystify blockchain and expedite the learning process. The report outlined how the core competencies and skills required for blockchain are broader than the core technology and encompassed skill sets, which fall under the following categories: Foundational technology (e.g. cryptography, public key architecture); Distributed ledger technology (e.g. mining, consensus algorithms); Forensics and law enforcement (e.g. money laundering, dark-net); Markets, economics and finance (e.g. business modelling, cryptonomics); Industrial design (e.g. supply chain, Internet of Things); and Regulations and standards (e.g. smart contracts, governance frameworks). From an accountancy perspective, it is envisaged that certain traditional skills relating to accountancy will be eliminated or reduced (such as reconciliations or provenance assurance, for example). Blockchain transactions will enable new value-adding activities but while the range of extant skills required will change, this change need not be Byzantine. It is envisaged that the markets and regulations categories outlined above will be important for bridging the blockchain literacy gap between various business and technology stakeholders. Looking ahead, accountancy practices can examine their business models in order to derive value from blockchain. Janus, the Roman god, contained both beginnings and endings within him. That duality characterises blockchain too. It will put an end to traditional ways of doing things and usher in a new era for business and for the world at large. It will be divisive, pervasive and transformational all at the same time, and will encourage accountancy professionals to look ahead and not base their operations and decision-making on past data. The blockchain future is one with present and predictive transacting data systems with in-built transparency and integrity.   Fearghal McHugh is a lecturer in Chartered Accountants Ireland and GMIT. Dr Trevor Clohessy is a researcher and lecturer in GMIT.

Unconscious bias isn’t going away – and neither is the pressure for diverse and inclusive workplaces, writes Dr Annette Clancy. Companies are under increasing pressure to improve gender equality, level the pay gap and generally change their approach to workplace inclusion. Part of this demand stems from equality legislation, but there is also growing public pressure to act. However, research tells us that we prefer to be in the company of people who are similar to us. We assume that we will have more in common, that we will be understood and liked, and that there will be minimal conflict. Of course, most of these assumptions are in the realm of fantasy – we all know people who are very similar to us but with whom we have fractious relationships. We also assume that the opposite will be true when it comes to people who are dissimilar to us. Consider, for example, the many stories in the US media of white people calling the police to complain about black people going about their business in their neighbourhoods. Head over heels? Freud went one step further and told us that the relationship between leaders and followers was like the act of falling in love or the state of trance between hypnotist and subject. What Freud was getting at was that we are unconsciously predisposed (in our personal and work lives) to choose people with whom we have a strong emotional attachment. At first glance, none of that makes for very good practice when it comes to increasing diversity, improving recruitment practices or searching for a new job. Hiring the most qualified candidate based on their CV and how they interview for a position seems straightforward enough, but it isn’t just what’s written down or their skills that will always convince the panel to appoint a candidate. Biases based on gender, race and other factors can present unconsciously and influence the decision, even when the panel has the best of intentions. Quick judgements Unconscious bias refers to a bias that we are unaware of and is out of our control. Our brain makes quick judgements about people and situations, and our culture, experiences and background influence these judgements. Everyone has unconscious bias and although training can increase awareness, research suggests that it has a limited effect on behaviour. One of the reasons why training is limited in its effectiveness is because the bias is ‘unconscious’. One afternoon’s worth of instruction is not going to eradicate a lifetime and a society-worth of unconscious programming. What has shown some promise is holding managers, teams and companies to account for the decisions they take. Other strategies include regular discussions on bias, making it an ordinary reflection point and not a ‘once-off’ conversation that is forgotten as soon as it happens. A good starting point for discussion is Harvard’s Project Implicit Tests, which will give you immediate feedback on your biases towards a wide range of issues. Mitigating bias Biases can affect your expectations of different groups. In hiring processes, it’s important to ask if you hold male, female or non-binary candidates to different standards. Assessing candidates ‘blind’ by concealing their name, for example, is another way in which organisations can mitigate bias. Likewise, as a jobseeker, do you have biases towards particular companies that are out of your conscious awareness and may be hindering your search? Biases can also affect how you manage your staff and may be a contributory factor as to why you retain or lose staff. Do you, for example, welcome challenges to your management style? Is it possible that you harbour different expectations of male and female staff members? How open are you to questioning your own unconscious bias? Unconscious bias isn’t going away, and neither is the pressure for diverse and inclusive workplaces. Bringing both of these topics right into the mainstream might be the first step towards having the conversation.   Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.

