When Marie Claire McDonnell noticed that Irish Chartered Accountants in Toronto were left out in the cold, she started the Toronto Chapter. Now, she wants the new group, and her career in recruitment, to gain momentum. Tell us about your current role. I recruit mid-senior level accountants in mining, real estate, energy and technology industries in Toronto, Canada. Describe your typical day.  No two days are the same in recruitment. The focus of my role is relationship building both on the client and candidate side. I have control and influence over people’s career choices, which is very gratifying. How did your involvement with the Toronto Chapter come about? I have had a lot of success placing Irish Chartered Accountants in Toronto. In a city that networks significantly, I noticed there was no formal networking group for all the Irish Chartered Accountants I meet. When Fergal McCormack and Brian Keegan visited Toronto in March, I jumped at the opportunity to work with the Institute to set up a committee here and kick-start the Toronto Chapter. Our first event in July 2019 was a great success. We had four Irish Chartered Accountants in a panel discussion about their experiences living and working in Toronto.  What are the best and worst aspects of living in Canada? Best: the quality of life, diversity and there is always something fun going on in the city.  Worst: the winter. We get a lot of snow. I like to ski so I enjoy that side of it, but when it is still snowing mid-April, the novelty has well and truly worn off! What are your goals/plans for 2020? I would like to host three successful events with the Irish Chartered Accountants in Toronto Chapter in 2020. Career-wise, I am hoping to gain momentum in the technology industry in Toronto, which has become a major hub for talent. I recently visited the Robert Walters office in San Francisco and realised there are cross-border relationships which can be developed through our partnerships in California.  What’s the best piece of advice you’ve ever received? The early bird catches the worm! I wake up every day at 5.30am, start work at 7am. I feel those golden hours pre-9am are crucial in providing clarity and structure around the productivity of my day. It is challenging to stay organised in recruitment, so if I have that quiet time in the morning to set my goals for the day, it allows me to be more focused. Marie Claire McDonnell is Senior Consultant at Robert Walters, Canada.

Chartered Accountant, John Morgan, explains his five steps to becoming a trusted finance business partner. On 22 September 2002, I was in Croke Park to witness my home county, Armagh, win its first All-Ireland Senior Football Championship Final. Two years into my Corporate Finance career with EY in London, it got me thinking: it’d be great to get home to witness Armagh’s inevitable decade of domination! Having completed my Chartered Accountancy training with EY in Belfast, I was given the opportunity to join a newl y formed team in London that focused on pre-acquisition due diligence for private equity clients. I spent two years in that team, working with amazing people on fascinating deals. My favourite aspect of the role was getting underneath the forecasts in the information memo and working with operational management to understand and challenge revenue and cost forecast assumptions. Getting beyond the numbers and dealing with operational management was something I relished, but it was frustrating to never see whether forecast assumptions materialised. I wanted to not only review and challenge such assumptions, but also work with the management team on implementing the plan. Lesson 1: understand the business I then returned home to Northern Ireland to join BT as a Finance Business Partner, which gave me the opportunity to work with the Operational Director to manage a budget and drive business performance. I immediately got stuck into the detail and came up with money-saving opportunities. BT in the early noughties perhaps still had low hanging fruit, but I immersed myself in understanding the business – both from an operational and strategic perspective. In 2003, the Ireland CEO stood on stage at the company’s annual management conference and spoke about the difference broadband would make to both BT and the country. He seemed convinced that this was a game changer, so I took time out of my day job to spend some time with engineers understanding the network. This taught me lesson number one – to be an effective business partner, you must understand the business from an operational and strategic perspective. This helps on two fronts: first, you gain credibility with the senior operational managers you are attempting to influence; and second, you can become more than a number-cruncher and begin to add value. Lesson 2: build relationships A key lesson for me in the early stages was how to manage key stakeholders with different priorities. Learning to balance conflicting interests is crucial, and this manifested itself with my Operational Director and Finance Director. My first Financial Director wrote on my annual performance report: “has a healthy disrespect for traditional views in