Peter Vale and Christopher Crampton outline some expected changes to international taxation in the coming year. 2020 is set to be a busy year for international tax. For Ireland, it’s a key period. While international tax reform to date has been good for the country, the changes being looked at in 2020 pose challenges.   Global tax changes – Pillars One and Two The outcome of meetings in January are key to the OECD’s plans to reach consensus on both the Pillar One and Pillar Two proposals. While the Department of Finance expects the ultimate outcome to be a reduction in Irish corporate tax receipts by up to €2 billion, it’s a very difficult one to call. Pillar One examines a reallocation of profits to market jurisdictions. While this does impact on our corporate tax base, it should not prove fatal on its own. However, recent pronouncements from the US suggest that getting consensus on the Pillar One changes could be difficult. Pillar Two looks at a global minimum effective tax rate and is, perhaps, of more danger to Ireland. A tax rate of 12.5% was suggested by the French Finance Minister in December. While at first glance this would look positive from an Irish perspective, the devil is in the detail.   The most recent OECD draft proposals look at an allocation of profits to individual countries based on a group’s consolidated financial statements. This could provide a distorted result for groups with large intellectual property (IP) migrations to Ireland, in particular, and potentially lead to an effective tax charge significantly lower than 12.5%.  The early months of the year should provide key signals as to the direction of travel on both Pillars, with the outcome critical to the relative attractiveness of our corporate tax regime in the future. We should not rule out the EU taking matters into its own hands, particularly if reaching a consensus looks like being a protracted affair. Transfer pricing Finance Act 2019 saw the introduction of OECD 2017 guidelines into Irish tax legislation. One of the biggest impacts of the guidelines will be more onerous documentation requirements in 2020 for Irish companies, although many will already be maintaining similar documentation on a group-wide basis. At first glance, this might seem to cause disruption for Irish subsidiaries of US multinationals with significant IP in Ireland. While these groups typically have significant substance here, many of the IP functions are carried out outside Ireland; often in the US. Another key change in Finance Act 2019 was the introduction of transfer pricing for Irish small- and medium-sized enterprises (SMEs). While it is expected that the documentation requirements will be more relaxed for SMEs, the extension of transfer pricing will create further administrative requirements on Irish businesses. On the positive side, the extension of transfer pricing to SMEs is subject to Ministerial Order, which we might see later in 2020. Any transfer pricing requirements will apply from that date or later; they should not be retrospective to 1 January 2020. For businesses within the scope of transfer pricing now, more focus from Revenue in 2020 can be expected.   IP migrations 2020 will see the final year of “double Irish” migrations, with 31 December 2020 marking the end for groups with IP currently housed offshore in Irish incorporated non-resident entities. After that date, those entities become regarded as Irish tax resident. While many groups have already moved their IP onshore (much of it to Ireland), a significant number of groups have yet to do so. Hence, we expect many IP migrations to take place in 2020. When an IP migration takes place, the market value of the IP determines the amount of tax allowances available in Ireland. This number is often large, and so we expect to see Revenue examine these IP valuations closely. Interestingly, when these tax allowances expire then, all other things being equal, a significant increase in Ireland’s corporate tax receipts at some point in the future would be expected. However, a lot could happen in the intervening years! Revenue audit focus Aside from the focuses identified above, we don’t expect significant change in the nature of Revenue audit activity in 2020. We expect Revenue’s focus to remain on PAYE and VAT for SMEs, which tend to be the areas of greatest non-compliance.   