Sharon Cunningham ACA decided to co-found Shorla Pharma as an answer to her need to do something meaningful. Now, this women-led company is working towards bringing oncology therapies to global markets. Name: Sharon Cunningham Age: 34 Title: Co-founder, Shorla Pharma From: Waterford Hobbies: Running, gym, fashion and reading Favourite quote: ‘If you’re offered a seat on a rocket ship, don’t ask what seat! Just get on.’ - Sheryl Sandberg Why did you decide to become an entrepreneur? I found myself inspired and fascinated by other entrepreneurial journeys, particularly since joining  an early-stage pharmaceutical company post-training. I was motivated to do something meaningful and purposeful; to have a wider impact and create positive change, and I’ve always had an appetite for risk. I did an MBA at UCD Michael Smurfit Graduate Business School and, upon graduating in 2015, a colleague and I began planning Shorla Pharma. We now have a pipeline of oncology products for global markets that deliver a major contribution to patient care and, ultimately, enhance patient outcomes.  Describe your typical day. There is no such thing as a ‘typical day’ for me anymore, and that is one of the aspects that I enjoy the most. My work is extremely varied. If I’m in the office, I can be working on anything from business development to product development to financial modelling. I’m in Dublin at least one day a week for conferences and meetings, and I travel frequently, particularly to the US to engage and interact with key opinion leaders, clinicians and the US Health Authority given that the US is a major market for Shorla Pharma.   What do you find most challenging? The business is progressing rapidly and it’s increasingly difficult to find time to reflect. Due to the fast pace, decisions need to be made quickly and change must be embraced regularly. I often take guidance from my intuition now, and that’s a big change given my analytical background. As a business owner, what traits do you value most? When selecting a consultant, employee or service provider to work with, I look for enthusiastic individuals who can demonstrate a desire to succeed – preferably with a proven track record. Organisational fit is essential; all the smarts in the world won’t make up for a personality that doesn’t fit the existing dynamic. Most importantly, I look for common sense – people who are pragmatic and possess a ‘can-do’ attitude. What is your best piece of business advice? Don’t overlook the basic fundamentals that a company needs to function. Create agile business systems, cover your legal and taxation bases, and pay close attention to the numbers. Above all, don’t forget to enjoy the journey and remember, there are rarely traffic jams on that extra mile.

When in a professional crisis, it’s difficult to see the wood through the trees. Resolving this inflection point as a business leader can take a different set of skills not yet in your arsenal, explains Brian Fowler. An inflection point is a period when an organisation must respond to disruptive change in the business environment effectively or face deterioration but, in practice, it’s a rare but decisive moment that marks the start of significant change – often in crisis. These moments not only affect organisations and industries, but they also impact on careers, too. At an inflection point, we are in a situation where the expectations placed upon us have so fundamentally altered because of the changes in the profession or working environment that if we don’t adapt, ourselves or the business will fail. When managing senior appointments, I am in contact with executives facing career challenges every day. The different types of situation are so vast that I couldn’t outline them easily, but pending redundancy after being a part of an organisation’s long-term senior leadership team or an executive transitioning from the safe zone of their current position to a different organisational role are not uncommon. If it’s a job move, many recruiters will introduce you to great opportunities.  However, it’s important to remember that a recruitment consultant’s primary task is source a candidate for a particular job and requirement for their client. If you are at a career inflection point, not only do you need a job, but you need proper career advice.  Who can help? There is a saying “That for every will, there is a relative!” and, in business, for every problem, there is an advisor, both competent and incompetent. It’s human nature to start the discussion with people within your network, whom you feel could be a good advisor. Your family and friends know you, but do they understand your business strengths and achievements, and how you have coped and tackled challenges?  Soundboarding with your peers seems intuitive but is often detrimental. Similarly, there are brilliant people in academia, but they may not have been at the coal face of business. It would be best to talk to executives who have a successful business track record, and whose only objective is to support and advise you.  