Tax

Revenue can ‘warehouse’ businesses’ VAT and Payroll tax liabilities that arose on foot of the COVID-19 related restrictions.  This is part of the range of economic measures announced by the Minister for Finance recently. We are yet to see the legislation providing for ‘Revenue warehousing of tax forbearance’ however, we have information from the Department of Finance and further details from Revenue on how this ‘warehouse’ measure is intended to work. The measure is to apply to businesses in all sectors of the economy who have been negatively impacted by COVID-19. Revenue has confirmed the following: COVID-19 related VAT and Payroll tax debts, due from 1 March 2020 to the date when sectoral restrictions are lifted, will be parked for a period of 12 months no interest will accrue on the tax debts during the 12 month period thereafter, the COVID-19 related tax debts will carry a reduced interest rate of 3% (down from 10%), until the debt is paid the timeframe allowed to pay the ‘warehoused’ debt will be flexible and determined by the ability of the business to pay both COVID-19 related debts as well meeting its ongoing tax liabilities as they arise in the normal course for the warehousing arrangement to apply, all returns must be filed in accordance with the Revenue guidance that has applied since the start of the current pandemic. The operational details are being finalised and the necessary legislative amendments will be brought forward in Finance Bill 2020 according to the Department of Finance. 

May 05, 2020
Tax UK

The latest HMRC Stakeholder Digest provides a round-up of the steps HMRC is taking to help people during the Coronavirus outbreak.   “The government has set up a dedicated support page where businesses can find the right support, advice and information to help with the impact of coronavirus. Self-Employment Income Support Scheme Contacting eligible customers Making a claim Payments How tax agents can support their clients Job Retention Scheme Guidance VAT scrapped on E-publications Treasury cut taxes to reduce PPE costs Scams Update"

May 05, 2020
Tax UK

In its response to the consultation examining the establishment of freeports in the UK, the Northern Ireland tax Committee stated the importance of ensuring that the customs rules set out in the Protocol on Ireland/Northern Ireland will apply for goods moving onwards to the Republic of Ireland and vice versa once goods leave a freeport.   The Committee also made a number of other recommendations in the area of tax and freeports including: -  recommendations that any employer NICs incentives for Freeports should go beyond the incentives currently in place in the UK  enhanced capital allowances could be offered akin to those currently available within UK Enterprise Zones;   the annual investment allowance (“AIA”) limit could be higher than that available to other UK businesses  a higher rate of relief (say 10 per cent) could be made available for new structures and buildings (currently 3 per cent); and   the business premises renovation allowance scheme could be re-introduced.   

May 05, 2020
Tax UK

HMRC are advising companies not to submit corporation tax returns for accounting periods ending on or after 1 April 2020 until it has updated its systems.  Company Tax Returns for accounting periods ending on or after 1 April 2020 with zero tax chargeable (nil returns) can still be submitted online, as the tax rate change has no impact.  The HMRC free filing service (CATO) will only support accounting periods ending on or before 31 March 2020 until the service is updated.  If you have an urgent need to file your Company Tax Return before the system is updated, for an accounting period ending after 31 March 2020, contact the Corporation Tax helpline.

May 05, 2020
Tax International

The OECD tax talks webcast is available to watch. It provides a full update on the OECD’s work on taxation in the context of COVID-19. The OECD is providing advice on a range of tax topics while using its large co-operation network to facilitate collaboration among countries. For more information, read the OECD’s latest update which outlines how the OECD is providing it’s data analytical and data gathering capacities to help governments face these unprecedented tax and fiscal challenges.

May 05, 2020
Tax

Read the latest data on tax policy measures taken by OECD member governments so far in response to the COVID-19 pandemic.