On the corporation tax side, we have seen Revenue increasingly look for back-up supporting tax losses carried forward, which can prove challenging where the losses were generated some time ago but are being used presently. Businesses should be aware of this when considering document retention policies. Budget 2021 While Budget 2020 has just passed, it’s worth noting that this Budget was based on a more negative outlook than now appears to be materialising. This could mean we finally see more meaningful movement on our high marginal income tax rates later in the year, or possibly a reduction in capital taxes. Of course, a lot can happen between now and then, including a new government, further global tax changes, and six months of known unknowns! And, that’s all without mentioning Brexit. In summary, another year of significant developments on the international tax front looks likely, with the outcome critical for Ireland. Peter Vale FCA is a Tax Partner at Grant Thornton. Christopher Crampton ACA is an Associate Director at Grant Thornton. Brass Tax -- new year, new tax rules by Leontia Doran Since we’re fast approaching a new tax year in the UK (from 6 April 2020), let’s take a look at what is on the horizon for practitioners. IR35 rules From 1 April 2020, the IR35 rules in the public sector are being extended to the private sector with an exemption from the rules only available to “small” businesses. The IR35 legislation is designed to combat avoidance by individuals who are supplying their services to businesses via an intermediary (such as a company) but who would be an employee if the intermediary wasn’t used. Making Tax Digital From 1 April 2020, the UK will join the ranks of France, Italy, Austria, Turkey and Malaysia when it introduces its own digital services tax.  Making Tax Digital (MTD) for VAT continues. Some businesses are now able to apply for an extension to meet the digital links requirement once the one-year soft-landing period ends on either 1 April 2020 or 1 October 2020. However, the criteria to do so is strict, as set out in the updated VAT notice.  Corporation tax The rate of corporation tax is also legislated to fall from 19% to 17% from 1 April 2020. However, the Government has stated that it will remain at 19%. As it’s already on the Statute books, legislation will be needed to reverse this.  And therein lies the rub. The next UK Budget isn’t taking place until 11 March, which means the related Finance Act likely won’t be enacted until several months later. Retrospective legislation is never a good thing. Leontia Doran FCA is UK Taxation Specialist at Chartered Accountants Ireland.

As the new UK Government has been formed by the Conservative party with a significant majority, its policies will set the tax agenda for 2020 and the following four years. Claire McGuigan summarises the main proposals. Business taxes In Finance Act 2016, the rate for corporation tax for 2020/21 was set at 17%. As this rate is set in legislation, it is the rate (excluding the UK banking corporation tax surcharge of 8%) that companies must use for their deferred tax calculations. However, during the election campaign, the Conservative party pledged to maintain the rate at 19%. Therefore, once this change is enacted, businesses will need to revisit their deferred tax calculations. The Chancellor is expected to stick to the existing plans to introduce restrictions to payable research and development (R&D) tax credits from April 2020 to reduce the scope for tax avoidance by small- and medium-sized enterprises (SMEs). However, the Conservatives have pledged to increase the value of the R&D expenditure credit (RDEC) for larger companies from 12% to 13% and review the project qualifying criteria to establish if it can be widened to include R&D on cloud computing and data. They also committed to increasing the relief available under the new structures and buildings allowance to 3% a year. Both of these changes are likely to take effect from 1 April 2020. The Conservative party confirmed its commitment to introduce a Digital Services Tax (DST) from April 2020, although it is not clear if there will be enough time to finalise the necessary legislation by then. Also, at the time of writing, the OECD has asked the UK to postpone implementation of this tax to allow for a standard approach to be considered across all countries. During the election campaign, all three main parties promised to review the impact that the IR35/off-payroll labour changes will have on private sector businesses. Given that these changes were longstanding Conservative party policy, it is unlikely that they will be abandoned entirely. However, delaying the changes until 2021 or committing to a ‘post-implementation review’ may feature in the Budget. Similarly, the outcome of the Loan Charge Review is expected. Again, for the Government to abandon this tax enforcement action seems unlikely, but the Chancellor may announce much more flexible payment terms for individuals facing the charge. Finally, for business taxes, the Conservative party manifesto contained a promise not to raise the rate of VAT during the next parliament. Brexit The promise to “get Brexit done” was central to the Conservatives’ election campaign. With a transitional period operating until 1 January 2021, most operational laws and cross-border arrangements will remain in place until that date. During 2020, the new Government will aim to negotiate a post-Brexit trade deal with the EU that will take effect from 1 January 2021. However, some