Brexit

In a week where the UK Prime Minister met the Taoiseach in Belfast, we look at the new customs arrangements for goods moving from Britain to Northern Ireland next year and who it applies to.  We also bring news of the UK government’s warning to medicine suppliers to start stockpiling medicines while the UK and Japan are hopeful a trade agreement can be reached very soon. Taoiseach and UK leader meet in BelfastIn their first meeting since becoming Taoiseach, Micheál Martin and UK Prime Minister Boris Johnson met in Northern Ireland this week.  According to Mr Martin, a desire to reach a sensible Brexit agreement emanated from the meeting.  The two leaders met to discuss the impact of COVID-19, the Brexit negotiations and the future UK/Ireland relationship. In their post meeting comments, both said they had agreed to work to put structures together to ensure the relationship is not “lost” and is instead nurtured and developed further.  Both Mr Johnson and Mr Martin agreed that the last thing either economy need is another shock in addition to COVID-19 so it was in everyone’s interest to agree a free trade agreement between the EU and the UK. Who should use the Trader Support Service?This week we bring you further details on who can use the Trader Support Service; the new system launched by the UK government to support customs arrangements for goods moving from Britain to Northern Ireland when the UK leaves the EU customs union on 31 December 2020.  From 1 January 2021, businesses who:move goods between Britain and Northern Ireland, or bring goods into Northern Ireland from outside the UK;act on behalf of someone to move goods between Britain and Northern Ireland, or bring goods into Northern Ireland from outside the UK;are based in Northern Ireland and receive goods from outside of Northern Ireland;send parcels between Britain and Northern Ireland, or bring parcels into Northern Ireland from outside the UK, using Royal Mail or an express operatorcan use the Trader Support Service.  The service, which is costing £355 million, will be free to use and will provide businesses with support and guidance on how to meet any new customs obligations. Businesses can also use the system to have customs declarations completed on their behalf.  Businesses that are interested in using the service should sign up for further information.   Government warning to stockpile medicines in case of no-dealWith a significant percentage of medical supplies entering the UK market from the EU, medicine suppliers in the UK have been strongly urged to hold additional stocks of medicines in the UK to buffer against any disruption Brexit might bring come 1 January 2021, when the transition period ends.In a letter to medicine suppliers published this week, officials in the Department of Health and Social Care said that while they recognise that global supply chains are under significant pressure because of Covid-19 they are “asking suppliers to put in place flexible mitigation and readiness plans in preparation for new border and customs procedures”.Medical suppliers have also been asked to confirm what their contingency plans are for the end of the transition period.  This call from the UK government comes amidst continued uncertainty as to what form the relationship between the UK and the EU will take come 1 January 2021.  The UK has said it will not extend the transition period beyond 31 December 2020 to reach an agreement with the EU. UK/ Japan trade deal in the makingThe UK and Japan are hopeful that the outline of a post Brexit trade deal can be reached between the two countries by the end of this month.  The UK government have said that such an agreement could increase the UK’s trade with Japan by about £15.2 billion in the long run and increase worker’s wages by £800 million. Textiles, agriculture, and the services industry are just some of the sectors set to benefit from the deal.  The UK would also like to secure agreement on the free flow of data between the countries to support new areas such as Artificial Intelligence. The UK estimate that reductions in tariffs on goods exported to Japan could be worth over £30 million each year in the long run.  Both sides are eager to put a formal agreement in place before the end of the year when the post-Brexit transition period expires.  Otherwise, trade between the two countries will revert to World Trade Organisation rules which could mean significant customs duties. For all Brexit updates, visit https://www.charteredaccountants.ie/knowledge-centre/brexit/home  

Aug 13, 2020
Thought leadership

 Originally posted on Business Post, 2 August 2020.Increases in VAT usually pass the acid test of tax policy – the extraction of the most amount of money with the least amount of complaint.  Compared to an income tax increase, the general population rarely gripes about increases in VAT rates.  Hiking the standard rate of VAT of 21% to 23% in 2012 generated hardly any noise compared to the introduction of USC and the reduction of allowances and credits the previous year.  So will people really notice the VAT decrease of 23% to 21% in the July Jobs Stimulus? VAT is a truly European tax in that the rules are devised in Brussels and then implemented in EU member countries.  It is Brussels that decides that the maximum rate of VAT cannot exceed 25%. .  European rules tell us that a box of teabags is charged 0% VAT, but a cup of tea in a café is charged 13.5% VAT while a tin of iced tea in the supermarket is charged 23% VAT.  There’s little enough any Irish government can do to tinker with the VAT system, except make marginal rate adjustments. VAT is a major contributor to the Irish Exchequer.  In 2019, over €15 billion was collected in net VAT receipts which is more than one quarter of the total tax receipts for that year, yet it is a notoriously blunt instrument of public policy.  No VAT is charged on the clothes of the children whose parents are on social welfare, but no VAT is charged either on the clothes of the children of high earners.  Maybe that’s why governments avoid using it for public policy purposes unless you include the now defunct 9% rate of VAT for the hospitality sector.    So it was all the more surprising that the July stimulus knocked two percentage points off the main VAT rate.  The cost of this measure is €440 million, which is a little less than 10% of the total value of the package.  This estimate for the cost of this six month VAT reduction period is in line with Revenue estimates for good years.  In a moribund economy the Department of Finance seems to expect a spending spree.  Remember too that the 23% rate only applies to about half of the items or services we buy.  The rest are charged at lower rates or are exempt. Outside of the retail sphere, the education sector and the banking sector pay sizeable amounts because their activities are largely VAT exempt.  These sectors cannot recover the VAT they pay on purchases because they don’t charge VAT on their sales.  In the main VAT is therefore a consumption tax ultimately falling on the consumer.  So will the VAT reduction boost sales of clothing, alcohol, electrical and other household goods and luxury foodstuffs which fall into the 23% VAT category?  It might not, even if businesses pass on the VAT rate reduction to their customers.  Despite suggestions otherwise from some political quarters, Minister for Finance Paschal Donohoe was quite clear that the 2% reduction should be passed on to consumers.  That's not going to make a huge difference for many items because the value of a 2% VAT reduction approximates to about €1.60 for every €100 spent.  It only becomes a different story if you go out to buy a big-ticket item like a car, where the VAT saving could perhaps insure it for a year. There is no law obliging traders to reduce their prices because there has been a reduction in the VAT rate.  As long as they charge the correct amount of VAT at the correct time, they can take whatever margin they wish.  Past history however suggests that small VAT reductions like the current 2% reduction tend not to get passed on to consumers.  Part of the rationale when the 9% rate of VAT on hospitality was introduced was that a full 4.5% reduction to the normal 13.5% rate would be visible and palpable and therefore consumers would expect to see the difference.So even if it is passed on, a 2% VAT reduction may be inadequate to drive additional volumes of consumer spending.  In terms of business benefit it might have been better to apply the projected €440 million cost towards reducing the vast amounts of VAT debt currently being warehoused against the day when businesses can finally pay their tax liabilities.  Given that the EU state aid restraints are temporarily lifted, that €440 million could have been targeted, for example, specifically to forgive some of the historical VAT due from the SME sector.  The July Jobs stimulus was good.  Ministers and their officials alike did well to deliver what in effect is a full scale national budget in the space of few weeks.  The purpose and rationale of many of the measures like the extension of the wage subsidy, the extension of the pandemic unemployment payments, and the extinguishing of commercial rates is readily apparent.  The object of this VAT reduction is not as clear. I've never seen a tax reduction I didn't like.  However, many consumers may not notice this tax reduction and many businesses could benefit more from this element of the jobs stimulus if the cost of the VAT reduction was diverted to reducing their current and not their future tax debts.  Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Aug 13, 2020

