What are the headlines of last week’s Budget? The reduction in the two middle USC rates, an increase in the ceiling at which the 2% USC rate applies and an increase to the entry point to the top rate of income tax seems to be the most widely debated Budget headline. For the average two-person income household, these changes will mean a tax saving of around €320 a year. In addition, the Earned Income Credit will be increased to €1,150, so self-employed individuals will get an additional €200 tax credit next year.  The main money spinner for Budget 2018 is the 4% increase in the stamp duty rate on commercial property. The additional income for government from this tax hike, expected to be as much as €376 million, is earmarked to pay for the income tax reductions.  The much publicised sugar sweetened drinks (SSD) tax was pledged by the Minister to be introduced from April next year. This will mean an increase in the price of certain beverages by up to 30c per litre. It is worth noting that this tax is not expected to apply to dairy products, such as chocolate milk, and certain fruit juices.  A new share-based remuneration incentive called the Key Employee Engagement Programme (KEEP) is to be introduced from 1 January. The aim is to assist unquoted SME companies to attract and retain employees.  Is there anything in the detail which Chartered Accountants should be aware of? The main revelation on Budget Day was the increase in the rate of stamp duty on commercial property from 2% to 6% with effect from midnight on Budget night. Comments from the Minister after Budget Day tell us that this increase was a key part of his maiden budget to fund income tax reductions. The increase in rate should not affect agricultural land, the Minister for Agriculture, Food and the Marine said and this was reiterated by Minister Donohoe but, as ever, we need to see the detail in the Finance Bill. Farm sales between relatives would be subject to a 1% rate where consanguinity relief is available, otherwise the 2% rate applies. Young trainee farmers will remain exempt, subject to examining the details in the Bill.  The 4% stamp duty rate increase may initially seem harsh. However, this new rate is still lower than the 9% rate which applied on such transactions up to 2008. The 2% rate was introduced in 2011 as a means to encourage a then-deteriorating property market.  Chartered Accountants with interests in intellectual property will be acutely familiar with the recommendation in the Coffey report to restrict the deduction for capital allowances for intangible assets (and any related interest expense) to 80% of the relevant income arising from the intangible asset. This measure featured in the Budget. A tax deduction for capital expenditure incurred on the acquisition of specified intangible assets (SIA) such as patents/registered designs, trademarks/brand names and know-how, is provided for under section 291A TCA 1997. The relief is seen as an essential part of our FDI offering. Like the stamp duty rate increase, this measure took effect from midnight on Budget night.  Chartered Accountants have an opportunity to have their say on Ireland’s international tax strategy as the Minister launched a public consultation running until 30 January 2018. This consultation is in response to the recommendation in the Seamus Coffey report on Ireland’s corporate tax regime.  What would you describe as the most positive and least positive aspects of the Budget from our members’ perspective? The changes to the USC rates and income threshold, and the income tax rate band moving from €33,800 to €34,550, for single individuals are positive as this cohort faced a sharp income tax hike on moving from the 20% rate band to the 40% rate band. The changes will alleviate the disincentive to work overtime or take on additional jobs as more euros can be earned before half is taken in income tax, USC and PRSI.  While financial assistance for the SME and Agri-food sectors are positive, there needs to be a change to VAT import rules to deal with upfront VAT costs under the current system which will take effect when the UK leaves the EU. Brexit concerns for Irish businesses which trade in UK imports were not adequately addressed. It is also disappointing that much needed enhancements to the CGT relief for entrepreneurs did not feature in the Budget. Do you expect any significant new measures in the Finance Bill? The Bill usually includes new measures not previously announced, particularly in the area of Revenue powers and anti-avoidance. I expect we will see something in this area. I also expect to see legislation for the new PAYE system, PAYE Modernisation, and stamp duty legislation to pick up on changes needed arising from the Companies Act 2014.  Kimberley Rowan is a Tax Manager at Chartered Accountants Ireland.