uncertainty will continue: in the election campaign, the Prime Minister promised not to extend the transition period beyond 1 January 2021 so, theoretically, there may still be a ‘no-deal’ Brexit if a trade deal is not agreed. Alternatively, an extension to the transition period may be possible if a post-Brexit deal takes longer to agree. Employer issues Although the Conservative party committed to ending freedom of movement on Brexit day, under the transitional rules, EU citizens would be able to come to the UK to live and work without any formal application process. If those individuals wish to remain in the UK after 31 December 2020, they can apply for “temporary leave to remain” in the UK which, if granted, will allow them to continue living and working in the UK for 36 months from the date it is granted. From 2021 onwards, the Conservatives plan to introduce a points-based immigration system. Despite the national insurance contributions (NIC) changes for individuals, the Conservatives pledged not to increase NIC for employers and, to help small employers, they also plan to increase the NIC employment allowance from £3,000 to £4,000. Employers should prepare for a significant increase in the national minimum wage (NMW) from April 2020. The Conservative party has pledged to increase it in stages to £10.50 over five years – this equates to a 5% increase from April 2020 and each subsequent year of the parliament. Personal taxes During the election campaign, all the main parties proposed changes to capital gains tax, although the Conservative party proposals were the least radical. The Conservative manifesto did pledge to “review and reform” entrepreneurs’ relief (ER). While it is perhaps unlikely that the valuable ER rules will be immediately repealed, there may be some interim changes to the rules announced in the Budget, pending the outcome of a more fundamental review during 2020/21. The Conservatives intend to raise the annual NIC starting threshold for employees to £12,500 over the next parliament, with an immediate increase to £9,500 from April 2020. The rates of NIC will be frozen for the duration of the new parliament. The Prime Minister also made an election commitment not to increase income tax rates during the new parliament. Past political controversy over pension tax relief perhaps influenced politicians not to make specific commitments on the topic during the election campaign. However, because of the impact the annual allowance charge is having on senior NHS clinicians, the Government has already announced temporary measures to ensure that where they take on additional hours, such individuals would not lose out overall. The ‘quick fix’ compensation arrangement announced during the election campaign is unlikely to be sustained for the long-term, and a review of the underlying rule is likely to be announced in the Budget as it can trigger tax charges for many workers in the public sector (and private sector). On tax avoidance, they propose a new package of measures including doubling the maximum prison term to 14 years for individuals convicted of the most serious types of tax fraud and creating a new HMRC Anti-Tax Evasion Unit.   We await the Government’s first budget, scheduled for 11 March 2020, with anticipation. Claire McGuigan is Director, Corporate Tax, at BDO Northern Ireland.

Becoming a partner in the firm is often the goal when accountants go into practice, but it’s not a walk in the park. Jackie Banner outlines four key steps on the road to making partner. Making partner is the end goal for many who go into practice. The status, financial compensation, and endorsement of one’s skills and expertise are all obvious draws to progressing to this level. Then there is the opportunity to effectively become a ‘business owner’ with responsibility and influence over how the firm is run. This latter piece sounds simple in theory but requires the right considerations and capabilities to execute.  We can’t gloss over the technical competency that is required to make it to partner. Possessing exceptional domain knowledge in your chosen area of expertise is fundamental to any move upwards. Eagle-eyed attention to detail and a holistic view of the business as a whole are also required to consider yourself technically sound. With a rapidly changing business landscape, the burden of knowledge is significant, and can lead a potential partner to focus too heavily on the technical side alone.  