Finding the answers When a professional hits a career inflection point, feeling inadequate is not uncommon. As a business leader, you may find that the skills and training that have brought you to this point in your career may be insufficient to bring you into the next development phase. The approach you will want to take may be a continuation of how you have resolved usual day-to-day business issues in the past, but you must remember that you are at an inflection point, and possibly heading into unchartered territory. Professional support and guidance will pay dividends.  Working with an executive coach can be an eye-opening experience. Great coaches are masters at asking questions that help them understand exactly what you are grappling with, but more importantly, they will help you view your situation through a new lens. Coaches don’t have the answers, but their questions can guide towards the answer that will best suit you.  People experiencing a dramatic change, in work or life, tend to keep asking themselves the same questions over and over. These questions are within their comfort zone, but the inflection point problem needs a different approach. The executive needs to start asking a different set of questions to come up with a plan to resolve the situation. An executive coach is the person who can teach you what questions to ask. Interacting with a coach should not only help you develop tactics to overcome today’s issues but help you gain skills to overcome future challenges. You will need to come up with better answers when facing professional challenges, and those answers will come more easily if better questions inspire you.  Brian Fowler is the Founder and Managing Director of financial recruitment specialists, Accountancy Solutions.

David Duffy highlights the latest VAT cases and discusses recent VAT developments. Two-tier VAT registration In eBrief 114/19, Revenue announced the introduction of a “two-tier” VAT registration process which took effect from 15 June 2019. The purpose of this change is to help speed up VAT registration applications for most businesses while also protecting against fraudulent traders obtaining VAT numbers that would allow them to buy-in goods or services from abroad VAT-free. Under the new system, applicants must specify whether they are applying for a ‘domestic-only’ or ‘intra-EU’ VAT registration number. Businesses that trade in goods or services with counterparties in other EU member states should apply for intra-EU registration. Other businesses should apply for domestic-only status. It is our understanding that domestic-only and intra-EU numbers will follow the same format. However, only intra-EU numbers will be valid on the EU’s VAT Information Exchange System (VIES) website. The VIES website is intended to allow suppliers to validate their customers’ VAT numbers for the purpose of intra-EU trade. Domestic-only VAT registration numbers will not be valid on the VIES website. For new applicants to obtain an ‘intra-EU’ VAT registration, additional information will be required, including details of due diligence undertaken to establish whether their suppliers are genuine traders and the arrangements for the cross-border transport of goods (if applicable). Less information will be required for domestic-only applicants, but these applicants may at a later time apply for intra-EU status, at which time they will be required to provide additional information on their intra-EU activities. All VAT registrations in effect prior to the introduction of the two-tier system will be automatically treated as having intra-EU status and there is no requirement to contact Revenue in this regard. Further changes are expected to be introduced in September 2019 to accelerate the processing times of VAT registration applications. EU VAT updates Recovery of VAT incorrectly charged In the case of PORR Építési Kft (C-691/17), the Court of Justice of the European Union (CJEU) confirmed that the Hungarian tax authorities were entitled to disallow a claim by the taxpayer, PORR, in respect of VAT incorrectly charged to PORR by the supplier of motorway construction services. This was on the basis that PORR should instead have self-accounted for VAT under the reverse charge procedure. The CJEU confirmed that in such circumstances, the customer must pursue the supplier for a reimbursement of the VAT incorrectly charged in the first instance. It is only if reimbursement from the supplier is impossible or excessively difficult (e.g. if the supplier is insolvent) that the customer can address their application to the relevant tax authority. However, the CJEU confirmed that the tax authority is not required to ascertain whether the relevant supplier can adjust the VAT before rejecting a claim by the customer for a deduction of VAT incorrectly charged. This case highlights the importance of adopting the correct VAT accounting mechanism in order to claim recovery of the VAT arising on the supply. VAT bad debt relief In A-PACK CZ case (C-127/18), the CJEU held that a tax authority cannot deny a supplier’s claim for a VAT adjustment on bad debts, simply as a result of the debtor ceasing to be VAT registered. The VAT legislation in the Czech Republic appears to have included a condition that a VAT bad debt adjustment could not be made in these circumstances. In addition to confirming that this condition was incompatible with EU VAT law, the CJEU went on to say that the fact that the customer is no