The Brexit talks are deadlocked. Is there a way out? Eoin O’Shea takes a look. Last week, at the end of the fifth round of Brexit negotiations, EU chief negotiator Michel Barnier confirmed that the talks between the EU and the UK are ‘deadlocked’. The upshot of Mr Barnier’s finding is that talks surrounding the UK’s future trade relations with the EU, or even talks leading to a transitional arrangement between the parties, are on an indefinite hold as far as the EU is concerned.  Mr Barnier went so far as to say that any future relationship between the UK and the EU would have to be robust, ambitious and lasting and, in the current circumstances, could not flow from a situation where the UK was not proposing to honour financial commitments built up during its membership of the EU. Mr Barnier reiterated (laying bare, perhaps, one of the reasons for the lack of progress thus far) that the EU would not be making concessions on any of the matters at issue between the parties: citizens’ rights, the Northern Ireland border and the UK’s financial obligations to the EU. While UK negotiator David Davis said he witnessed more progress than Mr Barnier cared to mention, he did not disagree with the Frenchman’s view that concord had not been reached on any of the parties’ current negotiating objectives.   A number of months ago, former UK/EU luminary Lord Kerr put it as being 45% likely that the UK would crash out of the EU without a trade deal being in place, leading to a customs tariffs between the UK and the EU. Given that five rounds of negotiations between the parties on relatively straightforward matters (compared to long term relationship issues) have ended in stalemate every time, it is perhaps the case that we are now, more likely than not, (taking Lord Kerr’s 45% and adding at least 5% to it) facing a Brexit that will be quite hard indeed.   To bring matters forward, it seems clear that the UK will need to concede on issues close to the heart of Brexiteers, including agreeing to pay significant monies to the EU as part of a Brexit bill and agreeing to a permanent role for the EU courts over important UK issues, such as immigration.  While relations between the two sides have not deteriorated to the level of Donald Trump/Kim Jong Un (for no one is making threats on Twitter…yet), it is clear that, if progress is to be made at all towards a long-term trade arrangement, one of the sides could usefully accommodate a rocket in the right place. Eoin O’Shea FCA is a barrister specialising in tax and commercial law. 

The Mediation Act 2017 (the Act) was just signed into law on 2 October 2017 and is expected to come into force in the coming weeks. The Act applies to all litigation disputes (but not to arbitration or certain disputes under tax and customs legislation). The Act encourages mediation processes which have the potential to achieve better outcomes for the parties and reduce strain on the courts system. The Act preserves the essence of mediation: voluntary, collaborative agreement where the parties control the process. Mediation has been successfully used for dispute resolution for many years in Ireland but the Act reinforces and supports the process. Although not all disputes are amenable to mediation, the Act encourages parties to resolve their difficulties without having to go through an expensive trial process.  Role of the mediator A mediator must act in an impartial, facilitative manner to assist the parties to resolve their dispute. Prior to the commencement of mediation, the Act requires the mediator to furnish the parties with his/her experience and qualifications, and to ensure that no conflicts of interest exist. While the mediator may make proposals for resolution of the dispute when requested to do so by all parties, the outcome of mediation must be determined by the parties, not the mediator. The Act will likely increase the number of mediations, leading to a greater need for mediators, particularly those with specialist expertise. Complex financial disputes involving corporations and multi-nationals may benefit from mediators with experience in business valuations and the application of technical accounting standards.  Knowledge of business and commercial common sense will also be key attributes.  Experienced accountants have many of these attributes and may well be interested in becoming accredited mediators. The expected increase in numbers of mediations is also likely to mean that the parties will need professional or expert advice, including financial expertise, at an earlier stage in the dispute process. This will ensure that parties are in a position to fully consider the financial and taxation ramifications of any settlement proposal.   Key points for accountants Just some things accountants should keep in mind: You must actively consider mediation before litigating; Before litigating, solicitor's statutory declaration must confirm that the client was advised about mediation process; There will be an increased role for financial and taxation experts and advisors at outset of certain disputes; There will be a greater need for mediators with financial, taxation and general business experience and expertise Liam Kennedy, Partner and Head of Commercial Dispute Resolution at A&L Goodbody and accredited CEDR mediator, Joe Kelly, Partner in the Litigation and Dispute Resolution Department at A&L Goodbody and accredited CEDR mediator and Mark O'Shaughnessy, Associate at A&L Goodbody. 