The most common missteps that senior level accountancy professionals make in the race to partner have to do with the investment in their own leadership ability,  relationship management and ability to think like someone who’s running a business or a profit-and-loss account. Here’s how to tackle these key steps to making partner. Invest in your leadership ability Over the last six decades, leadership scholars have conducted more than a thousand studies to determine the definitive characteristics and personality traits of great leaders. Out of all the research, not one unanimous, best practice leadership archetype has emerged. Prevailing opinions on the best leadership styles are replaced as quickly as the latest iPhone. However, there are some common through lines in many of them that you can draw from. Whether it’s Six Sigma, values-led leadership, contingency theory (which in itself says there is no one ideal leadership style), communication methods, humble leadership or any number of other theories and best practices, be sure to establish a combination of leadership qualities that best align with you as a person and as a leader.  Signalling that you have the right level of ambition necessary is also required. This is demonstrated by how you carry yourself, your communication style, and interactions and relationships with colleagues and clients. Combine these with that aforementioned oft-ignored investment in yourself to build your own definitive leadership style.  Vision and strategy The most common piece of feedback we hear from nomination committees or hiring partners about unsuccessful final interviews is that the candidate lacked vision in their pitch. At this level, technical competency is assumed. You will be speaking to peers who are equally, if not more skilled than you. They want a business leader to sit alongside them; someone with a new perspective that can bring energy and excitement that will contribute to business growth.  Presenting a forward-thinking, clear vision that will grow not only your business unit but add to the company is perhaps the most valuable thing you can do to be perceived as someone ready to make partner. In practical terms, that vision should translate to an actionable business plan.  When preparing, think strategically about how you’re going to generate earnings, develop a client pipeline, and hit the figures that justify your being chosen as an equity partner. A partner needs to ascertain what those expected figures are for the firm with which they are interviewing. This means crafting a realistic three-year plan to grow revenues at a level that a partner needs to be commercially viable, which is firm dependent.  Relationship management We all need a sounding board to bounce ideas off of or to go to for advice. Therefore, your network and your professional relationships should be a priority on the road to partner. Partners, no matter what age or level of seniority, should have a mentor.  As Chris Outram discusses in his book, Making Strategy Work, you need ‘co-conspirators’ on whom you rely to give their support when it comes to internal decisions and information-sharing across business units. This extends to stakeholder management both inside and outside your firm.   Putting it all together In an increasingly “what have you done for me lately?” world, contextualising the human side of the job is key. Trust your team to deliver while driving them towards a coherent vision by demonstrating effective leadership and building a sustainable pipeline of business.  Sounds easy when you put it on paper, right? There is no doubt it is a huge challenge to make the leap but having a clear idea of what is required and how it should be presented is the first step on the road to partner.    Top tips on the road to partner 1. Have a plan – Set targets and milestones for yourself to track your progress and professional development. Decide what you want out of your career and then work towards achieving it.    2. Invest in upskilling – Find opportunities to develop your technical and soft skills. Invest in as many areas as are available to you.     3. Specialise your skill set – Practice experience is broad and often provides exposure to a wide range of skills and experience, which is great. However, drill down and become a subject matter expert where possible. Be the go-to person in your network for a particular subspecialty.   4. Be flexible – In any business, targets move, circumstances in your or your clients’ business can change quickly. When unexpected events arise or a strategy or project scope moves, always think of yourself as a support for change and not a barrier.   5. Say “yes” – There will always be an element of a job or a particular client you’d rather steer clear from, but don’t. Always say “yes” when asked to take on something new or different.   6. Define your client portfolio and market opportunity – The more distinct your client portfolio is from your peers or your partners, the more likely you are to become a destination for referrals, hold client relationships, and see significant fee income potential in line with expectations for equity partner level.   7. Find a mentor – Find a peer who you admire and who has made choices you respect. Someone who is willing to be your sounding board and provide advice on how to achieve what you want in your career.  Jackie Banner leads Practice Recruitment for Azon Recruitment Group.