Chartered Accountants Ireland Chartered Accountants Ireland has updated the Technical and business updates page on our COVID-19 Hub with updates on Auditing implications of Coronavirus, Financial Reporting implications of Coronavirus and Information for insolvency practitioners.  We have also updated our page on Other Regulator Updates for both ROI and NI / UK in response to COVID-19.   EuropeAccountancy Europe outline 4 steps to a sustainable recovery from Covid-19 in their recent online blog. International The IASB will be holding two repeated live webinars on 17 August 2020 (09:00 and 15:00 (BST)) to discuss the second com­pre­hen­sive review of the IFRS for SMEs Standard.In December 2019, the IASB published the exposure draft of a new standard 'General Pre­sen­ta­tion and Dis­clo­sures' that is intended to replace IAS 1 'Pre­sen­ta­tion of Financial State­ments'. The IASB is in­tro­duc­ing the exposure draft in a series of webinars.The IASB  has updated its work plan, which have been analysed to see what changes have resulted since it was last revised in July 2020. The IFRS Foun­da­tion has announced that due to concerns about the COVID-19 pandemic and the global nature of its or­ga­ni­za­tion, all meetings with advisory and con­sul­ta­tive groups will be held remotely until the end of 2020.    

Aug 12, 2020

Brendan FitzGerald is a Chartered Accountant living and working in Portugal. Recently, he kindly spoke to us about his life and work there, touching on the challenges, perks and secrets of great sourdough.Why did you first go away and/or why Portugal?The reasons behind me moving to Portugal were twofold.  The first was for family reasons. My wife is originally from Brazil and due to the close cultural proximity of both Brazil and Portugal we decided it was a good opportunity for my wife and her mother to be close to each other and of course for my mother in law to be close to her grandchildren! My mother in law now spends two thirds of the year in Portugal. The second reason was to satisfy our sense of adventure.  Having spent over ten years in Dublin, Ireland we wanted to try something new and experience a new country.  We felt our kids were at just the right age, having not started school and thought “it's now or never”.  Thankfully, I work for an organisation and with people who are supportive. They helped make the move happen, something I will always appreciate.What are the pros and cons of living there?The main advantage of living in Portugal with a young family is the country’s culture and lifestyle.  Portugal has a relaxed pace of life, terrific food centred mainly around fish and fabulous weather.  There are plenty of places to visit and the choice of beaches is endless.  There is a strong investment in children’s facilities including swimming pools, public playgrounds and sports facilities so there is lots to do with young children.  As ever though,  it is not always rosy in the garden!  Being away from friends and family in Ireland can be difficult. I find myself missing small things sometimes, you just can’t get Clonakilty black pudding in Lisbon and forget about Barry’s tea (a controversial choice at the best of times, I know)!  The language barrier is also something to overcome.  While I am lucky enough to understand the language very well from listening to it at home over the years, the spoken word remains a challenge. Simple things like going to the local offices to pay your car tax can elevate your stress levels beyond what they need to be for what should be a simple task!  Luckily, most of the time the Portuguese are willing to break into English to help out if needed and this is often appreciated.What advice would you give your pre-departure self?Keep calm and accept it will take anywhere up to a year to start to feel fully comfortable in your new environment. While the initial stages can be challenging as you navigate the administration tasks, settle into your new accommodation (if you are lucky enough to have found a place before you arrive) and find schools for your children, try and enjoy the new experiences a new country brings during this time.Can you describe your home town, your home away from home?I live near a town called Cascais, which is west of Lisbon on the Atlantic coast. The town itself is historically a fishing town and still is today.  During the spring and summer months many tourists pay a visit, some on day trips from Lisbon, others for longer stays. The pace of life is steady and the mantra is keep stress to a minimum! The locals are extremely proud of their town and region and will happily engage anyone who wants to discuss it. I recently took up cycling and enjoy riding around the region, especially along the coast where the views of the sea and the Sintra mountains are stunning.Are you in touch with any other Chartered Accountants in Portugal/nearby in the region?I have met a few Irish expats over the last couple of years.  Some are retired and others are either working for international organisations or own their own businesses. I am not sure whether or not they are all Chartered Accountants. I may have to ask next time I see them!Finally, we heard your family make great sourdough, we have to know the recipe! What are your children's tips for success?The great thing about sourdough is its simplicity! The trick is to create a good “starter” which is just flour and water added and subtracted in equal quantities from a jar for about 11 days (you can get exact guidance online).  The sourdough itself is then just flour, water, salt and the starter. Buy a proofing basket and a dough scraper and then get cracking! Every one you bake will turn out different.  My eldest daughter says the key to success is “patience”. Good luck!Brendan FitzGerald is Director of Internal Audit with Metlife Europe. 

