In Irish news this week, Revenue has revised its guidance on the VAT waiver of exemption following the High Court decision in the Killarney Consortium case and Revenue has also updated its guidance on Relevant Contracts Tax (RCT) to clarify the application of RCT on contracts involving both the sale of land and provision of construction services. In UK news, the latest Tax Gap data has been published and HMRC is seeking agent volunteers to take part in testing during phase two of delivery of its Import One Stop Shop system. In International news, the European Commission has published its annual report on taxation. Irish 1. Revenue has updated its guidance on the collection of cancellation amounts arising from the cancellation of a waiver following the High Court’s judgment in the Killarney Consortium C v Revenue Commissioners case. 2. Read the updated guidance published by Revenue on the RCT treatment of contracts that involve both construction services and land sales. UK 3. The 2023/24 Tax Gap data has been published by HMRC. 4. Are you an agent involved in filing Import One Stop System (IOSS) returns and payments on behalf of clients? HMRC is seeking agents to participate in testing during phase 2 of delivery of the IOSS system. Read about what you can expect and how to get involved. International 5. Read the Annual return on taxation 2025 which was recently published by the European Commission. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter. Subscribe to the Tax News by updating your preferences in MyAccount. You can also read this week’s post EU exit corner here.  

Last week Chancellor Rachel Reeves delivered the 2025 Spending Review in Parliament which saw HMRC awarded an additional £0.5 billion in 2026/27 to make it a digital first organisation. The Spending Review sets planned spending totals for all UK Government departments from 2026/27 to 2028/29 inclusive in addition to investment spending plans until 2029/30. Although there were no specific tax announcements in the Spending Review, speculation now continues that there will be further tax rises in the Autumn Budget later this year given the spending and investment plans set out. The Institute for Fiscal Studies has now published a podcast setting out its analysis of the review whilst the Federation of Small Businesses says that the review lacked business focus. The House of Commons Treasury Committee subsequently announced an inquiry into the review. HMRC settlement The settlement includes additional funds of £0.5 billion in 2026/27 to “make HMRC a digital-first organisation”. This will be used to improve digital services and enable the use of AI to both assist taxpayers and improve productivity within HMRC.   Over the next three years, HMRC’s settlement is as follows: 2026/27: £7.3 billion, an increase from 2025/26 of £0.5 billion, 2027/28: £7.1billion, and 2028/29: £6.9 billion. By 2029/30:  90 percent of taxpayer interactions will be digital self-serve, up from the current 70 percent; and  HMRC will have reduced the number of letters it sends by 75 percent. HMRC will “eliminate all outbound post, with limited exceptions such as letters which generate revenue”.  However, it “will continue to ensure alternative channels, including phonelines, are still there for those who need them”.  The Institute looks forward to discussing how HMRC will achieve these very ambitious targets, including how inbound post will be treated, whilst also improving its current service levels as the taxpayer self-assessment population continues to grow because of fiscal drag. More information on this is expected to be available in the coming weeks when HMRC publishes its Digital Transformation Roadmap which was delayed from the spring pending the outcome of phase two of the 2025 Spending Review. The move to use more AI is interesting given recent comments by the Public Accounts Committee which said in a recent report that HMRC’s reliance on its legacy IT systems was restricting its use and development of AI. HMRC’s settlement also aims to enable the department to deliver the package of measures announced previously to close the tax gap including modernising HMRC’s use of data and recruiting an additional 5,500 compliance staff and 2,400 debt management staff.  Alongside the main Spending Review publications, HM Treasury also published ‘Spending Review 2025: Departmental Efficiency Plans’ which explains how different departments will deliver efficiencies. According to this, HMRC will deliver efficiencies of £773 million per year by 2028/29 in the following areas:  moving to digital services, improving and modernising its IT estate, continuous improvement and productivity which includes anticipated benefits from bringing the functions of the Valuation Office Agency within HMRC, restructuring its physical estate by consolidating offices into regional centres, exiting some sites and streamlining facilities contracts. By 2030, HMRC is aiming to have 85 percent of staff based outside London, and increasing focus on up-stream compliance to prevent errors from being made, rather than taking action after.