BT”. However, my Operational Director did not consider my disrespect “healthy”. He felt that I was not working in partnership with him, so be conscious that your stakeholders may have different priorities and react to your recommendations in different ways. So, lesson number two taught me that unless you can constructively work in partnership with operational management, you won’t succeed. What helps in this respect is objective alignment – you should be on the same side; both striving to drive the business forward. Lesson 3: simplify complex financial data Perhaps one of my first successes was working with my operational Managing Director on driving a material improvement in the cost of installing telegraph poles. The key was being able to distil complex data in a user-friendly manner, which helped drive operational decision-making. My superior felt we were inefficient, so I armed him with some simple unitary analysis that articulated clearly these inefficiencies for both the trade unions and our procurement team. This was critical in negotiating better third-party rates and gaining union agreement to outsource the function. So, lesson number three was the importance of translating complex data into simple, operational language that supported decision-making. I’ve always found unitary analysis really useful in this respect. Lesson 4: be relentless and resilient The bigger the decisions you get involved in, the higher the stakes – and in the early noughties, I learned that you don’t always get it right. Mistakes happen and when they do, the best thing you can do is pick yourself up, brush yourself down and move on. So, lesson four centres around the need to be both relentless and resilient. Lesson 5: do less, coach more As the teens progressed, I started to manage bigger teams, and this leads me to my next key lesson: being an effective leader is the key to success in a senior business partner role. In the noughties, I had more of a solitary role. Now, leading teams of up to 30 people, the balance of time changes significantly as I have evolved from a ‘doer’ into a ‘leader’. It is perhaps my biggest challenge, but unquestionably the most rewarding experience of all. So, lesson number five is that, to excel in senior finance business partnering roles, you need to become an effective leader. Conclusion If you master these five points, you will become a trusted finance business partner. This is what separates a good business partner and a great business partner – moving from merely commentating and recommending, to leading and driving decisions, playing a leading role on some key commercial and strategic decisions, building the business case, and being part of the sign-off on big investment decisions. The line between being a finance business partner and an operational manager can get a bit blurred, which is perhaps when it works best – when you are being asked by the business to step in and do things that you feel is a bit over and above the day job. In the mid-2000s, I led a significant acquisition in Northern Ireland. In the late 2000s, I led the fibre broadband investment business case. And over the last decade, I have signed off on BT’s largest public sector customer bids. When I joined BT in 2003, I never envisaged the fascinating work I would get involved in – from the broadband revolution to leading on some of BT’s largest public sector long-term contracts. But perhaps the most rewarding was building, and being a part of a high-performing team. It all worked out perfectly. Well, almost. What ever happened to that second All-Ireland for Armagh?   John Morgan FCA is Local Government & Health Finance Director at BT Enterprise.

While Finance Bill 2019 may have seemed to cater to SMEs, Peter Vale highlights where it includes significant measures for international businesses. The headlines surrounding Budget 2020 and Finance Bill 2019 may have left the impression that most of the legislative changes have been focused on domestic small- and medium-sized enterprises (SME), with less focus on foreign direct investment (FDI) and Irish companies with international operations (which may, of course, include SMEs). The reality is that the Finance Bill was packed with provisions of interest for groups with international operations, either inbound or outbound, albeit many of these were expected and hence didn’t attract the same headlines. Here are some of the key Finance Bill measures for international businesses, some of which were expected, and others which came as a surprise. Mandatory reporting As expected, the Finance Bill saw the introduction of  Council Directive 2011/16/EU (DAC6), which covers the mandatory reporting of certain cross-border transactions to home country tax authorities, to be subsequently exchanged between EU Member States. The DAC6 provisions reflect the ever changing global tax environment and follows on from the Common Reporting Standard (CRS), which was a game-changer in terms of providing for a new level of reporting and transparency. Irish taxpayers might feel relaxed about the new provisions on the basis that Ireland already has domestic mandatory reporting rules, although these haven’t had much bite in practice.  