The merger of the SME and large company research and development (“R&D”) tax relief schemes, and the making permanent of full expensing for businesses were the main changes to business taxes. Merger of R&D tax relief schemes  Continuing with the theme of reform to the UK’s R&D tax relief regimes which began in the 2022 Autumn Statement, the SME and large company regimes are to be merged, as planned, from 1 April 2024. However, the Chancellor did not specify the rate(s) of relief which will be available under the merged scheme, which is likely to be announced in the 2024 Spring Budget.  The merged scheme will offer a taxable R&D expenditure credit, based on a percentage of R&D expenditure, that will be able to be offset against a company’s tax liability or, subject to some adjustments, be paid in cash to the business via a payable tax credit.   In our submission to the House of Lords Finance Bill Sub-Committee inquiry into draft Finance Bill 2023/24, Chartered Accountants Ireland recommended that the commencement date for the introduction of a single unified scheme be deferred beyond 2024 to allow for a longer period of consultation to be undertaken on the potential options available.  It was also announced by the Chancellor last week that under the merged R&D scheme, payments of the merged scheme payable tax credit to loss making companies will be reduced via a notional tax. The aim of this is to ensure that the overall tax benefit is similar to that available to profit making companies.   This will be done by calculating the net amount at Step 2 using the rate applicable to the taxpayer (either the small profits rate (“SPR”), currently 19 percent, or the main rate (25 percent)), by applying the SPR to loss making companies. Companies will also be able to off-set the amount withheld against tax in future years.   According to the publications, this change in the rules for the merged scheme is designed to ensure that loss making companies receive more cash benefit upfront, compared to the position set out in the July policy paper.  R&D intensive scheme  The intensity threshold in the R&D intensives scheme is to be reduced from 40 percent to 30 percent for accounting periods that commence on or after 1 April 2024. A one-year grace period will also be introduced which will allow companies who dip under the 30 percent threshold to continue to receive relief as an R&D intensive company for a further year.  More details of the changes to R&D tax relief are available in a HM Treasury policy paper with confirmation that all changes come into effect in respect of accounting periods beginning on or after 1 April 2024.  R&D tax reliefs - removing nominations and voiding assignments   From 1 April 2024, R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, subject to limited exceptions. In addition, from 22 November 2023. no new assignments of R&D tax credits are possible. This means that in most circumstances payments of R&D tax credit claims will be paid directly to the company in order to ensure that they “have full oversight of the claim and receive payment more quickly”. This will be legislated for in the Autumn Finance Bill 2023.   Closure of the R&D review   At Spring Budget 2021, the Government launched a review of R&D tax reliefs. The Government is now concluding that review with the announcement of the merged scheme.   The Autumn Statement publications do refer to the potential that further action may be needed to tackle high levels of non-compliance in R&D tax reliefs, hence it is expected that HMRC will be publishing a compliance action plan in due course.   The Government will also continue working with industry to develop the enhanced support for R&D intensive SMEs and will also consider if further simplifications can be implemented.  Full expensing for companies  Full expensing was announced in the 2023 Spring Budget and replaced the 130 percent super deduction which came to an end on 31 March 2023. The relief is only available to companies incurring expenditure on new plant and machinery (with some exclusions) and was originally scheduled to last for a three-year period until 31 March 2026. The Chancellor announced last week that full expensing is being made permanent.  Although this was badged as the biggest tax cut in modern British history, in reality it is only of real benefit to larger companies who have the capacity to invest in more than their annual investment allowance limit, which already provides 100 percent relief for such assets, up to a maximum of £1 million. The Office for Budget Responsibility expects this to increase business investment by £3 billion per year.   At present, assets for leasing remain excluded from full expensing. However, the Government is to continue to consider whether there is a case to extend full expensing to leasing hence a technical consultation will be published in due course to seek input on draft legislation which will also consider whether error and abuse risks can be appropriately mitigated.  A technical consultation is also expected to be launched on wider changes to simplify the UK’s capital allowances legislation.  Tax relief for training costs  HMRC is also to rewrite guidance around the tax deductibility of training costs for sole traders and the self-employed. This aims to ensure that taxpayers can be confident that updating existing skills or maintaining pace with technological advances or changes in industry practices, are allowable costs for tax purposes.  