May 05, 2020
Public Policy

In today’s bulletin, read about the Government’s newly announced €6 billion support package for businesses. Fianna Fáil, Fine Gael, and Green Party are set to start formal negotiations for Government formation on 7 May 2020. On the EU side, read about the European Commission’s new Circular Economy Action Plan, and the Council of the EU’s adoption of an EU-wide classification system, or "taxonomy” in a bid to promote sustainable investments. On the UK side, you can read about their updated guidance on meeting post-Brexit climate change requirements from 1 January 2021. Government announce a support package of over €6 billion to support businesses impacted by COVID-19 The Irish Government announced on 2 May 2020 a suite of measures to further support small, medium and larger business that are negatively impacted by COVID-19. With the total package amounting to over €6 billion, the measures include: A €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises on commercial terms A €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates  The ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt The waiving of commercial rates for a three-month period beginning on 27 March for businesses that have been forced to close due to public health requirements  Provision of a Restart Fund for micro and small businesses of €250 million for micro and small enterprises This announcement followed the publication of the Government’s Roadmap for Reopening Society & Business, which sets out a five stage plan (starting 18 May 2020) to ease the COVID-19 restrictions and reopen Ireland’s economy and society.   Fianna Fáil, Fine Gael and Green Party to start formal negotiations for Government formation on 7 May 2020 The leaders of Fianna Fáil, Fine Gael and the Green Party have agreed that formal negotiations on a programme for Government will begin on Thursday 7 May 2020. This comes as an update to Fianna Fáil and Fine Gael’s response to the Green Party’s 17 demands. These demands formed the basis of agreement on a programme for government to implement measures to revive the economy in a sustainable and environmentally friendly manner. The six-page letter, penned jointly by the two main parties, attempts to answer the posed questions as clearly as possible. As a key highlight, the two main parties have also committed to introducing a new Climate Bill within the first 100 days of a new Government. The Bill will enshrine in law the target of carbon neutrality by 2050. The Green Party had previously called on Fianna Fáil and Fine Gael to commit to reducing greenhouse gas emissions by at least 7 per cent per year, if they are to enter Government. In response to the policy framework document, the party made 17 demands of the two larger parties, such as a commitment to end Direct Provision and the introduction of a universal basic income. As of now, the two main parties only have 72 Dáil seats between them, eight short of a majority of 80 required to form a government, thus leading to talks about forming a coalition. They are hoping to entice smaller parties, including the Green Party, the Labour Party and the Social Democrats, to increase their Dáil numbers.   Carbon Tax increase announced in Budget 2020 came into effect on 1 May 2020 The carbon tax increase announced in Budget 2020 came into effect on 1 May 2020. The carbon tax, introduced by the budget in October 2019, added 6.5 cent to every litre of petrol and diesel. However, the tax also introduced a tax increases on home-heating fuels. This increase had been postponed until today. The tax was raised by €6 to €26 per tonne of carbon dioxide in last year's budget, and will add €2.73 to a 40 kg bag of coal, 59 cent to a bale of briquettes and €65 to every fill of a 900-litre home heating oil tank. The carbon tax does not apply to electricity, where a public service obligation (PSO) levy is applied instead. The Government introduced the tax as part of a global deal to cut the level of emissions in Ireland. By increasing the carbon tax, the Government hopes to incentivise citizens to use fewer fossil fuels which cause climate emissions and climate change. In June 2019, Chartered Accountants Ireland responded to the Department of Finance’s consultation on the options for the use of revenues raised from increases in carbon taxes, saying that to the achieve acceptance taxpayers would have seen a direct link between the carbon tax collected, what the additional revenues are spent on and how they benefit, with revenues from the carbon taxes being ring-fenced and the poorest households protected by a series of targeted reliefs through the tax and welfare system, starting with an increase in the fuel allowance.    Europe’s new Circular Economy Action Plan  On 11 March 2020, the European Commission adopted a new Circular Economy Action Plan. The plan is one of the main blocks of the European Green Deal, the European roadmap for climate neutrality and Europe’s new agenda for sustainable growth where economic growth is decoupled from resource use, presented by the von der Leyen Commission on 11 December 2019. It claims that “applying ambitious circular economy measures in Europe can increase EU's GDP by an additional 0.5 per cent by 2030 and create around 700,000 new jobs”. The initiatives in the plan build on the work done since 2015, when the European Commission launched its first Circular Economy Action Plan.   The new Action Plan aims to modernise and transform the European economy while protecting the environment, making the European economy fit for a green future, strengthening competitiveness, and giving new rights to consumers. The plan also supports innovation and investment by mobilising private financing in support of the circular economy through EU financial instruments such as InvestEU. It also introduces legislative and non-legislative measures targeting areas where action at the EU level brings real added value. The Circular Economy Action Plan presents measures to: make sustainable products the norm in the EU; empower consumers and public buyers; focus on the sectors that use most resources and where the potential for circularity is high, such as: electronics and ICT; batteries and vehicles; packaging; plastics; textiles; construction and buildings; food; water and nutrients; ensure less waste; make circularity work for people, regions and cities; lead global efforts on circular economy. Find more information about the Circular Economy Action plan in this factsheet and in a Q&A answering frequently asked questions about the plan.   Sustainable finance: Council adopts a unified EU classification system On 15 April 2020, the Council of the European Union (“EU”) adopted a regulation setting out an EU-wide classification system, or "taxonomy", which will provide businesses and investors with a common language to identify those economic activities which are considered environmentally sustainable. The common classification system is to encourage private investment in sustainable growth and contribute to a climate neutral economy. The taxonomy will enable investors to refocus their investments on more sustainable technologies and businesses. It will be key to enabling the EU to become climate neutral by 2050 and achieve the Paris Agreement's 2030 targets. These include a 40 per cent cut in greenhouse gas emissions, for which the Commission estimates that the EU has to fill an investment gap of about €180 billion per year. The future framework will be based on six EU environmental objectives: climate change mitigation; climate change adaptation; sustainable use and protection of water and marine resources; transition to a circular economy; pollution prevention and control; protection and restauration of biodiversity and ecosystems. The taxonomy for climate change mitigation and climate change adaptation should be established by the end of 2020 in order to ensure its full application by end of 2021. For the four other objectives, the taxonomy should be established by the end of 2021 for application by the end of 2022. The regulation needs to be adopted by the European Parliament at second reading before it can be published in the Official Journal and enter into force.   Changes to UK’s climate change regulations, emissions trading, ecodesign and energy labelling Guidance has been published by the UK Department for Business, Energy & Industrial Strategy on how climate change regulations, emissions trading, ecodesign and energy labelling will change from 1 January 2021. The most recent update says that the EU ETS will continue for the 2019 and 2020 compliance years during the transition period from 1 February 2020 to 1 January 2021. The EU Emissions Trading System (EU ETS) is a cornerstone of the EU's policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world's first major carbon market and remains the biggest one.   Read all our updates on our Public Policy web centre.