The new DAC6 provisions, however, are much wider in reach, covering not just tax-motivated transactions, but also transactions that may have a “potential tax effect”, but aren’t themselves driven by tax avoidance motives. While the new rules only require reporting from August 2020, they apply retrospectively to transactions from 25 June 2018. Intermediaries and taxpayers need to be aware of the scope of the new rules and have measures in place to track and report such arrangements. Anti-hybrid rules The Finance Bill also saw the expected introduction of anti-hybrid rules, effective for payments made after 1 January 2020, and follow on foot of the binding EU Anti-Tax Avoidance Directive (ATAD1). It is worth noting that the anti-hybrid rules apply to payments made post-1 January 2020 – the actual accounting period of a company is not relevant. So, who needs to be concerned about anti-hybrids? Minority sport? The first thing to note is that there is not a de minimis threshold, therefore all companies irrespective of size are potentially within the scope of the new provisions. The rules target a number of arrangements, in particular where there is a “deduction without inclusion” or a “double deduction” as a result of hybrid mismatches, such as a payment being treated as tax deductible interest by the payor country but as a tax-exempt dividend in the recipient country. It is worth noting that just because a country does not tax a payment does not mean that there is a hybrid mismatch. Thus, the payment of interest by an Irish company to a jurisdiction that does not tax interest income will not be a hybrid mismatch, although interest withholding tax may need to be considered. The anti-hybrid rules are complex. While Revenue guidance (due to be published in 2020) is critical, equally critical is that this guidance is drafted in consultation with relevant industry stakeholders so Ireland’s attractiveness is not adversely impacted vis-a-vis other EU countries. Transfer pricing As expected, the Finance Bill introduced 2017 OECD transfer pricing guidelines into Irish legislation. Other important provisions were also introduced, including the introduction of transfer pricing to non-trading transactions (with limited exceptions), the abolition of pre-2010 grandfathering arrangements and the extension of transfer pricing rules to both capital transactions and to SMEs. The extension to SMEs is significant as it will, at a minimum, add an administrative burden to smaller companies. It is, however, subject to a Ministerial Order. The Minister was reluctant to add to the administrative burden of the SME sector with Brexit looming. Bringing Irish transfer pricing requirements in line with 2017 OECD guidelines will introduce some additional reporting requirements for many companies, with master file and local file requirements now in place.   Of note is that the thresholds for master file and local file introduced in the Bill, €250m and €50m respectively, are much lower than in many other countries. This could trigger additional documentation requirements for some large groups. Many Irish groups will also have intra group financing arrangements in place that may not be arm’s length compliant, and these will now need to be reviewed in light of the Finance Bill changes, which come into effect for accounting periods beginning on or after 1 January 2020. Financial Services/property fund changes There were several changes in the Bill to provisions governing the taxation of Irish real estate funds and section 110 securitisation vehicles. The changes for property funds as initially drafted were unexpected. They were wide-ranging and impacted on funds that only had third party debt. At the time of writing, Committee Stage amendments were expected to correct this anomaly and other provisions that could have inadvertently created a double tax charge for some funds. Additional anti-avoidance provisions have been added for section 110 companies, including the broadening of the control test used in determining whether certain profit participating interest payments are tax deductible, and placing the bona fide commercial purposes test on an objective basis, thereby giving Irish Revenue more scope to challenge aggressive securitisation arrangements.   Interest deductibility limitations Under ATAD1, Ireland is obliged to introduce new rules which broadly restrict interest deductions to 30% of earnings before interest taxes and amortization (EBITA). The Finance Bill did not contain any provisions in respect of these new rules, which are now likely to apply from 1 January 2021 onwards.   In summary, Finance Bill 2019 was one of the most significant in recent years, with new anti-hybrid and transfer pricing provisions, and the introduction of DAC6 reporting requirements. These fulfil Ireland’s commitment to being at the forefront in the adoption of international tax changes and bring our tax regime into compliance with international best practice and relevant EU Tax Directives. Undoubtedly, however, these will add further complexity to the lives of tax professionals and in-house tax teams.  Peter Vale FCA is Tax Partner at Grant Thornton.