Aug 11, 2020
Brexit

The European Commission has proposed changes to the EU’s VAT rules, in preparation for the end of the transition period with the UK on 31 December 2020. The amendment to the VAT Directive introduces a special identification number for businesses in Northern Ireland, so that EU VAT provisions can be properly applied to goods, in line with the Protocol on Ireland / Northern Ireland.  Under the Protocol, EU VAT legislation will continue to apply to goods traded in Northern Ireland. This broadly means that goods sold and transported from Northern Ireland to the EU (and vice-versa) will be treated in the same way as cross-border supplies of goods within the EU.  This includes VAT exemptions and deductions. The provisions will not apply to supplies of services in Northern Ireland. UK VAT rules will apply after the transition period. Supplies of goods and services made elsewhere in the UK will also be subject to UK rules for VAT. For more information read the European Commission’s update.

Aug 10, 2020
Brexit

The UK government has released a collection of papers that sets out how HM Treasury intends to use the powers under the European Union (Withdrawal) Act 2018, to ensure that the UK will have a functioning financial services regulatory regime in all scenarios when the UK leaves the EU.  For all Brexit updates, visit www.charteredaccountants.ie/brexit

Aug 10, 2020
Brexit

The UK government has released further details on how the new points-based immigration system, set to kick in on 1 January 2021, will operate. In the latest statement, the UK government has reiterated the immigration status of Irish citizens, confirming there will be no change to their rights to enter, live and work in the UK without requiring permission. There will continue to be no routine immigration controls on travel from within the Common Travel Area to the UK, and no immigration controls on the land border between Northern Ireland and Ireland.This statement includes further information on:The requirements of the points-based systemSalary and skills thresholds for skilled workersA route for students and graduatesWho can apply?Visiting the UKOther immigration routes

Aug 10, 2020
Brexit

On Friday last, the UK government announced that a Trader Support Service will be launched shortly to support customs arrangements for trade from Britain to Northern Ireland when the UK leaves the EU customs union at the end of the year. The service will be available to all traders at no cost and will provide support and guidance on information needed to trade in certain products.From 1 January 2021, goods entering Northern Ireland from Britain will need customs declarations. Under the NI Protocol, the UK and EU have agreed that to avoid a hard border on the island of Ireland, Northern Ireland will continue to follow EU rules on agricultural and manufactured goods, while the rest of the UK will not. While the UK will leave the EU customs union, Northern Ireland will continue to enforce the EU’s customs rules at its ports. While the information released is relatively light on detail in terms of how the system will work, what we do know is:A new Trader Support Service will be available to all traders at no cost, reportedly from September.  This service will provide support and guidance on the processes and information needed for certain products. Effectively the UK government will act as a customs adviser for businesses. Traders will have to provide information digitally on the goods being moved. The Trader Support Service will use this information to complete declarations on behalf of companies, according to the UK guidance released. Businesses who have an EORI number will be provided with a reference ID to use the service. All traders who wish to use the support are encouraged to sign up for further information.Further details on how the electronic processes will work will be set out by the UK government in due course. To recap, the broader customs arrangements that will apply after the transition period ends on 31 December 2020 are as follows:  Moving goods from Northern Ireland to Great BritainThe process remains the same.  Moving goods from Great Britain to Northern IrelandChanges will apply and customs declarations will be required. A new Trader Support Service, available to all traders at no cost, will be established to provide support and guidance on the processes for food and agricultural products. Trade in goods between Northern Ireland and Ireland, and between Northern Ireland and EU Member StatesThis process remains the same.  There will be no changes at the border, no new paperwork, and no tariffs or regulatory checks. For trade with the rest of the worldNorthern Ireland will benefit from UK Free Trade Agreements.

Aug 10, 2020
Tax

In one of the most important consultations for many years, HMRC is exploring potential options to regulate the UK tax profession in its consultation “Call for evidence: raising standards in the tax advice market”. The NI Tax Committee will be responding to this consultation which closes on 28 August 2020. The call for evidence asks for views and evidence on several issues including: the scope of the market for tax advice and services; the characteristics of good and bad practice; current government interventions; international models; and possible approaches to raising standards. The Committee is particularly interested in hearing your views on the potential options set out by HMRC on pages 28-32 of the consultation. The full list of consultation questions is also available for your feedback. Please contact Leontia Doran by Monday 17th August 2020. The NI Tax Committee’s work in this area will aim to ensure the Institute’s brand is both protected but also appropriately recognised by HMRC and is not devalued in any way. The Committee is also clear that the impact on regulation of our members should be minimal. 