longer VAT registered because of insolvency proceedings is, in fact, supportive of the position that it is a bad debt and that the supplier should, therefore, be entitled to an adjustment for the VAT previously remitted on those supplies. There is no equivalent condition in Irish VAT law, but confirming the principle of an entitlement to claim VAT bad debt relief when it is clear that the debt will almost certainly not be collected is helpful. VAT exemption for granting of credit Vega International Car Transport and Logistic (C-235/18) was an Austrian company which had a number of subsidiaries throughout the EU. Vega provided fuel cards to drivers employed by its subsidiaries to allow them to purchase fuel for the purpose of providing transport services. Vega paid for the fuel purchased with the fuel card and at a later date, on a monthly basis, passed on the cost of the fuel to its subsidiaries plus a surcharge. Accordingly, Vega allowed its subsidiaries to obtain the use of the fuel but only pay for that fuel at a later date, in return for an additional charge.  Vega sought to argue that this should be considered a VAT-exempt service to its Polish subsidiary of the provision of credit. The CJEU agreed with this analysis as it concluded that Vega had not bought and resold the fuel, but had instead provided it subsidiaries’ employees with an instrument to allow them to purchase fuel. The judgment reconfirmed a principle established in other cases that the VAT exemption for the granting of credit is not limited to loans or similar products granted by banks and financial institutions, but can in principle apply to other circumstances where an additional charge is levied for deferred payment. VAT recovery on investment activities The University of Cambridge case (Case C 316/18) asked whether there is any entitlement to recover VAT connected with activities that are outside the scope of VAT, if those activities could help generate funds for other VATable activities.  The University in this case provides VAT-exempt educational services as well as VATable services, such as commercial research, and therefore has a partial VAT recovery position on its general overhead costs. However, the University also received donations and endowments, which it invested through a fund. It was accepted that this investment activity was non-economic activity, i.e. outside the scope of VAT. The CJEU was asked whether the University could recover VAT on the management costs of the fund at its general overhead recovery rate.  The CJEU concluded that, based on the facts of the case, there was not the necessary direct and immediate link between the fund management costs and VATable output activities, and therefore the costs did not form part of the University’s overheads. Consequently, as the fund management costs instead related to an activity that was outside the scope of VAT, there was no entitlement to recover VAT on the fund management costs. David Duffy FCA, Chartered Tax Advisor, is a VAT Partner at KPMG.

The new rules provide an opportunity  to review your client’s overall inheritance tax position, the terms of their will, and relevant estate planning opportunities. By Fiona Hall The Residence Nil Rate Band (RNRB) was introduced on 6 April 2017, so many of us are just starting to appreciate the intricacies of the complex legislation. This article will summarise the key points regarding the RNRB, including when it does and does not apply, what property can qualify, factors affecting the amount of the allowance, and some planning points. References to spouses are to include civil partners. The RNRB is an additional inheritance tax-free allowance where a home passes on death on or after 6 April 2017 to direct descendants. The legislation is found in the Inheritance Tax Act 1984 Section 8D-8M, with HMRC’s helpful guidance contained in its Inheritance Tax Manual. The RNRB applies whether the home passes on death via the will, under the intestacy rules or by survivorship. It generally does not apply to a lifetime gift of the home (subject to the downsizing rules, highlighted later) unless the gift with reservation rules apply. Then, for the purposes of the RNRB, the home is treated as passing on death and the allowance can apply. The legislation refers to a “qualifying residential interest”, which is an interest in a dwelling house that was the person’s residence at a time when the person’s estate included that property. A person may own multiple properties on death. In this scenario, the personal representatives may nominate which is to be taken into account for the RNRB and it can be a property let out at the time of death, so long as it has been the deceased’s home at some stage during ownership (i.e. not a buy-to-let). There is no minimum period of occupation or ownership of the property and no garden/grounds limitation applies. It can be a home outside the UK so long as it is within the charge to inheritance tax. The RNRB is being phased-in over four years starting at £100,000 in the 2017/18 tax year and increasing by £25,000 each year until 2020/21 when it will be £175,000. The RNRB is not aimed at the very wealthy and it is tapered where the net value of an estate exceeds £2 million. The “net value” is the market value of