Creative sector tax reliefs  The Government expects further growth and a rise in employment as creative industries embrace new technologies. To maximise the benefits of this, the Government will further boost the international competitiveness of tax incentives for the UK’s world-leading visual effects sector by increasing the generosity of the audio-visual expenditure credit for visual effects expenditure. Work will begin with industry on how best to design this with the intention of implementing changes to the tax relief from April 2025.  As part of this, the Government has published a call for evidence on recent trends in the visual effects industry. This aims to inform the design of additional tax relief for expenditure on visual effects, which the Government intends to deliver via the audio-visual expenditure credit. The Government intends to consult on the detailed policy design of further support and intends to implement changes to this expenditure credit from April 2025.   As previously announced, animated feature film will be eligible for a 5 percent uplift in relief under the audio-visual expenditure credit.   The Government has also amended the proposed definition of a documentary. The new definition is designed to align with the guidance used by the British Film Institute and will apply to the audio-visual expenditure credit, which will be legislated for in the Autumn Finance Bill 2023.   The proposal to cap the relief that companies can receive on connected party transactions is also being amended. Companies will now be required to disclose connected party transactions and charge connected parties at an arm’s length price. This will also be legislated in the Autumn Finance Bill 2023.   Simplification for smaller businesses  As announced in Spring 2023, the Government is undertaking a systematic review of guidance and key forms for small business and has already begun to implement some improvements including enhanced guidance when checking if you need to submit a self-assessment tax return, new interactive guidance to help businesses register for self-assessment, and improved guidance designed to make it easier to report VAT errors.   Expanding the cash basis  Following a consultation at Spring Budget 2023, the Government is expanding the cash basis for unincorporated businesses. These changes will take effect from 6 April 2024, for 2024/25 and will be included in the Autumn Finance Bill 2023. More details are set out in a policy paper which confirms that the cash basis will be the default method of calculating the tax adjusted trading result, meaning an election will no longer be required. Hence all unincorporated businesses will use the cash basis unless they make an election to use the accruals basis instead.  Currently, businesses are only able to join the cash basis if their turnover is less than £150,000, and they are forced to leave in certain circumstances, including where turnover exceeds £300,000. The turnover restriction will be removed entirely from 6 April 2024.  Chartered Accountants Ireland responded earlier this year to this consultation and supported the expansion of the cash basis but recommended that business should have a choice and be able to choose which basis best suits them hence it is pleasing to see that the Government have taken this on board and will allow businesses to opt out of the default cash basis.   Oil and gas fiscal regime   Alongside confirming that the Energy Profits Levy (“EPL”) will end no later than 31 March 2028, the Government published the conclusion to the review of the oil and gas fiscal regime in a collection of documents which sets out an oil and gas fiscal regime package covering the short, medium, and longer term.  This includes setting out principles for the tax treatment of future oil and gas price shocks after the end of EPL and targeted support for the energy transition through allowing relief for payments made by oil and gas companies into decommissioning funds in relation to oil and gas assets that are repurposed for certain uses. Legislation will also remove the receipts from the sale of these assets from the EPL.   

Although not featured in the Chancellor’s speech, buried in the Autumn Statement 2023 publications is the outcome of HMRC’s recent small business review. This comprises what is referred to as a “package of changes to simplify the design of Making Tax Digital” (“MTD”). A separate corporate report with more detail was also published which provides details of further work and next steps. More information is also available in an email from HMRC. The package of changes announced includes maintaining the current MTD turnover threshold at £30,000 and design changes which aim “to simplify and improve the system”. These changes will take effect from April 2026 when MTD for income is initially scheduled to commence for self-employed business and landlords with turnover of more than £50,000. Earlier this year, Chartered Accountants Ireland met with HMRC to discuss the review and highlighted several concerns, including the need for HMRC to increase the exemption threshold. We are pleased to see that HMRC has decided, at present, to maintain the turnover limit at which MTD will be mandated to £30,000, effectively increasing this from the original exemption limit of £10,000. Taxpayers with turnover from £30,000 to £50,000 are still mandated to join MTD from April 2027. However, the Government will keep under review the turnover less than £30,000 population.  The MTD changes announced last week specifically:- aim to simplify the requirements for all taxpayers providing quarterly updates, and for taxpayers with more complex affairs, such as landlords with jointly owned property; remove the requirement to provide an End of Period Statement;  exempt some taxpayers, including those without a National Insurance number, from MTD; and  enable taxpayers using MTD to be represented by more than one tax agent. 