Aug 10, 2020
Tax

HMRC’s Coronavirus Job Retention Scheme  (“CJRS”) guidance has been updated in recent weeks as set out below. Members can visit our dedicated CJRS page, which also provides guidance on the scheme. Download our factsheet on the who, what, where, when and why of the scheme.  Recent changes to guidance The following guidance changes related to the CJRS1 scheme up to and including 31 July 2020:-         Page title  Changes  2  Check if you can claim for your employee's wages through the Coronavirus Job Retention Scheme   Additional line on complaints procedure in the ‘Contacting HMRC’ section: “If you think that there have been mistakes or unreasonable delays caused by HMRC, you can use our complaints process(link)” 6  Claim for wages through the Coronavirus Job Retention Scheme  Moved the information about overclaiming and underclaiming from the claim page to a new guide  Created a new heading closer to the green button to tell users what they need to do if they’ve claimed the wrong amount and linked to the new guide 13 If you claim too much or not enough This is a new guidance page and the section has been moved from “Claim for wages through the Coronavirus Job Retention Scheme“ page Amended this section to make clear the overclaim and underclaim process and new information on the obligation to notify HMRC for overclaims. A link to a factsheet with information about assessment and penalties relating to overclaims. An amendment to the wording to make clear the need to continue to pay employees the correct amount in the event of an underclaim. An additional line to make clear after 31 July you will no longer be able to amend a claim relating to the period up to 30 June to add an employee that should have been included on a claim submitted before that date.  The following pages have been updated mainly to delete CJRS1 scheme information, as you are no longer able to apply for CJRS1 claims (31 July deadline):  Check which employees… https://www.gov.uk/guidance/check-which-employees-you-can-put-on-furlough-to-use-the-coronavirus-job-retention-scheme  Find examples… https://www.gov.uk/government/publications/find-examples-to-help-you-work-out-80-of-your-employees-wages  Individuals you can claim for who are not employees https://www.gov.uk/government/publications/individuals-you-can-claim-for-who-are-not-employees  Check if your employer https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme  Steps to take https://www.gov.uk/guidance/steps-to-take-before-calculating-your-claim-using-the-coronavirus-job-retention-scheme  Calculate how much you can claim… https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme  Check if you can claim https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme The CJRS guidance has been updated as follows from 7 August 2020:  Page title  Changes 1 Check if your employer can use the Coronavirus Job Retention Scheme (Employee Page) Added a new line to clarify that supply teachers are eligible for the scheme in the same way as other employees and can continue to be claimed for during school holiday periods provided that the usual eligibility criteria are met.  Added a new line to set out that if furloughed employee is made redundant, they are entitled to receive redundancy pay based on their normal wage and not on the reduced furlough rate.  3 Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme Added a new line to clarify that supply teachers are eligible for the scheme in the same way as other employees and can continue to be claimed for during school holiday periods provided that the usual eligibility criteria are met.  Added a new line to set out that if furloughed employee is made redundant, they are entitled to receive redundancy pay based on their normal wage and not on the reduced furlough rate.  5 Calculate how much you can claim using the Coronavirus Job Retention Scheme Added a new subsection setting what to do if your fixed pay employee has worked enough overtime (in the tax year 2019 to 2020) to have a significant effect on the amount you need to claim. 6 Claim for wages through the Coronavirus Job Retention Scheme Adjusted to emphasise that, with regard to providing NINOs, employers should only contact HMRC if the employee has a temporary number or genuinely does not have one at all.  Additional line added on the importance of submitting correct data when making a claim.  9 Examples of how to calculate your employees' wages, National Insurance contributions and pension contributions Figures in example 2.1 corrected in the second step of both calculations.   Employer contributions commenced from 1 August 2020 Readers are reminded that from 1‌‌‌ ‌August 2020 the scheme no longer funds employers’ National Insurance (NIC) and pensions contributions for furloughed employees. Employers have to make these payments from their own resources.  From 1‌‌‌ ‌September 2020 employers will have to start contributing to the wages of furloughed employees. Grants will be for 70% of usual wages in September and 60% in October, but furloughed employees will continue to be entitled to receive at least 80% of their usual wages. Employers will have to make up the difference from their own resources. Are you or your clients claiming for 100 or more employees? Please use HMRC’s standard template to submit employees’ details. It is important that you or your clients submit the correct data (including NIC numbers) in the correct format. You can find the template on GOV‌.UK by searching ‘Job Retention Scheme template download’. Looking for help to work out your claim? Use HMRC’s online calculator to help you calculate your next claim. You can find this and guidance on how to use it by searching ‘calculate how much you can claim using the Coronavirus Job Retention Scheme’ on GOV‌.UK. Claimed too much in error? If you or your client have claimed too much for a CJRS grant and have not repaid it, you must notify HMRC and repay the money by the latest of whichever date applies below: 90 days of receiving the CJRS money you or your client are not entitled to; or 90 days of when circumstances changed so that you or your client were no longer entitled to keep the CJRS grant; or 20 Oc‌to‌be‌r 2020 if you received CJRS money you’re not entitled to, or if your circumstances changed, on or before 20 J‌ul‌y. Failure to do so may resuly in HMRC charging a penalty. How to let HMRC know about claiming too much You or your clients can let HMRC know as part of your next online claim without needing to call – the system will prompt you to add details on if you have received too much. If you or your clients have received too much and do not plan to submit further claims – or you have claimed less than you were entitled to – please contact HMRC to rectify. The key message from HMRC is that it is aiming to support taxpayers while tackling serious fraud and criminal attacks. HMRC understands that mistakes happen, particularly in these challenging times, and will not seek out innocent errors and small mistakes for compliance action. However HMRC are contacting a number of employers at the moment to check that they have claimed the correct amount. For more information, search for 'if you claim too much or not enough from the Coronavirus Job Retention Scheme' on GOV‌.UK. National Insurance numbers Employers need to provide a National Insurance number (NINo) for all employees as part of their CJRS claim. The only exception is in the very limited circumstances where an employee genuinely does not have a NINo, for example if they are under 16 years old. If you are claiming for an employee whose NINo you don’t currently know, you can check their number by searching GOV.UK for 'Check a National Insurance Number using basic PAYE Tool'. HMRC can no longer accept claims for fewer than 100 employees by phone where employers do not have all employee NINos, unless the employees they are claiming for genuinely do not have these. Protect yourself from scams Stay vigilant about scams which may mimic government messages as a way of appearing authentic and unthreatening. Search 'scams' on GOV‌‌‌‌.UK for information on how to recognise genuine HMRC contact. You can also forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599.  

Aug 10, 2020
Tax

HMRC and the UK Government continue to publish updates on COVID-19 related issues. 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 Government has published a briefing pack in respect of the Eat Out to Help Out Scheme; Some more details have been made available on the job retention bonus. As the employer, you or your clients will be able to claim the bonus after you have filed PAYE information for Ja‌nu‌ar‌y 2021, and the bonus will be paid from Fe‌br‌ua‌ry 2021. More detailed guidance, including how employers can claim the bonus online will be available by the end of September; and The House of Commons Justice Committee has published its report on the impacts of the pandemic on the legal professions in England and Wales. The report expresses concern that without further support many publicly-funded legal service providers may collapse, reducing access to justice.