the assets less liabilities at death, but before any reliefs or exemptions are deducted. It does not include the value of any gifts made in the seven years prior to death. Where taper does apply, the RNRB is reduced by £1 for every £2 above the threshold. For clients whose estates are above the taper threshold, lifetime gifts may be considered. Married couples should consider alternative options if leaving their entire estate to the survivor on first death will lead to tapering. The allowance due on a particular estate is the lower of the RNRB and the property value (after deduction of any secured liabilities and any reliefs, such as agricultural property relief). As with the nil rate band, the legislation provides that should one spouse not utilise their RNRB, on making the appropriate claim, the surviving spouse’s RNRB is increased by the unused amount (using rates on the second death). A transfer of unused RNRB is available regardless of: When the first death took place, including deaths before 6 April 2017; How much the first estate was worth (however, this may result in tapering where the first estate exceeds the taper threshold); and Whether or not the first estate included a residence. A point of practical importance when calculating the inheritance tax liability is that the RNRB applies in priority to the nil rate band. This is relevant in determining whether there is a claim for a transferable nil rate band and/or transferable RNRB by the surviving spouse. To qualify for the RNRB, the home must be “closely inherited” (i.e. generally that the property passes to direct descendants such as a child/grandchild of the deceased, including step-children and foster children). However, the legislation also extends to spouses of direct descendants, including their widows/widowers, provided remarriage is not a factor. The RNRB does not apply if the home passes to others, including parents, siblings, nephews and so on. Should the home pass into a trust for direct descendants, eligibility to the RNRB will depend on the trust terms. Trusts under which a direct descendant has a qualifying interest in possession will qualify, as will a bereaved minor or 18–25 trust. However, a discretionary trust will not. The home does not have to be a specific legacy in the will; it can pass through the residue. However, where residue passes to qualifying and non-qualifying beneficiaries, HMRC treats each as inheriting a proportion of the home and this may lead to a restriction to the available allowance. A deed of variation could be considered in such circumstances. If the maximum RNRB is not being utilised, you should consider whether the downsizing provisions apply. These complex provisions are designed to replace the RNRB lost due to a disposal of the original home. To qualify for a “downsizing addition”, the deceased must have disposed of a home on or after 8 July 2015 and either moved to a less valuable property or ceased to own a home, and some of the estate must be closely inherited. In conclusion, these relatively new rules provide an opportunity to review a client’s overall inheritance tax position, the terms of their will, and any relevant estate planning opportunities.   Fiona Hall is Principal, Private Client Tax Team, at BDO Northern Ireland.

Jonathan Ginnelly outlines the main stamp duty considerations for those acquiring commercial property in the Republic of Ireland. The stamp duty rate on non-residential property in the Republic of Ireland was increased to 6% in Finance Act 2017. Since this rate increase, stamp duty has become a real and significant cost when it comes to property acquisitions and, in some cases, it can be a deal-breaker. While stamp duty is a cost for the purchaser, the increased rate will inevitably have an impact on the purchase price paid to the vendor so as to manage the overall cost of the acquisition. Specific provision was also introduced to ensure that the increased rate also applies to certain property holding entities, such as companies, which might have been used to transfer property indirectly to avail of lower stamp duty rates. In addition to introducing the higher rate of stamp duty on non-residential property, Finance Act 2017 introduced a new provision to allow for a partial repayment (up to two thirds) of the stamp duty paid for land that is to be developed for residential purposes. This article will look at where the 6% rate can apply to property holding entities and provide a brief overview of the refund scheme for relevant residential developments. Property holding entities Where property is held through a company (including foreign companies), a partnership or an Irish Real Estate Fund (IREF), the higher rate of stamp duty (6%) can apply on the transfer of shares, interests or units of such entities. The higher rate should only apply in the following circumstances: Where the property was acquired by the entity with the sole or main objective of realising a gain on disposal; Where the property was, or is, being developed with the sole or main objective of realising a gain on disposal when developed; or Where the property was held as trading stock. Where one of the above conditions is met, the higher rate will apply on the transfer of shares, interests or units – but