Kimberley Rowan highlights the key elements of Finance Bill 2019.  Most of the measures contained in Finance Bill 2019 (the Bill) were expected. It consisted mainly of legislative provisions for the tax changes announced by the Minister for Finance as part of Budget 2020. But some measures were not expected. The change to the general rule on tax deduction for any taxes on income, for example, was not expected by most tax practitioners. A handful of other measures contained in the Bill were also surprising. In this article, I will explore the unexpected measures and provide an overview of the key anticipated measures, focusing on those that affect the domestic taxpayer. Peter Vales write about the key Finance Bill measures for international businesses in his article on page 68. Tax-deductible expenditure The Finance Bill includes two changes to the general rules applying to tax-deductible expenditure. First, a tax deduction is not available for “any taxes on income”. This matter has been before the Tax Appeals Commission in a number of cases and now puts Revenue’s view on a legislative footing. This will be relevant in the context of Irish companies that suffer foreign withholding tax on their business profits. The second amendment aligns the tax deduction for doubtful debts with impairment losses under the relevant accounting standards. KEEP The Bill confirms the welcome enhancements to the Key Employee Engagement Programme, as announced on Budget Day. However, new complex conditions seem likely to limit the practical application of the enhancements. For example, the definition of a qualifying group includes only a qualifying holding company, its qualifying subsidiary/subsidiaries and its relevant subsidiary/subsidiaries. The qualifying group (excluding the holding company) must be wholly or mainly carrying on a qualifying trade, must have at least one qualifying subsidiary and all the companies in the group must be unquoted. It seems that the definition does not extend to scenarios where the parent company in a group is a trading company with multiple subsidiaries or where a holding company holds cash or undertakes certain activities. Income tax payments The Bill introduces exemptions for certain income tax payments. The exemptions introduced cover: The reimbursement of expenses by the HSE to an individual for the donation of a kidney for transplantation (under conditions defined by the Minister for Health); Certain foster care-related payments made by TUSLA; Certain training allowances paid by, or on behalf of, the Minister for Education and Skills; and Certain student support payments awarded by SUSI, education and training boards, or local authorities. The Bill also introduces an amendment to clarify the availability of the income tax exemption on a range of payments made by the Minister for Employment and Social Protection, including payments made under the Magdalen Laundry ex-gratia scheme. The amendment is to clarify that a qualifying person for the relief must, in all circumstances, have received a payment under the Magdalen Restorative Justice Ex-Gratia Scheme. Food supplements  The change in the VAT treatment of food supplements was widely expected. The Bill introduces a provision that, with effect from 1 January 2020, food supplements will be subject to VAT at 13.5%. A concessionary zero rating had applied to these products. The change from zero to 13.5% VAT rate follows a comprehensive review by Revenue of the VAT treatment of food supplements, engagement with the Department of Finance in 2018 concerning policy options, the publication of Revenue guidance in December 2018 and a public consultation in May of this year. Revenue will not, as previously announced, apply a 23% VAT rate to these products. There was no change to the rate in last year’s Finance Bill, but Revenue did issue guidance in December 2018 which removed the concessionary zero-rating of various food supplement products with effect from 1 March 2019. However, the withdrawal of Revenue’s concessionary zero-rating of food supplement products was delayed until 1 November 2019 to allow time for the Department of Finance’s public consultation on the taxation of food supplement products in summer 2019. The zero rate continues until 31 December 2019. From 1 January 2020, the 13.5% rate will apply. The change introduced in Finance Bill 2019 will not impact certain products. These are: Well-established and defined categories of food that are essential for vulnerable groups of the population such as infant formula, baby food, food for special medical purposes and total diet replacement for weight control; Human oral medicines that are licensed or authorised by the HPRA are zero-rated for VAT purposes under a different provision. This includes certain folic acid and other vitamin and mineral products for oral use. Once such products are licensed/authorised by the HPRA as medicines, they are zero-rated for VAT purposes; and Fortified foods (i.e. foods