Aug 10, 2020
Tax

HMRC continue to hold a number of webinars covering various COVID-19 business supports. These have a limited number of spaces, so save your place now. Extension to the Coronavirus Job Retention Scheme and flexible furloughing Self-Employment Income Support Scheme Statutory Sick Pay Rebate Scheme Other help available Eat Out to Help Out Scheme  You can ask questions during all HMRC’s live webinars using the on-screen text box. HMRC’s webinars are constantly updated to provide the latest government guidance on changes as they develop. You can also sign up for email alerts about live and recorded webinars, YouTube videos and online guidance.  

Aug 10, 2020
Tax

In today’s tidbits Finance Act 2020 received Royal Assent last month and various guidance has been updated. Finance Act 2020 received Royal Assent on 22 July 2020; Use updated form IHT35 to claim relief when you sell 'qualifying investments', that were part of the deceased's estate at a loss within 12 months of the date of death; The guidance on the patent box regime has been updated; Use the GAAR Advisory Panel opinion on reducing an estate's value via subscription for shares in a new company and gifting shares to an employee succession trust to help you recognise abusive tax arrangements; The contact details for calling or writing to HMRC for tax advice if you're a non-UK resident entertainer or sportsperson who performs or competes in the UK have been updated; and The guidance on the structures and buildings allowance has been updated. 

Aug 10, 2020
News

With offices beginning to re-open, how can you engage with a dispersed and disjointed team? By collectively coming up with a team engagement plan, says Anna O’Flanagan, much of the worry and anxiety about returning to work can be expelled.Have you thought about your team engagement plan post-quarantine? How can you rebuild a team that is currently dispersed and disjointed? Without a clear path for people returning to work, there will be some anxiety around the next steps. Instead of letting this mishmash of individual interpretations create the narrative, why not consciously and collectively think about a team plan to determine the 'new normal'?How do we do this? Here are four pointers to get the conversation moving with your team.Figure out the ‘why’It is useful to revisit the ‘why’ of your team. Why does our team exist? Why do we do the work we do? Why do we do it that way?This can focus a team’s attention on the purpose of their work and determine new priorities that may have emerged in the past few months. It can also enhance confidence around the approach and provide an opportunity to clarify any issues.Share the lessons learnedGather your team, either remotely or in person, to discuss the lessons they have taken from this remote or blended working experience and what changes you would all like to make as a result.Create a planWrite up the notes from the two exercises, create a plan, and share it with the team. Explain that it is a living and flexible plan, which can be adapted as you go. Seeing it written down will give team members assurance that they have been heard and that what they have said counts. The plan also provides people with a point of reference, safe in the knowledge that there is a plan that keeps the team at the heart of everything.Meet upGet together in person. It doesn’t have to be for long, and it doesn’t need to be indoors or even have a work focus. But, if it is possible, try to meet outside the office for an enjoyable experience together. Team members have been cooped up, stewing in worry and ambiguity for too long. It is time to meet (safely and socially distanced) for a couple of hours and be together in support of one another in these strange times.Some teams are still cautious about meeting up in person, but there are many ways to bring a team together safely. Meet up in a park near the office on a nice day, or for a fun outdoor activity like an organised, professional treasure hunt or hike. These are effective ways to de-stress and re-unite remote and blended teams.Anna O’Flanagan is the Founder and Head Squirrel at Red Squirrel Team Building.

Aug 10, 2020
Tax

This week, in Irish tax news, you can read about the Financial Provisions (Covid-19) (No.2) Act 2020, signed by the President on 1 August. In the UK, the application process for the second Self-Employment Income Support Scheme grant opens on 17 August 2020 and in International news, read an OECD report on Tax Administration responses to COVID-19.       IrelandThe Financial Provisions (Covid-19) (No.2) Bill 2020 passed through the Oireachtas last week, with no Committee Stage amendments by the Minister for Finance. The Financial Provisions (Covid-19) (No.2) Act 2020 was signed by the President on Saturday, 1 August Revenue published a leaflet containing a summary of tax measures contained in the July Jobs StimulusUK The application process for the second Self-Employment Income Support Scheme grant to support those affected by Covid-19 opens on 17 August 2020We want to hear your opinions as HMRC’s Powers and Evaluation Forum recommences its work on data and transparency post the initial impact of the Covid-19 pandemic.International Read the report prepared by the OECD's Forum on Tax Administration (FTA) regarding Tax Administration responses to COVID-19 