This Wednesday, the Global Forum will be meeting to discuss developments in the fight against offshore tax evasion. The annual plenary meeting is taking place in Lisbon, Portugal and will be live on OECD WebTV from 9.00am Irish time.

New data from the OECD suggests that 37.1 percent of global net profits are taxed at effective tax rates (ETRs) below 15 percent. Their research shows that 56.8 percent of all global profits taxed below 15 percent arise in high-tax jurisdictions. It is suspected that this is achieved through tax incentives and targeted concessions.

Azerbaijan has become the latest country to join the BEPS Convention. The BEPS Convention is the key instrument for updating double tax agreements and reducing tax avoidance by multinational enterprises. The Convention also enhances dispute resolution between countries.

Retailers face escalating cyber security challenges during peak events such as Cyber Monday. Will O’Brien outlines four steps to protect customer data this holiday season In the retail sector, cyber security often lags behind other sectors regardless of the retailer’s size or value. In the short-term, this can lead to some initial minor inconveniences, but if left unattended, it can manifest into serious issues that impact the organisation’s brand, reputation and customer loyalty. The security challenge During the peak Christmas consumer events of Black Friday and Cyber Monday, the retail sector sees a sharp uptake in business. As a result, its value to malicious actors also increases. To leverage this busy period, cybercriminals use unsophisticated phishing campaigns to gain access and steal data. when a retailer’s ‘accounts and billing’ function is in full swing during the holiday season, for example, they are more likely to fall victim to a phishing attack. While some retailers have reasonable controls in place to protect against these attacks, many rely heavily on insecure third parties to fulfil critical business functions. According to PwC’s 2023 Digital Trust Insights Survey, supply chain risks have become a big focus for regulators and organisations, with senior executives in Ireland identifying increased regulatory scrutiny as one of the top five impacts on their business since 2022. Without conducting the correct level of cybersecurity due diligence on third parties, retailers can open themselves up to cyber-attacks by providing third parties with access to their data. If these third parties fall victim to cyber-attacks, the organisation’s data – through payroll, accounts and shipping, for example – may be at risk. Despite the third party being at fault, the data controller (the organisation) is subject to fines and reputational impact. Defending consumer data Organisations can protect their digital assets by understanding the retail-specific cyber threats and associated remediation activities. 1. Education and awareness  Your people are your first line of defence against phishing campaigns. All staff should be educated on security procedures and aware of attack methods. A robust cybersecurity education and awareness programme is the best way to achieve this. You should tailor this programme for your organisation by identifying the critical threats and customising the content to address these threats. 2. Third-party risk management Third-party risk management (TPRM) is the process of analysing and minimising the cybersecurity risks associated with outsourcing to third-party vendors or service providers. It involves effective selection, due diligence, contracting, ongoing monitoring and the correct termination processes. 3. Malware and ransomware prevention Anti-malware and ransomware detection technologies can help to reduce the risk of a severe cyber attack likely to cause operational, reputational and financial damage to your organisation. Detection and response tools can be used to identify malware and limit the blast radius of the attack, for example. 4. Incident management and response With organisations facing more regulations than ever, the capacity to respond to a data breach quickly and effectively has never been so important. Senior executives should test their incident response capabilities and muscle memory with simulated strategic and tactical tabletop exercises. Incident response plans should be enhanced based on the learnings from these exercises. This documentation can include communication statements, runbooks for technical responses to ransomware, and breach notification processes for notifying the Data Protection Commission of a personal data breach. Implementing these controls can help to mitigate the financial and reputational impact of a security breach. Prioritisation You cannot eliminate cyber risk, but prioritising retail-specific cyber threats can help to mitigate the potential risks and damage. An effective cybersecurity programme will ensure that you can prepare, withstand, recover and learn from malicious attacks and security events online. Will O’Brien is Director of Cyber Practice at PwC