Brian Keegan considers the poignant parallel between Brexit and New Zealand in the 1970s. "Earthquake? Best thing that ever happened to us.” This isn’t the best response to the damage done to the city of Christchurch in New Zealand in the wake of the terrible earthquake in 2011. My man had the grace to acknowledge as much after he remembered the appalling loss of life and limb from this particular natural disaster. Nevertheless, as someone who was deeply involved in the New Zealand construction industry, he was all too happy to see the opportunities created by the devastation. It isn’t the first time that New Zealanders suffered due to powerful circumstances outside their control. While the memories of the 2011 earthquake are clearly fresher, there is also a folk memory among New Zealanders of the economic damage caused to them when the United Kingdom joined the European Union in 1973. For a country largely dependent on agriculture exports to its former Commonwealth headquarters, the British accession to what was then the European Economic Community some 40 years ago was a disaster. The economic disruption of 40 years ago is comparable to the threatened damage from Brexit to the food industry of Ireland – north and south. In the 1970s, New Zealand’s main exports were butter and lamb. Despite being on the other side of the world, the UK was a key market for these goods and, in fact, accounted for some 30% of New Zealand’s exports. Being members of the Commonwealth, New Zealand had preferential access to UK markets. That access was to be a casualty of Britain’s accession to the EU. In fact, so great was the problem for New Zealand that London committed to doing what it could to protect New Zealand’s vital interests in the course of negotiating the British accession treaty. The so-called Luxembourg agreement guaranteed limited access for New Zealand produce for a five-year transition period. The idea was to give New Zealand breathing space to negotiate free trade deals with other markets and diversify its export offering, but the economy tanked nevertheless. If all this sounds familiar, that may be because we are witnessing history repeating itself in a way that would have considerable entertainment value if the issues weren’t quite so serious. Leo Varadkar’s mischievous remark that Westminster should offer pay-per-view wasn’t that far off the mark. We may, however, be watching the wrong channel if we are to learn from this repeat – it’s the New Zealand experience we should focus on. In the 1970s, New Zealand wine was virtually unobtainable in Europe and kiwi fruits were a rarity. Now they are mainstream. 40 years on, New Zealand’s export destinations are Australia, China, the United States (US) and Japan in order of importance. The country’s volume of trade with the UK has declined by over 60%. Our Brexit discussions must now move on from brinkmanship and dead-in-a-ditch rhetoric. We are going to have to figure out how to co-exist and trade with our nearest neighbours, culturally and geographically. Business will have to work out how to diversify and establish new markets, and hopefully avoid a repeat of the worst aspects of the 1970s suffered in New Zealand. I doubt very much that any of us will ever be exclaiming, however thoughtlessly like my earthquake man, that Brexit was the best thing that ever happened to us. That’s because there’s one other point about the New Zealand experience. Even though it was clear for about a decade that the trading relationship with the UK would inevitably change in 1973, the New Zealanders seem to have done precious little about it until the hammer fell. Sometimes it takes a crisis to deliver change. Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.

Brexit deadline The 31 October Brexit deadline is fast approaching and clarity on the issue is as far away as ever. At the time of writing, many options seem possible, including a Brexit delay and a UK general election, but perhaps the most likely prospect is a no-deal or limited-deal Brexit. Both the Irish and British governments have urged businesses to prepare for Brexit, particularly those that import, export or transport goods, animals or animal products. It seems that the UK government is operating on the assumption that a hard border will return to the island of Ireland, as revealed in a UK no-deal contingency document codenamed ‘Operation Yellowhammer’, which was eventually published in mid-September after leaks to the press. The document warns of potential unrest in Northern Ireland along with road blockades, job losses and disruption to the agri-food sector, as well as an increase in smuggling and the potential for disruption to electricity supply. We must hope that this is a dire overestimation of a worst-case scenario. Meanwhile, in Dublin, Institute President Conall O’Halloran recently met with Minister for Finance, Public Expenditure and Reform, Paschal Donohoe TD, to discuss the post-Brexit scenario as well as the Institute’s 2020 Budget submission and other business issues. Brexit support Our Institute will do everything it can to support members and member firms at a time of great uncertainty. You can read our latest updates on www.charteredaccountants.ie, particularly in our Brexit Web Centre and our page dedicated to no-deal Brexit planning. We are encouraging businesses across Ireland and the UK to ensure that they can continue to trade with each other post-Brexit. Applying for a customs registration (an EORI number) is just the first step in the process. Getting an EORI number takes between