May 05, 2020
Tax

The OECD published a new working paper, What drives consumption tax revenues? Disentangling policy and macro-economic drivers, which looks to identify how economic downturns affect consumption tax revenues, particularly during the global financial crisis of 2007 - 2009. The report does not consider the implications of the current crisis, however its findings provide insights on how the COVID-19 crisis is likely to affect consumption tax revenues. The report notes that the VAT rate reductions that were introduced in the financial crisis to spur consumer spending would have limited impacts during the current emergency phase of this crisis. Rather, measures such as deferring VAT payments, should be taken to improve business liquidity. However, in the longer run, consumption tax revenues can help to rebalance government budgets, for which monitoring and understanding the drivers of tax revenue changes will be key. Read the OECD’s update for more information.

May 05, 2020
In the media

In his regular column in the Business Post, Dr Brian Keegan talks about how new taxes are often the by-products of crises, such as the 2008 financial crash. This pandemic is likely to be no different. In his column in the Irish Examiner, Dr Keegan discusses how a fair, credible and reliable audit and reporting regime goes a long way towards sustaining confidence in Irish industry to speed up the path to economic recovery.  

May 05, 2020
Thought leadership

Originally published on Business Post, 26 April 2020 One of the most inane comments I heard about Brexit was from a management guru who said that the Brexit crisis only forced businesses to plan in ways that they should have been doing already.  As being wise after the event goes, this takes some beating.  It's like remarking that falling off a pier should prompt you to consider taking swimming lessons. Yet if Brexit caught some of us unawares, everyone was blind-sided to the prospect of a Covid-19 pandemic.  Even the Minister for Finance could admit this week that a pandemic was not on the critical planning path of his department, while observing that it probably was not on the planning radar of any other finance minister in the world either.  Every business is now though being prompted to reconsider what they do and how they do it. Ironically one of the most compelling prompts is coming from the Revenue Commissioners.  The Wage Subsidy Scheme run by the Revenue is very successful.  Some 300,000 workers are taking home more than they might otherwise take from over 45,000 employers as a result of the scheme.  The scheme received a further boost with last week’s announcement of enhanced subsidies for lower paid workers.  In addition, workers whose pre crisis earnings exceeded €76,000 per annum but who have since suffered pay cuts to bring their earnings below that cut-off threshold may now also be eligible for wage subsidies. While the focus has rightly been on the plight of workers, wage subsidies are of course paid to businesses which in turn pass them on to their employees.  Unlike its UK counterpart (also of course applicable in Northern Ireland) where eligibility is predicated on people being laid off temporarily on “furlough”, eligibility for the Irish temporary wage subsidies is based on a decline in business.  At its simplest and crudest measure, wage subsidy scheme eligibility depends on a fall-off in sales or orders of 25% or more in quarter two of 2020.  That is as against a comparable period, typically quarter two of 2019.  For many of us, that level of fall-off is all too evident.  Nonetheless, not all businesses, though they may be severely challenged by the lockdown, can convincingly estimate a 25% drop-off for quarter two.  That could be because some strands of their operations are continuing to thrive despite the lockdown. Consider for example a wholesale and retail trade.  Retail may have dried up completely because there is no footfall, but the wholesale side of the business continues perhaps with even increased demand for some product lines.  Similarly a training organisation may find that while demand for an attendance at classroom-based sessions has evaporated, its online training offerings are experiencing a surge. The newest version of Revenue guidance addresses the position for such industries, permitting them to identify individual commercial streams within their organisation which are experiencing a 25% drop-off in business.  Employees associated with those elements of the business should be eligible for wage subsidies. When claiming the temporary wage subsidy in accordance with this newer version of guidance, businesses must be able to show that the divisions which are in trouble within the organisation are long established, and in particular had been well established before the pandemic.  Makey-uppy commercial divisions within companies constructed for no reason but to apply for wage subsidies will wither under future Revenue scrutiny. Even if some shop doors are open post 5 May, training venues eventually open their doors, and passenger number restrictions are eased at some point in the future, will there be bodies to buy or to learn or to travel as in the halcyon days of 2019?  That may take a lot longer.  A self-imposed lockdown will remain, not least because the shaking of both personal and industry finances over the past several weeks will have instilled caution.  A newfound and exaggerated prudence will prevail for months to come even after the restrictions are lifted.  The Minister for Finance signalled during the week that the wage subsidy payments could continue in a changed or tapered form beyond their twelve week span which is due to end in June.  This will be necessary and we all now need to look beyond that point.  Those businesses along with the individual divisions within companies and organisations which are currently not eligible for wage subsidies will form the backbone of the recovery.  However, if we do not ensure that support is maintained for the industries most damaged by the Coronavirus crisis, national recovery will be patchy at best.  The level of unemployment, forecast this week by the Department of Finance to reach 220,000 by year end, will remain stubbornly high.  Job retention and restoration – remember that the subsidies can also be claimed for workers who are re-hired - are critical to achieving a rapid recovery.  The Wage Subsidy Scheme is fundamental to ensuring this can be achieved.  It is surely better for the country to subsidise workers’ wages as markets return to normal than to pay dole.  Unlike the last financial crash and unlike Brexit, we can be wise before the event as we resolve the crisis. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland  