1 in 4 SMEs surveyed by Chartered Accountants Ireland in April reported that their business has lost employees or seen prospective employees unable to take a role due to the unavailability of affordable housing. This is evidence of the economic impact the housing crisis is now having according to the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I), the umbrella group for professional accountants, as it published its 2026 Pre-Budget submission today.   The OECD has noted that Ireland’s housing stock lacks the flexibility to meet the increasing demand for housing, and only last Tuesday, the Economic and Social Research Institute (ESRI) told the Oireachtas Committee on Housing that there will be no major uptick in housing supply in 2025 and 2026. CCAB-I notes this market failure, and calls for a targeted, time bound and regularly reviewed tax intervention to correct it.   Cróna Clohisey, Director of Members and Advocacy at Chartered Accountants Ireland said  “Viability of certain construction projects, namely apartments, student accommodation, and independent living facilities has been cast into sharp focus in recent months, with knock on impacts on the costs of rent, availability of student accommodation and the lack of options for downsizers. Recent data from the CSO shows that there was a drop of 24% in apartment completions from 2023 to 2024.   “October’s Budget should include tax measures to stimulate the development of such dwellings, but they need to be targeted, time-limited, and regularly reviewed to ensure that they are cost effective and do not repeat the mistakes of the past. We welcome the opportunity to discuss with government how tax might work as a lever in this regard.”    Regulatory burden  57% of SMEs surveyed by Chartered Accountants Ireland last month cited regulatory compliance as the area they most need help from the government in tackling (rising to 75% amongst small practices). In its Pre-Budget submission, CCAB-I identifies key areas where the intersection of tax law and administration are loading uncertainty and burden onto businesses, and calls for the following measures to be considered in Budget 2026:  Key proposed simplification measures   Simplify tax filing by introducing a single pay-and-file date for capital gains tax aligned with the annual income tax return.   Simplify the reporting of tax-free small benefits and expenses (the Enhanced Reporting Requirements rules) by replacing real-time reporting with monthly or quarterly returns. CCAB-I also recommends that penalties of €4,000 that are potentially chargeable where a reportable item is missed are made proportionate with the fact that the payments are non-taxable.   Introduce legislation enabling businesses to provide their staff with reasonable levels of hospitality while working without having to apply a benefit-in-kind tax charge. This would provide much needed certainty to business as to what they can provide in terms of lunches and teas and coffees and would critically support the local economy and hospitality sector. As we operate within a self-assessment tax system, employers should be empowered to determine what is a reasonable accommodation.  Cróna Clohisey, Director of Members and Advocacy at Chartered Accountants Ireland said  “A single pay-and-file date for capital gains tax aligned with the annual income tax return would alleviate the administrative burden of what is a low-yielding tax. 2024 Exchequer receipts from CGT accounted for approximately €1.7 billion, only 1.6% of the total tax receipts in that year.   “There is similar scope to ease administrative burdens for SMEs when it comes to the reporting of tax-free small benefits and travel expenses. The requirement to report these benefits “on or before” the time they are made or paid is excessive and should be replaced by monthly or even quarterly reporting. For example, in order to reduce the number of returns and the administrative headache of this requirement, many businesses now only reimburse travel expenses to workers on the same day as payroll. This means workers can be out of pocket for longer.  “Our research also shows that the regulatory compliance burden is particularly acute for SMEs with fewer than 50 staff; 35% have sought advice on how to reduce this burden, and they are the least likely to be able to shoulder it.”  Measures to support SMEs   The Programme for Government 2025 committed to rigorously implement the SME test to scrutinise every new piece of legislation and regulation for its impact on SMEs and examine the regularity of SME reporting and filing requirements.  CCAB-I calls for consideration to be given to enhancing the R&D tax credit regime for SMEs which has played an important role in promoting innovation and job creation in Ireland. The existing regime is limiting for the SME sector due to the restrictions on relief available for third party costs, and the use of third parties to carry out research and development on behalf of the SME is an indispensable option for Ireland’s SMEs. The automatic qualification for the R&D tax credit for SMEs in receipt of RD&I funding from Enterprise Ireland would also benefit the sector and remove complexity and uncertainty in this area.   Businesses are facing substantially higher employment costs, so CCAB-I is also asking that Government commits to no further increases in the rate of Employers’ PRSI for the next four years. Incremental increases across all classes of PRSI are planned up to 2028. Consideration should also be given to reducing the rate of Employers’ PRSI on minimum wage workers by 1.5% to help with the initial costs of pension auto enrolment which will likely come in next year.   Clohisey concluded:  “According to research we conducted last month among SMEs, 3 in 4 (77%) said that business costs have increased in the past six months, with staff costs the biggest challenge. There is anecdotal evidence that increases in minimum wage are causing employers to reduce hours to offset the increased costs, so committing to no further increases in the rate of Employers’ PRSI for a set period of time would go some way in trying to stem increasing labour costs.”  ENDS  Pre-Budget Submission 2026: Addressing the ongoing housing shortage