three and five minutes and can be completed online. While some traders have experience in the customs formalities required to import and export outside of the EU, it will be a first for many – particularly smaller enterprises. Businesses need to upskill in the area of customs using Government supports. They should also assess whether they have gaps in customs knowledge. Revenue estimates that customs declarations are expected to increase from 1.4 million to 20 million per year post-Brexit. HMRC estimates that declarations will grow five-fold to around 250 million. It’s best to be as prepared as possible. New academic year As we move into October, our Institute is about to welcome a new crop of students following a campaign to recruit the brightest and best to the profession. A new programme of specialist qualifications covering areas as diverse as corporate finance and cybersecurity are also getting underway. A central part of our strategy is to train the very best business professionals so that they can make a significant contribution to the economy on the island of Ireland, and further afield. We’re working hard to ensure that whatever the economic climate, we’re providing high-quality Chartered Accountants who will make a valuable contribution to firms and businesses. On behalf of my colleagues in the Institute, I’d like to offer our best wishes to all of our new students as they start out on their Chartered journey. Barry Dempsey Chief Executive

Charities in Northern Ireland may have to provide more detail to the Charities Commission in the near future, but any initiative that restores the public’s trust is to be welcomed. By Angela Craigan On 27 August 2019, the Charity Commission for Northern Ireland opened a public consultation in respect of new questions charities must answer in their annual returns plus additional information that organisations applying for charitable registration online must answer. The proposed questions cover topics such as safeguarding, data protection, loans and payments to related parties, and the use of commercial fundraising partners. The Charity Commission NI advises that the questions are designed to help it gather important information on individual charities and the charity sector as a whole. The format of the proposed new questions requires each charity to reveal if any trustee owes money to it, whether any of the charity’s assets are leased from a trustee, and whether a trustee has been paid for carrying out their role. These questions are already asked in the annual monitoring return, but will now be asked when applying for registration. The Charity Commission NI also intends to ask charities if they have reported a data breach to the Information Commissioners Office in the past year. It will also collect information on what percentage of charitable expenditure relates to charitable purposes for organisations of less than £250,000 a year. All of the new and revised questions Charity Commission NI propose to include in the registration application and the Annual Return Regulations 2019 are available to view in the consultation document. The public consultation will focus on the most significant questions, and will allow an opportunity to voice opinions on the proposed changes. The consultation process will run for eight weeks, closing on Tuesday 22 October 2019. The changes will be of particular interest to members working in the charity sector and those who are trustees of Northern Ireland charities. The consultation has arisen as a result of increased risks within the charity sector including safeguarding, cybercrime and fraud. These increased risks have had a negative impact on the public’s perception of the charity sector. A key role of the charity commission is to increase public trust and confidence in charities. The commission is of the opinion that the additional questions will increase transparency and, as a result, public confidence in charities. The recent safeguarding failures in some high-profile charities have highlighted the importance of trustees being aware of their responsibilities and the safeguarding standards expected of them. The commission has added questions in relation to the ‘expression of intent’ form that is completed by those waiting to be called forward for registration. The commission also proposes to add more questions to the classification section of the charity registration form. In this section, applicants describe their charitable purpose, the focus of the charity and the beneficiaries of the organisation. It is important that trustees understand their responsibilities in respect of the information filed with the Charity Commission. Trustees may delegate the task of submitting an application or annual monitoring form, but they cannot delegate the responsibility of making sure they are accurate and submitted on time. If an annual monitoring form is late, the register of charities shows them as being in default. Once submitted, the register will read “Due documents received late”. This is of increased importance as funders are now using the register to check if forms are being returned late and will look less favourably on charities that file late when awarding grants. As an advisor to a large number of local charities, and as a trustee of Action Mental Health and New Life Counselling, I firmly believe that this sector is invaluable. I therefore welcome any move to increase public confidence in the charity sector.  Angela Craigan FCA is a Partner with Harbinson Mulholland, the accountancy and business advisory firm.