May 05, 2020
Tax UK

HMRC and the UK Government continue to publish updates on COVID-19 at some pace. When using a form or publication going forward or contacting HMRC, check you are using the most recent version or up to date way of contact which may have changed due to the pandemic.  The page on information for NI businesses and employers has been updated See the recording of last week’s Ulster Society webinar on rebooting the economy in a re-shaped world HMRC have issued a brief on the temporary VAT zero rating of personal protective equipment (PPE). This details a temporary zero rate on PPE which applies from 1 May until 31 July 2020. A policy paper has also been published and a new section added to VAT Notice 701/57 The Bounce back loan scheme was launched yesterday The Government has extended the deadlines for responses to a number of open HMRC and HM Treasury consultations. These include the consultations on the revised HMRC Charter and the call for evidence on raising standards in the tax advisers market. See the relevant page for more details of the consultation response deadlines which have been extended HMRC has announced that the reporting and payment deadline for the PAYE Special Arrangement for Short Term Business Visitors for 2019/20 is extended from 19 April 2020 to 31 May 2020 The First-tier Tribunal has announced a further general stay of all proceedings received before 24 March 2020 up to and including 30 June 2020 The House of Lords report “Off-payroll: treating people fairly” on the reform of the IR35 legislation calls for a fundamental rethink of the Government’s approach. At present, the rules are still intended to be implemented from 6 April 2021, which was delayed from 6 April 2020 due to the pandemic Currently, the 2019/20 deadline for filing annual share plan returns and benefit in kind returns including P11ds remains 6 July 2020 Finance Bill 2020 had its second reading in the House of Commons on 27 April 2020. The next step would usually be a Committee of the Whole House. However due to the pandemic the whole Bill will be looked at by the Public Bill Committee instead. No date has yet been published for this stage though it has been confirmed that the Committee’s proceedings are due to be concluded by Thursday 25 June 2020 The Budget 2020 announcement of a zero rate of VAT on e-publications which was due to take effect from 1 December 2020 has been brought forward and will now apply to all e-publications from 1 May 2020. HMRC has issued a Brief, policy paper and guidance on the change HMRC has confirmed that reclaims of employees' coronavirus-related statutory sick pay qualify as state aid under the EU commission’s COVID-19 temporary framework which means support is capped The Chancellor has written to the Treasury Committee to confirm a relaxation of the statutory residence test for skilled individuals coming to the UK to help the coronavirus response A new post, “Construction Industry Scheme: top five tips for tax agents” has been published HMRC has published guidance setting out that subject to the relevant conditions being met,  charities will be able to claim gift aid on cancelled event tickets 0

May 05, 2020
Professional Standards

This document aims to provide MLROs with observations from the UKFIU on what is being seen in reporting around COVID-19 and SARs. Several SARs have been seen relating to suspicions that individuals are exploiting the COVID-19 outbreak to account for money movements that suggest possible money laundering. Although it is UK based, the information will also be of interest to MLROs in Ireland.

May 04, 2020

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