Aug 07, 2020
Brexit

  In today’s Brexit Bulletin, we bring you some further details of how customs arrangements will work between Britain and Northern Ireland from 1 January 2021. You can also read about the European Commission’s proposed changes to the EU’s VAT rules in preparation for the end of the transition period with the UK on 31 December 2020, as well as the latest updates to the UK points-based immigration system set to kick in on 1 January 2021.  UK government to act as customs adviser for tradersOn Friday 7 August, the UK government announced that a Trader Support Service will be launched shortly to support customs arrangements between Britain and Northern Ireland when the UK leaves the EU customs union at the end of the year. The service will be available to all traders at no cost and will provide support and guidance on information needed to trade in certain products. From 1 January 2021, goods entering Northern Ireland from Britain will need customs declarations. Under the NI Protocol, the UK and EU have agreed that to avoid a hard border on the island of Ireland, Northern Ireland will continue to follow EU rules on agricultural and manufactured goods, while the rest of the UK will not. While the UK will leave the EU customs union, Northern Ireland will continue to enforce the EU’s customs rules at its ports. While the information released is relatively light on detail in terms of how the system will work, what we do know is:A new Trader Support Service will be available to all traders at no cost, reportedly from September.  This service will provide support and guidance on the processes and information needed for certain products. Effectively the UK government will act as a customs adviser for businesses. Traders will have to provide information digitally on the goods being moved. The Trader Support Service will use this information to complete declarations on behalf of companies, according to the UK guidance released. Businesses who have an EORI number will be provided with a reference ID to use the service. All traders who wish to use the support are encouraged to sign up for further information.Further details on how electronic processes will work will be set out by the UK government in due course. To recap, the broader customs arrangements that will apply after the transition period ends on 31 December 2020 are as follows:Moving goods from Northern Ireland to Great BritainThe process remains the same. Moving goods from Great Britain to Northern IrelandChanges will apply and customs declarations will be required. A new Trader Support Service, available to all traders at no cost, will be established to provide support and guidance on the processes for food and agricultural products.Trade in goods between Northern Ireland and Ireland, and between Northern Ireland and EU Member StatesThis process remains the same.  There will be no changes at the border, no new paperwork, and no tariffs or regulatory checks.For trade with the rest of the worldNorthern Ireland will benefit from UK Free Trade Agreements. VAT rules with Northern Ireland after the transition period The European Commission has proposed changes to the EU’s VAT rules, in preparation for the end of the transition period with the UK on 31 December 2020. The amendment to the VAT Directive introduces a special identification number for businesses in Northern Ireland, so that EU VAT provisions can be properly applied to goods, in line with the Protocol on Ireland / Northern Ireland.  Under the Protocol, EU VAT legislation will continue to apply to goods traded in Northern Ireland. This broadly means that goods sold and transported from Northern Ireland to the EU (and vice-versa) will be treated in the same way as cross-border supplies of goods within the EU.  This includes VAT exemptions and deductions. The provisions will not apply to supplies of services in Northern Ireland. UK VAT rules will apply after the transition period. Supplies of goods and services made elsewhere in the UK will also be subject to UK rules for VAT.  For more information read the European Commission’s update. UK points-based immigration system: Further details revealedThe UK government has released further details on how the new points-based immigration system, set to kick in on 1 January 2021, will operate. In the latest statement, the UK government has reiterated the immigration status of Irish citizens, confirming there will be no change to their rights to enter, live and work in the UK without requiring permission. There will continue to be no routine immigration controls on travel from within the Common Travel Area to the UK, and no immigration controls on the land border between Northern Ireland and Ireland.This statement includes further information on:The requirements of the points-based systemSalary and skills thresholds for skilled workersA route for students and graduatesWho can apply?Visiting the UKOther immigration routes As PricewaterhouseCoopers (PwC) is administering the grants for HMRC, interested applicants can apply online through PwC. For more information, visit the dedicated page on the GOV.UK website.Financial services legislation under the EU (Withdrawal) Act 2018The UK government has released a collection of papers that sets out how HM Treasury intends to use the powers under the European Union (Withdrawal) Act 2018, to ensure that the UK will have a functioning financial services regulatory regime in all scenarios when the UK leaves the EU.  

Aug 07, 2020
Thought leadership

 Originally posted on Business Post, 26 July 2020.Deadweight is what economists call money that is spent to stimulate activity which would have happened anyway.  No need of any such concerns over the July jobs stimulus package announced on Thursday.  The need is so great that any money pumped in by the government in any direction is going to realise some benefit.  The trick now is to maximise it.Some of the negative responses towards the stimulus package measures look a bit tired and frayed.  The last time we had an emergency stimulus like this was back in May 2011 which brought in the 9% VAT rate for the hospitality sector.  That new 2011 government had been formed in early March, yet it took a full two months to start dealing with the employment crisis prompted by the banking collapse.  Things move faster these days so we need to move on from rear-view mirror economics.  We won’t ever revert to a 2011-style economy but neither can we go back to 2019 methods of doing things.It is clear that government looked to some international experiences when pulling together the bundle of measures.  Using the tax system to deliver relief works well and has been the pattern in several developed countries.  Extending the temporary wage subsidy scheme, even if it is no longer called that, is effective because of the speed of delivery of relief.  The Employment Wage Support Scheme now could cover a greater number of people because the employment reference point of 28 February is no longer sacrosanct.  Its duration, extended up to April of next year, provides yet a further reason for employers to hang on to their workforce.  There had been some suggestions that it would morph into an even more effective arrangement modelled on the German Kurzarbeit system where the government pays salary for the unworked time of employees on reduced hours.  However, the social welfare system in Germany is radically different to ours.  In Germany, almost 40% of a worker's wage goes to the government in social security before any income tax is paid.  In Ireland total PRSI contributions on employment top out at just over 15%.  The Employment Wage Support Scheme in its current shape may be as good as the country can support, because there is zero capacity in the economy to increase taxes in any form.  Every measure in the package needs to be seen in the context of what can be sustained.Any critiques of the jobs stimulus package based on the notion that things will return to 2019 economic status are misguided.  The business models for tourism, the hospitality sector, the entertainment industry and education have changed fundamentally, and might never revert to pre-coronavirus methods of earnings and delivery.  Take professional training for instance.  The technicians supporting the webcasting of classes and online invigilation of examinations will become just as important in the future as the teachers and exam markers were before coronavirus.  It may well turn out that the best elements of this package will be the restart grants to help businesses remodel their premises and service delivery, and the reskilling and apprenticeship programs.  The July jobs stimulus is not without its flaws.  Before the crisis, 330,000 citizens in the total workforce of 2.3 million were self-employed.  The pandemic unemployment payment was an unprecedented gesture towards this cohort of workers.  It was the first time that the State had offered the self-employed unemployment support to this extent.  Although it is being extended to April next year the payments are to be tapered back.  The new income tax reliefs to recover tax paid by the self-employed in happier years is a form of grant, but this assumes that their business was well established and profitable before the virus struck.  Timing is also an issue.  Reducing the VAT rate from 23% to 21% should help retailers manage cash flows, but it could also prompt consumers to delay the purchase of big-ticket items until the cut takes effect in September.  In the past, VAT reductions have been reversed by government in short order because retailers opted to allow the reductions add to their bottom line rather than benefit the customer.  This reduction is time bound, so there is no commercial penalty for not passing on the reduction.Without consumer confidence the stimulus could yet fail.  People need to be comfortable where they shop, where they eat, where they stay, how the travel and where they socialise.  Re-starting a business is not just about reopening doors.  Just as government looked overseas for ideas, consumers are well aware of the consequences of poorly managed reopening in cities as diverse as Leicester and Barcelona.We won't know for a while whether the balance between grants and loans is correct, whether we have done too much for employees at the expense of the self-employed, whether the measures can be implemented with sufficient speed and whether they will generate sufficient confidence in the consumer market.  The stimulus measures must be monitored as rigorously as NPHET monitor the impact of public health measures and adjusted as necessary to ensure they are working. Just as we are right to be concerned about a second wave of coronavirus infection we cannot afford a second wave of economic collapse.  This collapse can be avoided if we focus forward.  Let’s not try to re-model our economy back to how it looks in the rear-view mirror.Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Aug 06, 2020
Thought leadership