enriched with vitamins and/or minerals). Dwelling house exemption  An exemption from Capital Acquisitions Tax may be available in respect of inheritances of certain dwelling houses. One of the conditions to avail of the dwelling house exemption is that the person receiving the inheritance doesn’t have a beneficial interest in any other residential property at the date of the inheritance. Any dwelling house that is subject to a discretionary trust where the taxpayer is the settlor and a potential beneficiary must also be considered. The Bill amends the exemption following the High Court decision in the Deane case in 2018. The conditions of the relief are amended such that all properties inherited from the same estate are to be considered. A clawback is provided for where a beneficiary subsequently inherits an interest in any other dwelling house from the same disponer. R&D tax credit The Bill details the measures announced as part of Budget 2020 while also introducing several new measures. A summary of the key legislative amendments is as follows: Grants funded by any state and/or by the European Union must be deducted when calculating the amount of qualifying research and development (R&D) expenditure; A company that outsources to third parties must now notify in advance of, or on the day of, payment if that company intends to claim the R&D tax credit. Revenue has said that the purpose of this amendment is to ensure that the sub-contractors do not receive such notifications after their R&D claims have been filed. How this notification by the company will work in practice needs further consideration and guidance from Revenue; The application of a penalty for an over-claim of the R&D tax credit has been aligned with the procedure for over-claims of other credits; Where a payable amount or amount surrendered to a key employee is later withdrawn, any offset of losses or credits cannot be used to shelter the clawback on this amount; and Amendment to capital expenditure on scientific research to ensure that relief for capital expenditure on buildings or structures cannot be claimed in respect of the same expenditure. Pension deduction The Bill provides for tax relief for pension contributions made by a company to occupational pension schemes set up for employees of another company in certain defined circumstances. This amendment is to accommodate cases of a merger, division, joint venture, reconstruction or amalgamation where an issue could arise as to whether contributions are being made in respect of an employer’s employees. Specific conditions apply. A few words on the expected The Bill confirms the Minister’s announcement as part of Budget 2020 that there will be no significant income tax cuts for 2020. The Bill provides the legislation for the tax measures announced in Budget 2020 and the ones worth noting are: Extension of both the Special Assignee Relief Programme and Foreign Earnings Deduction to 31 December 2022; Enhancement of the operation of the Employment and Investment Incentive (EII), although a few technical points were not expected; Minor increases in the Home Carers Credit and the Earned Income Credit (up €100 and €150 respectively); The reduced Universal Social Charge (USC) rate for medical cardholders is extended; Extension of the 0% benefit-in-kind (BIK) rate on electric vehicles; Changes to the overall BIK treatment of employer-provided cars (not vans) from 2023; Capital Acquisitions Tax threshold increase from €320,000 to €335,000. The Bill confirms that the increase applies to gifts or inheritances taken from 9 October 2019; Increase in the rate of Dividend Withholding Tax from 20% to 25% with effect from 1 January 2020. Additional information gathering requirements are proposed at Committee Stage on the ultimate payer of a dividend before the payment of a dividend; Increase in the rate of stamp duty on non-residential property from 6% to 7.5% with effect from 9 October 2019; The ‘Help to Buy’ scheme and the living city centre initiative are extended for a further two years; and The R&D tax credit rate for small and micro companies has been increased from 25% to 30%. What’s next? The Bill is scheduled to move to Report Stage at the end of November and after that, as is the customary legislative process, to the Seanad. Under the requirements of the European Union’s two-pack budgetary schedule, a common budgetary timeline applies to all EU member states. As a result, the Bill will complete passage through the Oireachtas and be enacted as Finance Act 2019 by 31 December. More unexpected measures are unlikely at this stage of the Finance Act process. As this is likely to be the last Finance Act before Brexit, and the last before a general election in the Republic of Ireland, any legislative changes to the tax legislation will have to wait until the new government is formed and the next Finance Act.   Kimberley Rowan ACA AITI Chartered Tax Advisor, is a Tax Manager at Chartered Accountants Ireland.