Results published from the first worldwide consultation on how companies are adopting integrated reporting since the International Framework was released in 2013 show how the focus has moved from one of initial acceptance to progress in actual implementation.  Over 1,500 businesses in 62 countries globally are now integrating the goals of sustainable development and financial stability to support their reporting, which has been identified across the world as the future 'norm' for corporate reporting. The consultation was conducted over two months earlier this year. Over 400 contributions were received, including some from focus groups held in 19 countries around the world. The review found that the International Framework is standing up to the test of implementation and demonstrated that the concepts of Integrated Reporting have been widely accepted and embraced, with the focus now on enabling better implementation. Following the global 'Framework Feedback Exercise', the International Integrated Reporting Council (IIRC) has announced a series of guidance, thought leadership and case studies to help clarify, simplify and amplify the move towards integrated reporting internationally. This includes guidance on how to apply the IIRC's 'multi-capital' model; how to access intellectual, human, and social and relationship capital metrics to suit your unique circumstances; and research on how information and improved decision making can better connect. The IIRC has also said it is committing to working closely with market players to help simplify the corporate reporting landscape. The full report can be downloaded here.

The European Commission today published a communication (White Paper) calling for completion of Europe's Banking Union by 2018. According to the Commission, the Banking Union must be completed to deliver its full potential in making the Economic and Monetary  Union (EMU) more stable and resilient to shocks while limiting the need for public risk sharing. The Banking Union will cover deposit guarantee schemes, common financial backstops (to ensure taxpayers do not have to bailout bust banks), banking supervision, dealing with non-performing loans across Europe and getting banks to diversify their portfolios, among other things. These proposals need to be agreed by the European Parliament and the Council of Ministers from each Member State. The Commission is urging them to press ahead with completing Banking Union so "economic progress across the EU can be reinforced". This comes ahead of the December Euro Summit, where completion of the Banking Union will be part of discussions on further deepening the EMU. Together with the Capital Markets Union (CMU), a complete Banking Union will promote a stable and integrated financial system in the EU, said the Commission. Valdis Dombrovskis, Vice-President for Financial Stability, Financial Services and Capital Markets Union said, "A complete Banking Union is essential for the future of the Economic and Monetary Union and for a financial system that supports jobs and growth. We want a banking sector that absorbs crises and shares risks via private channels, thus ensuring that taxpayers are not first in line to pay. Today, we are presenting pragmatic ideas to move forward with risk sharing and risk reduction in parallel. We hope that these will be useful food for thought for EU co-legislators to reach consensus on the remaining measures by 2018." You can see the Commission proposals in more detail in the Fact Sheet, Q&A and full text of the Communication on the live links in the original release here.

IAASA has published the results of its survey into the operating segment disclosures by issuers. The survey covered the 2016/17 financial statements of twenty-nine entities listed on the Irish Stock Exchange. The paper also sets out some of the enforcement actions taken by IAASA relating to operating segment disclosures. Key survey results IAASA’s desk top survey identified that a total of eighty-four operating segments were presented by the twenty-nine selected issuers in their most recently published annual reports – an average of 2.9 segments per issuer. Eleven issuers identified the board of directors as their CODM, while seven issuers identified the Chief Executive Officer as the Chief Operating Decision Maker (CODM). Six issuers did not disclose the judgements made by management in applying the operating segment aggregation criteria and seven issuers did not disclose or specifically address the basis of accounting for any transactions between their reportable segments. Finally, five issuers did not provide all of the reconciliations required by IFRS 8 Operating Segments. It is IAASA’s expectation that management, boards and audit committees will continue to carefully assess and consider the disclosure requirements of IFRS 8 Operating Segments, and ensure that all relevant information is disclosed in their financial statements. You can read the full paper here.