 Originally posted on The Business Post, July 19, 2020.On the face of it, Ireland won the Apple case last Wednesday.  The General Court of the European Union held that Ireland was not in breach of EU state aid rules in the manner it had taxed Apple entities in this country.  Some political noise following the ruling had to do with the €13 billion of tax that the Exchequer “lost” as a consequence of the ruling.  This is nonsense.  The €13 billion never belonged to Ireland, because Irish tax law doesn't work that way for anyone, let alone Apple.  The tax rules for the profits which are subject to Irish tax existed long before major multinationals came to our shores.  The Commission's case against Ireland hinged around their misreading of the way Irish tax law operates, and the General Court confirmed that the Commission had indeed got it wrong.  The Revenue Commissioners were also winners.  The Apple case differed from many other state aid cases taken by the Commission in that the focus of the examination was how Irish officials applied the law of the land, and not on the state aid compliance of the law itself.  The judgment is not an undiluted victory for Revenue.  The court cited problems with the methodology applied in calculating the tax liabilities involved.  They talked about there being insufficient documentation being retained.  The judges though allowed common sense to prevail and recognised that an absence of paperwork in itself is insufficient to prove that there was a problem.  Of the scant paperwork which did exist and was discussed in the ruling, one item seemed to suggest that promised employment levels might have a bearing on corporation tax arrangements.  This was worrying from the Irish viewpoint as it highlighted a point of general unease among European institutions about the way Ireland conducts its tax affairs.  Nevertheless the court found that the Commission couldn’t argue that job creation was a factor in the case.There is an assumption in some quarters that the Commission will take this week’s decision to appeal.  To what end?  Though it may feel to them like a pyrrhic victory, the Commission’s entitlement to look at tax issues when it comes to challenging state aid rules was confirmed by the court ruling.  This entitlement, along with the entitlement of national officials to apply domestic law as best they see fit, may well be the only enduring lessons from the Apple case.  The world has changed since 2016 when the Commission first issued its findings against Ireland.  The tax point at issue in the Apple case is no longer an issue, resolved neither by Irish legislation nor by European Commission activity but by changes in US tax law.  The US Tax Cuts and Jobs Act of 2017 cancelled out the strategy of deferring tax on profits of US multinationals earned outside the US by keeping those profits outside the US.  It is not just the US system which has moved on.  The underlying rules of the global corporation tax collection system were created over a century ago.  Now the concepts of company management and control as factors in deciding where tax is paid (and which helped give rise to the Apple conundrum) are the focal point for the international corporation tax reform agenda led by the OECD.  It is hard to see how additional Commission challenges in the Apple case could further that agenda.The Commission should therefore now be looking forward and outward, rather than pondering whether it should be appealing the General Court’s decision.  Anyone who has read the written verdict will be struck not just by how considered and detailed it is, but also by the amount of time and effort taken up by the case from all parties.  All this time and effort could be better applied elsewhere.  Not only that, the European Treaties stipulate that a further appeal can only be on a point of law, which may be difficult given that the outcome was largely determined on the facts.  Losing an appeal on a point of law in a case this big holds significant political risks for the Commission.Giving evidence to the House of Lords last month, the EU's chief Brexit negotiator Michel Barnier underlined the importance of the single market in the context of an ever more disrupted and unstable international trading environment.  Regulating state aid is an internal management problem for the European Union.  Commission resources should now, as Barnier has highlighted, be devoted towards securing Europe's place as an international trading bloc and not fighting internecine tax wars with its member countries.  Future history books will note the Apple case as one of the last tests of an old corporation tax system before it became displaced by a new regime involving where companies generate their sales as well as where they generate their value.  That change will present challenges for small countries like Ireland where the capacity of companies to generate profits here is not matched by the size of the domestic Irish market.  We will have to secure wins as this change is developed if the corporation tax yield is to be sustained.  God knows, we've had plenty of practice fighting our corner in the international tax debate.Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Aug 06, 2020
Thought leadership