While it’s easy to see that climate-related corporate reporting is important, companies are finding it difficult to know where to begin. Hannah Armitage outlines the suggestions made by the FRC Financial Reporting Lab. Understanding of climate change has grown in recent years and society, business, government and regulators are responding. It has become clear that investors, companies and accountants are seen as part of the solution. In response, the Financial Reporting Council’s Financial Reporting Lab (the Lab) has recently released a report, Climate-related corporate reporting: where to next?, looking at the developing practice of climate-related corporate reporting. This project sought to understand the challenges companies face in reporting on climate change, and what investors want to understand from company reporting. This project received an unprecedented amount of investor involvement, and those investors saw climate change as being material to a wide range of businesses and want reporting to reflect this. Reporting on climate change? Reporting itself can’t solve climate change, but it plays a key role in providing information to investors and other stakeholders. Unfortunately, companies grapple with how best to report on climate-related issues. To help companies, the Lab’s report sets out what investors expect from reporting on climate change and assesses what best practice reporting looks like from an investor’s viewpoint. The Lab found that reporting in this area is a developing practice. Investor expectations are high and there is a need for company reporting to develop further to meet their needs. To help fill this gap, the Lab’s report outlines what investors seek to see articulated by companies and what companies should try to answer for themselves: How boards consider and assess the topic of climate change; Whether, and how, the business model may be affected by climate change, whether it remains sustainable, and how the company may respond to the challenge posed by climate change; What the opportunities and risks are, including the prioritisation of risks and their likelihood and impact; What strategic changes the company might need to make to capitalise on a changing climate and related opportunities; What scenarios might affect the company’s sustainability and viability, and how; and How the company measures the impact of climate-related challenges and the success of its strategy through reliable, transparent metrics and financially-relevant information. While many of these disclosures may be more on the narrative end of reporting, companies will also face financial statement impacts. Auditors have an important role to play. The IASB recently issued a useful briefing paper on IFRS Standards and climate-related disclosures.  This sets out how existing accounting standards address issues that relate to climate-change risks and other emerging risks. The Lab’s report also provides more detail on participants’ views and a range of examples of the developing reporting. Both companies and investors are building experience, capability and tools, but there is not a lot of time. The Lab’s report aims to help move this reporting practice forward. Hannah Armitage is a Project Manager in the Financial Reporting Council’s Financial Reporting Lab.

Economic indicators suggest a global recession is unlikely. However, Charles Hepworth believes there is one country that might be moving closer to recession territory. With Brexit looming and all its attendant uncertainty, a declining domestic GDP and large-scale layoffs which have contributed to the general public’s concern over the state of the British economy, the UK could be close to entering a technical recession. A recession is traditionally defined as the economy contracting for at least two consecutive quarters. Considering a full business cycle is approximately 4.7 years and that the last global recession ended in 2009, it could be argued one is overdue. Fears in the UK have been further magnified by the fact domestic GDP growth was negative in the second quarter of 2019, making Q2 the first contraction since the fourth quarter of 2012. Based on the technical definition, the UK would have been one bad quarter away from a full-blown recession if Q3 didn't see GDP growth of 0.3%. We can look to the floundering services industry as a key indicator of the current economic state. The sector makes up about 80% of the UK economy and, in August, it stalled uncharacteristically. Given the current political environment, it seems corporates are unwilling to make significant investment decisions given the lack of clarity around Brexit and the potential for restrictions on imports and exports. The overall uncertainty surrounding Brexit and the UK’s relationship with Europe has also contributed to falls in domestic construction and manufacturing sectors. Globally, central banks are treading a fine line of avoiding investor panic, in my view. The US economy remains strong, even as key European economies are in contractionary phases. We have seen stimulus packages in the US and across Europe, as both the Federal Reserve and the European Central Bank utilise quantitative easing to aid their respective economies. In the case of the US, GDP growth has remained strong, up 2.1% in the second quarter of this year and 1.9% in Q3. The consumer price index, often used as a recession indicator, showed a 1.8% core increase in the 12 months through October. Based on these numbers, we do not anticipate the US will enter a recession any time in the near future and that while certain markets might arguably have recessionary attributes, a global recession is unlikely, as well. Alongside the generally optimistic data, I feel investor sentiment is broadly positive outside of the UK. A resolution of the US-China trade war could provide some additional relief and rally the markets, particularly in regard to the US’s briefly inverted yield curve. Although, historically, an inverted yield curve has often served as the harbinger of a recession, this time around it is being somewhat contradicted by record high employment rates in the US and Europe (the UK included). Furthermore, an inverted yield curve tends to precede a recession by anywhere from 14 to 36 months, making an imminent economic fall unlikely. The international climate is ambiguous, but I believe that the UK is the primary economy at immediate risk of entering a recession. The world’s largest economies (US, China and Japan) have remained strong so far but the UK, on the other hand, has the particular issue of the Brexit paralysis. Consumers have become more risk averse, while businesses are reluctant to invest heavily when surrounded by such ambiguity lack of clarity over the outcome. Charles Hepworth is the Investment Director, Managed Portfolios at GAM. This article was originally published in The FM Report.