only where such a transfer results in a change of control, either directly or indirectly, over the immovable property. In addition, any contract or arrangement resulting in a change of ownership and control which might not ordinarily be ‘stampable’ will also be subject to the higher rate. Where minority interests are being transferred, such that control does not change, the higher rate should not apply. However, attempts to transfer several minority interests to a person or persons acting in concert will not escape the provisions. The provision should not apply to shares in companies that hold property where the property was not acquired for the purpose of realising a gain on disposal, for development purposes, or held as trading stock. For example, companies owning and operating a hotel or nursing home, or property rental companies (where the property was acquired for the purpose of generating rental income) should not be caught by the provision. Stamp duty refund scheme To encourage the development of residential property, a refund scheme was introduced in tandem with the increased rate to effectively reduce the 6% rate by two-thirds where the land acquired is to be developed for residential use. When a greenfield site or a site with existing non-residential property is purchased for development, this would not be considered “residential” property at the date of acquisition and, as such, is subject to the 6% rate. However, post-acquisition, a refund of up to two-thirds of the stamp duty paid may be available where the property is to be developed into residential units. Such developments can be carried out in either a single phase or in multiple phases. The refund (subject to a number of conditions) is available once construction operations on the residential development have been commenced pursuant to a commencement order issued by a relevant building authority. A phased development will have a number of commencement notices attaching to the various phases of construction. The key points to remember are: The first phase of construction operations must commence within 30 months of the date of execution of the instrument of transfer; The refund for a phased development can be claimed on a phased basis, or on completion of the entire residential development; On a multi-phase development, separate commencement notices will be required for each phase; There is a two-year time frame for completion. This two-year period runs separately for each phase; and If the residential development is not carried out in a phased manner, the full two-thirds refund can be claimed following commencement of construction operations – but the entire development must be completed within two years of the commencement notice. A refund claim for each phase can be made after the issuance of the relevant commencement notice and once construction operations have commenced. The refund will be for the proportionate amount of stamp duty relating to that phase. In a multi-phase development, there could be a number of phases commencing and finishing at various stages throughout the overall development. It is important to bear in mind that the 30-month time period in which the developer must commence construction runs from the date of execution of the instrument of transfer. If the development is carried out in phases, the legislation states that the construction operations in respect of the first phase must be commenced within 30 months of the date of the instrument of transfer. The last commencement notice and respective construction operations must commence before 31 December 2021 in order to fall within the scope of the relief. As such, the latest possible date for completion of qualifying construction works is 31 December 2023. Given the very specific timeframes involved, any development needs to be carefully managed to ensure all relevant dates are complied with. If any condition or timeframe is breached, a claw back of the refund can arise, leaving the taxpayer open to additional costs such as interest. Practical issues in claiming the refund Since the introduction of the refund scheme, certain practical difficulties have arisen in the refund application process. The stamp duty return may be filed by the solicitor dealing with the property conveyance, for example. However, when it comes to the refund scheme, taxpayers may opt to use the services of their tax advisor. In such cases, the advisor must liaise with Revenue to have the stamp duty records for that particular case transferred to the advisor’s ROS certificate. This can take some time to arrange, resulting in delays in the issuance of refunds. Where there are critical cash flow issues with a development and the taxpayer is relying on the stamp duty refund for financing purposes, early engagement with the tax advisors and Revenue is advisable. In conclusion, given the growth in property prices over the last number of years, the increased stamp duty cost now constitutes a significant part of the financing of acquisitions and developments. Accordingly, care should be taken to ensure that acquisitions and related development operations are structured so as to avail of the residential refund scheme where appropriate.   Jonathan Ginnelly is Tax Director at Grant Thornton Ireland.