 Originally posted on The Business Post, 16 July 2020.We have been locked for months in a battle against Covid-19, but one thing the pandemic hasn’t put on hold is the ever-closer problem of Brexit which needs our attention now.Imagine a situation where you are asked to negotiate a new deal with a key supplier. The negotiations are tricky because your supplier also competes with you on other products. Then your own shareholders call in the negotiator for the other side to find out what is going on.This unlikely scenario was actually played out last month. In recent days, the House of Lords Committee on the European Union published a transcript of a private meeting they held with Michel Barnier, the EU’s chief negotiator on the EU/UK trade deal. The questions were asked in English, the answers given in French and delivered via an interpreter. Barnier’s answers were bleak. No one will win in negotiations about least worst options. Even the best possible outcome won’t help many Irish businesses an awful lot.The trade negotiations will at best resolve issues of tariff rates and quotas. These are critically important to the agri-food sector because tariffs and quotas affect that sector far more significantly than other sectors. Otherwise most categories of goods, even without a trade deal, attract low or nominal tariffs under World Trade Organisation rules. Goods flowing between the two customs jurisdictions will attract paperwork and still have to be checked at the borders. Goods from Britain coming into the EU will have to be checked the same way as goods, say, from Brazil.The checking obligations will be costly and burdensome for all Irish industry doing business with Britain or doing business through Britain with other EU member states. The Revenue Commissioners were to hire 500 additional customs officers to do all this checking along with apparently 750 in the Netherlands, 700 in France, and close to 400 in Belgium. This is why survey after survey of Irish business concerns over Brexit highlight delays and disruption rather than customs tariffs as being the main problem.As Barnier pointed out in his evidence to the House of Lords, the European single market is an even greater asset for the remaining EU member countries because of increasing international trade tensions. It therefore seems highly unlikely that there will be any delays, postponements or concessions on customs checks next year. Border controls are not just about customs duties, but also certifying compliance with EU single market standards and, in the case of agri-foods and the export of live animals, health checks.The UK will phase in some customs obligations on their imports during the initial six months of 2021. The British side can, of course, do nothing unilaterally about the phasing of obligations on exports. There have been reports of increasing levels of concern regarding security and reputational risks if Britain is unable to police its own borders. Porous customs borders also dilute their capacity to negotiate trade agreements beyond the EU, and Britain continues to pin its hopes on commercial success from a wide range of trade agreements with other nations, notably the United States.The Northern Ireland protocol, the special arrangement which means that Northern Ireland will de facto be a member of both the EU customs union and the UK customs territory, will also take effect next year, independent of the success or otherwise of the trade negotiations. How this will work is still very much up for debate. A report last month from the University of Liverpool, based on interviews with Northern Irish and British business interests, describes a gathering “contagion of uncertainty”.This contagion of uncertainty over the operation of the Northern Ireland Protocol also extends right across the British establishment. This week, the same House of Lords committee that had the private conversations with Michel Barnier wrote to the Northern Ireland Secretary of State, Brandon Lewis, demanding to know why he continued to avoid appearing before them to explain exactly what was going on.Also this week, the UK Revenue and Customs authority, HMRC, invited tenders from interested parties for a service to “identify and support the education of traders” and make electronic declarations for Northern Ireland protocol purposes. That’s cutting it pretty close given that the new rules will come into effect in less than six months. The false dawns in March, May and then again in October 2019 marched business to the top of the no-deal hill and then marched it down again. On each occasion, it turned out to be alright on the night, and an extension averted import and export no-deal Brexit chaos. This time, Britain has ruled out any extension beyond 31 December next.Both border controls and the operation of the Northern Ireland Protocol will be simpler if there is a good trade deal, but a good trade deal will not magic either of them away. We have all been focusing on the problems of the pandemic and its impact right across the island. Yet, disruption for businesses trading post-Brexit is also a serious problem and unfortunately, it deserves our attention too.Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland.

Aug 06, 2020
Thought leadership

 Originally posted on The Business Post, 5 July 2020International associations have not fared well during the Covid-19 pandemic. The EU's approach to tackling the crisis has been (to put it charitably) fragmented because it does not have a core role in health matters, and the G7 group of the world’s richest nations couldn't come up with a joint declaration on the emergency in March, apparently because Mike Pompeo, the US Secretary of State, insisted on referring to the coronavirus as the “Wuhan virus”.Tax receipts for the first half of 2020 are higher than expected, thanks to state supports for SMEs – and keeping those in place will be key.Judging by the tax receipts published last week for the first six months of 2020, Irish business presses on. This is despite all reasonable assumptions, based on so many of us either being out of work or working in struggling businesses, that things are grinding to a halt. More tax was collected in the first six months of this year than in the first six months of last year, according to the exchequer figures published on Thursday.Not for the first time, the unexpectedly high tax receipts are in part due to high corporation-tax receipts, described in the exchequer statement as “volatile”. I'm not aware of any dictionary which defines “volatile” as marked by a consistent pattern of growth over a decade, which is what has happened here.It is often pointed out that 40 per cent of all corporation tax receipts comes from ten large companies anchored in the multinational sector. Less frequently highlighted is that 60 per cent of the corporation tax receipts haven’t come in the past from this exalted cohort. If this trend has continued, it would seem that many Irish businesses are continuing to operate successfully during 2020 – 60 per cent of a very large number is still a very large number.Once a company gets over a certain size, its corporation tax bill becomes, in effect, a real-time tax. Payments are based on current rather than on historic profit levels. If corporation tax receipts are strong – and this month they have been unusually so – it means that many businesses are performing well in many areas of the economy. In addition, the big multinational players are governed by corporation tax reforms introduced in many developed countries over the past decade.These reforms mean that it is increasingly difficult for companies to shut up shop and relocate simply for tax reasons. The level of corporation tax receipts shouldn’t be just dismissed as being further evidence of a perfidious tax haven economy, as so often happens. Rather they can be a useful indicator of the current commercial activity taking place in a country. The money is welcome too.We don’t have reliable signals for Vat this month as Vat payments only come through every two months, but the employment tax figures show a mixed picture. Income tax receipts are 20 per cent down from the same month last year even though the PRSI receipts are a little up. The key point here though is that 80 per cent of the income tax is still being collected, and this may reflect the emerging pattern that lower-paid workers were the most vulnerable to losing their jobs. The vast bulk of income tax receipts comes from higher wage earners.Last week’s exchequer figures reflect what was actually collected, rather than what was due for payment during June. At present, businesses are permitted not to pay over the PAYE they are withholding from their employees, without interest or penalty, under the so-called tax warehousing arrangements.Revenue figures from last month suggest that some €650 million in PAYE liabilities has been warehoused in this way so far. This is a significant sum, but it is only about 2 per cent of the total which might be due for collection from the national payroll throughout the year. Clearly many businesses still have considerable reserves or are sustaining a reasonable cash flow to meet their tax obligations.We know from the last recession that it was the need to borrow over successive years to fund welfare and public services that grew the national debt because tax revenues were insufficient; the cost of the bank bailout was not the main component. The evidence now is that, unlike the last time, we can avoid tax revenues drying up by using supports such as the temporary wage subsidy scheme. This scheme is an employment-related grant for industry and must be continued. If we can preserve the tax stream by continuing to plough money into industry with grant aid, the cost of doing so in 2020 could pale into insignificance when compared with having to fund social welfare and other supports over many subsequent years.Sustaining business activity and encouraging growth to reduce the need for future state supports is key, particularly for the SME sector. The July recovery package being promised by the new government must look to manage future government expenditure by ensuring that businesses rehire to fill the jobs that were lost as soon as possible. We had virtually full employment as recently as March, and we need to get back to that.The two ministers at the helm of Finance and Public Expenditure and Reform will hopefully recognise this and keep the business supports in place as they formulate the July stimulus package. If they can keep Irish business moving, employment will recover and everything else should follow from that.Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Aug 06, 2020