Gender allyship can help to support workplace equity, but only when it is genuine and meaningful. Andrea Dermody offers her advice on how to embed a culture of true support and allyship Harvard Business Review defines gender allyship as the purposeful collaboration of dominant group members (men) with women to actively promote gender equality and equity in their personal lives and the workplace through supportive and collaborative relationships, acts of sponsorship, and public advocacy to drive systemic change. While allyship can be a powerful tool for creating inclusive and equitable environments, however, there are instances in which it might not be as effective as intended. Research has suggested a stark perception gap between what men think they are doing to support women versus what they are actually doing.  The recent Allyship-In-Action study of more than 1,400 men and women found 78 percent of men said they had personally given a woman credit for her contributions and ideas in a meeting in the previous year. Just 49 percent of the women in the study reported witnessing such behaviour during that period. Despite good intentions, the effectiveness of men’s allyship efforts may be limited by several factors, including: Superficial engagement: Some allyship efforts may lack genuine commitment and understanding of the issues at hand.  Tokenism and performative actions: Both can create an illusion of support without leading to meaningful change. Lack of accountability and measurement: Allyship efforts can lack direction and fail to produce tangible outcomes without clear accountability and measurable goals. Resistance to change and inclusivity: Resistance from certain individuals or groups within the organisation can hinder effective allyship efforts.  In short, allyship is more than just ‘talking the talk’. It’s about fundamentally changing attitudes and behaviours. Simply calling yourself an ally to any person of an underrepresented group misses the point of allyship altogether.  Steps to successful allyship The secret to successful, long-lasting allyship lies in the combination of interpersonal action (developing awareness and motivation) and public action to create accountability and transparency. Here are five steps you can take to help allyship succeed in your organisation.  Educate yourself: Don’t ask people from marginalised backgrounds to take on the emotional, psychological and physical burden of educating you. Take responsibility for yourself. This list of resources from the University of Kent is a great place to start. Listen: Actively listen and amplify the voices of the communities for which you are trying to be an ally. Without listening, you have the danger of venturing into ‘saviour’ territory, where you assume you know more about what marginalised groups need than those in that group. Your actions become self-serving, and you benefit more than the groups you are trying to help.  Reflect on your privileges: The word “privilege” can be polarising, but it is essential to recognise the privileges you have to be an ally for others. Use your voice to make the voices of marginalised people heard. Use your privilege and influence to advocate for change and promote inclusivity. Stand up against discriminatory practices, biases and systemic injustices.  Mentor others: As an ally, showing your support through mentoring programmes is a great idea. By getting to know your mentee as an individual, you can learn about their experiences and perspectives. The more you know and understand, the better equipped you will be to help. See something, say something: Speak out in support of marginalised groups and actively challenge discriminatory behaviours and policies within your sphere of influence. If you see someone being discriminated against, support them at that moment, not later. Intervene even if the targeted individual or community is not present. By demonstrating that you don’t find it appropriate, you can help change the culture and create a more inclusive and equitable society.  Remember, though, that allyship is an ongoing journey that requires continuous self-reflection, learning and active engagement – it’s playing the long game for success. Andrea Dermody is a diversity and inclusion consultant, speaker and coach at Dermody

New approaches to infrastructure investment will be essential if Northern Ireland is to leave a positive economic and climate legacy for future generations, writes Kaine Lynch Infrastructure is a fundamental building block of society. It brings us together, protects the environment and supports economic growth. The benefits of enhanced infrastructure are more important today than ever before, given the need to boost the economy in Northern Ireland (NI) and meet legislative obligations concerning climate change. NI’s neighbours are making significant headway in relation to infrastructure. Earlier this month, the National Infrastructure Commission (NIC) in London published its second National Infrastructure Assessment (NIA) while the Irish Government unveiled plans for an Infrastructure, Climate and Nature Fund. In contrast, NI’s Department of Finance (DoF) recently commenced a consultation on potential revenue-raising measures necessitated by extreme pressures on public finances. NI’s lack of wastewater infrastructure constrains development, demand for social housing is outstripping supply, public transport usage lags behind the rest of the UK and the road network is deteriorating rapidly. These issues won’t resolve themselves. If we don’t act, NI’s infrastructure will continue to deteriorate, and our children will inherit an even larger infrastructure deficit.  