The digital VAT quarterly deadline bites for the first time. On 7 August, the first quarterly return deadline for businesses mandated to meet the requirements of Making Tax Digital (MTD) for VAT will arrive for those businesses with a VAT return period that ended on 30 June 2019. Businesses must use MTD for submitting VAT returns if they are VAT-registered and have taxable turnover exceeding the VAT registration threshold (currently £85,000). The first return period beginning on or after 1 April 2019 must meet the requirements of MTD. Some more complex businesses have been given an extension until 1 October 2019. Not only does the business have to use functional compatible software to submit VAT returns, but the business must also now keep and preserve certain digital records. A year-long ‘soft landing’ period will apply during which HMRC will accept the use of ‘cut and paste’ as a digital link, but only if a digital link hasn’t been established between software programs. Now that the first returns are with HMRC, what will its response be? We’ve heard that HMRC will apply a light touch approach if a business “does their best to comply” with the core requirements; only in those instances will no filing or record-keeping penalties be issued. What will this light touch approach look like and for how long will it last? These questions are yet to be addressed. We would like to hear how your first MTD submission went. Contact leontia.doran@charteredaccountants.ie to tell us. Leontia Doran is UK Taxation Specialist at Chartered Accountants Ireland.

While Alternative Performance Measures have enjoyed a rising profile, it would be folly to think that IFRS financial reporting has diminished in value. By Jamie Leavy Today’s world is fast-paced and what was the norm yesterday, in certain cases, can seem to be redundant today. We are living through a technology revolution, which has changed the corporate world unrecognisably from that of five years ago. One of the major changes is the exponential growth in the availability of real-time data that is providing existing and potential investors, lenders and other creditors (users) of companies with more valuable sources of information than ever before. This has coincided with the proliferation of Alternative Performance Measures (APMs), which provide users with information on a company’s performance and financial position. In 2016, the European Securities and Markets Authority (ESMA) released a paper on APMs that defined an APM as “a financial measure of historical or future financial performance, position or cash flows of an entity which is not a financial measure defined or specified in the applicable financial reporting framework”. APMs are commonly disclosed outside of, or as a supplement to, a company’s annual financial statements. These developments have led to a number of commentators suggesting that IFRS-based financial reporting is now of little importance and is seen as out-dated to users. It is suggested that users’ interest now focuses predominantly on APMs and non-financial information within annual reports and other announcements to provide them with an understanding of a company’s performance and financial position in order to make future investment decisions. However, before the preparers and users of financial statements place their IFRS Standards book in the nearest recycling bin, I would suggest caution in both solely relying on APMs for decision-making and diminishing the importance IFRS financial reporting provides to users. IFRS reporting Given the vast increase in information available to users, it would be somewhat naïve to expect IFRS financial reporting to have sustained its importance on a relative basis. It is logical that users will make use of APMs when predicting how a share price might move. These measures act as an important tool in deciding whether to hold, sell or buy shares in a company. However, these predictions depend heavily on one condition – the current share price being correct. This can only be the case if the underlying IFRS-based financial information is calculated consistently with other companies and is materially correct. Therefore, IFRS-based reporting, especially within the audited financial statements, remains a crucial element in the user’s decision-making process. The benefits of IFRS Comparability: financial reporting under IFRS provides a high level of transparency by enhancing the global comparability of companies’ financial statements. Users can easily compare a company’s performance and financial position to that of domestic and overseas competitors as well as to the prior year’s figures. It also provides economic efficiency by helping users identify opportunities and risks globally. It facilitates the comparison of potential investment opportunities in numerous companies globally, safe in the knowledge that the figures of each company are based on identical, sound and clearly defined accounting principles. IFRS creates a common accounting language. This level of transparency and comparability is not achieved by APMs, as they are not uniformly applied and are often uniquely adjusted at the individual company level. Not only is there a difficulty for users in comparing performance measures of different companies, it is similarly problematic to compare the current and prior year APMs. This is as a result of the various adjustments that are included or excluded in the calculation year-on-year. Accountability: the use of IFRS in financial reporting strengthens accountability by reducing the information gap between users and management. IAS 1 requires that all significant management judgement and estimates used in calculating IFRS amounts be explained within the notes to the financial statements. This ensures that users have information that provides them with an understanding of any adjustments or subjectivity involved. On the other hand, the major risk of APMs, and the reason for such regulatory interest, is the lack of accountability. In many cases, APMs lack order and structure and there is widespread concern about the potential misuse of these measures by management.   Yes, when used appropriately these measures can provide users with valuable information. However, APMs can potentially be utilised by management to adjust important figures – such as profit and revenue, for example – to show a more positive figure than the IFRS-based equivalent, or be used to ignore ‘inconvenient’ expenses by excluding them from the calculation. This has led to instances where, for example, companies have disclosed adjusted earnings figures as a positive highlight in announcements while the IFRS-based equivalent figure is actually a loss and is disclosed outside the highlights section. Further cases have been noted where a company discloses an APM in, for example, an unaudited preliminary announcement, but this measure is subsequently not repeated anywhere in the financial statements. In both examples, users need to exercise caution in interpreting these measures. They should closely analyse the adjustments being made and the associated reasoning. APMs – not all bad The intention is not to downplay the positive role that APMs, when used appropriately, can play. APMs are an important element in the communication between a company and its users. They can enhance financial analysis by segregating the effects of items that do not support an understanding of historical or future trends, cash flows or earnings. To ensure that APMs are credible, however, they should supplement the IFRS information in financial statements rather than compete with them. This requires a level of discipline regarding measurement and presentation. Working in harmony While I disagree that IFRS reporting is no longer of prime importance to users, there is room for continued improvement. Nowadays, users want all available information to better explain and understand performance; this is one reason why APMs have risen in popularity. The IASB has acknowledged that improvement is required and it is currently working on a Primary Financial Statements project. The aim is to provide better formatting and structure in IFRS financial statements, with the primary focus on the income statement. It has been suggested that this project will lead to additional subtotals, similar to current common APMs such as operating profit and EBIT, with more specific classifications of items being introduced. This should create more discipline around APMs by providing more reconcilable line items in the financial statements. The IASB has also suggested that it may require preparers to explain and reconcile APMs in the notes of the financial statements, which will provide users with a better understanding of the measures and lead to the measures being subject to audit. This project has the potential to improve IFRS-based reporting further and provide a defined and trusted link between financial reporting and APMs. It is unknown when, if any, changes from this project are to be implemented. However, in 2016, ESMA released Guidelines on Alternative Performance Measures. These guidelines are not intended to eliminate the use of APMs but instead, to ensure that APMs clarify rather than obscure the financial performance and position of a company. The prevailing principle of the guidelines is that APMs reported outside the financial statements must be consistent with the information disclosed within. The guidelines provide the opportunity for a company to present APMs while safeguarding against the manipulation of results by requiring that APMs be presented in a clear and transparent manner. The guidelines include 48 paragraphs of detail regarding the presentation of APMs, but the main aspects are as follows: APMs should be meaningfully labelled and defined; The purpose of the APMs should be clearly set out; Comparative data should be provided for all APMs; APMs should not be displayed with more prominence, emphasis or authority than measures directly stemming from the IFRS-based financial statements; Clear reconciliations should be given; and Unless there is a good reason for change, the presentation of APMs should be consistent over time. IAASA has received a number of undertakings in relation to the above aspects since the guidelines were published. Furthermore, IAASA has published a number of thematic reviews in relation to the use of APMs, namely: Alternative Performance Measures – Thematic Survey (September 2017); Alternative Performance Measures – A Survey of their Use Together with Key Recommendations: An Update (January 2015); and  Alternative Performance Measures – A Survey of their Use Together with Key Recommendations (November 2012). Conclusion The substantial increase in information available to users has meant that IFRS financial reporting is no longer the only reporting type available. The use and prominence of APMs has increased over the last five years; however, IFRS financial reporting is still as important as ever in the user’s decision-making process. The aim of every company should be to provide as much relevant and reliable information to users as possible. To achieve this, APMs will play an important role – but only when used appropriately. To ensure appropriate use, both APMs and IFRS-based reporting should work together to provide an overall view of the financial performance and position of the company. The ESMA’s guidelines will be critical in realising this goal – if companies follow the guidelines, the combined information within the financial statements should be defined, clear and reconciled in order for users to grasp and gain value from every page. Users will then benefit from the comparability and transparency that IFRS offers, supplemented by additional valuable information in the form of APMs.   Jamie Leavy ACA is a Project Manager in IAASA’s Financial Reporting Supervision Unit.