However, there are several actions NI can take to address this. Long-term strategy Critical to the success of any endeavour is a plan. While there are several infrastructure-related strategies, NI does not have a cross-sectoral one akin to the UK’s National Infrastructure Strategy or the National Development Plan in Ireland. Like the approach adopted by the NIC, the development of a plan must begin with a clear understanding of NI’s current baseline and relevant sectoral priorities. This evidence-based approach will allow the region to push beyond time horizons associated with political cycles and focus on the legacy we leave for the next generation. Prioritisation framework Given NI’s infrastructure deficit, it is inevitable that the development of an infrastructure plan will identify a longlist of challenges and an unaffordable list of potential interventions. Challenges must be systemically triaged to arrive at a realistic shortlist. The process should consider the maintenance, renewal and resilience of NI’s aging assets and constructing new ones. The process of triaging will require a single set of carefully developed criteria that identify relative priorities across the programme. It will also be necessary to apply the criteria strictly and consistently. Without this uniform approach, it will be impossible to robustly make difficult decisions to invest in one thing over another. The analysis will, of course, also identify lower priorities. Existing projects aimed at addressing these should be carefully considered. Continuing to develop lower priority projects will result in fewer remaining resources to focus on addressing those of higher importance. Commercial models In addition to prioritisation, there is a need to critically examine how NI’s financial envelope for infrastructure can be expanded. The recently published NIA identifies that private sector investment will account for around 50 percent of total infrastructure investment over the next two decades. However, NI remains heavily reliant on public sector funding. Opportunities exist to chart a new course and better leverage private sector investment, whether it be to develop NI’s electric vehicle charging network or increase housing stock. The potential introduction of revenue-raising measures as outlined by the DoF would pave the way for reduced reliance on the public purse and unlock potential lending opportunities to support ‘invest to save’ initiatives. The UK Infrastructure Bank, established in 2021, presents an opportunity for the Executive and councils to temporarily expand their financial envelope. The Executive can also access Reinvestment and Reform Initiative borrowing at even more competitive rates. Delivery structures NI has immensely talented infrastructure professionals. Individuals are limited, however, and expertise is dispersed across the public sector. These factors make it difficult to deploy the right skills to the right place at the right time, reducing the likelihood of project success. The UK Government Commercial Function and the Infrastructure and Projects Authority are models in which skills and resources are held centrally but deployed to departments to support delivery. Implementing a similar approach in NI would allow the pooling of limited skilled resources, develop deep infrastructure delivery expertise and deploy resources to where they are needed most while ensuring funding departments retain overall accountability and control. Kaine Lynch is Director of Government and Infrastructure Advisory at EY. You can read more here.

From next year, individual taxpayers will see more in their pockets as a result of the planned reductions in national insurance contributions However, today’s Autumn Statement featured little in the way of immediate tax cuts and supports for small and medium sized businesses As a region, Northern Ireland continues to be left behind on key issues and supports   22 November 2023 – Today’s Autumn Statement was a missed opportunity to provide struggling businesses with tax incentives and supports which would allow them to grow and thrive, according to Chartered Accountants Ireland. The Institute, which represents almost 5,000 members in Northern Ireland, more than two thirds of whom work in business, made these remarks as Chancellor Jeremy Hunt delivered his Autumn Statement in Westminster earlier today. Commenting, Janette Burns, Chair of the Northern Ireland Tax Committee of Chartered Accountants Ireland said:  “Today’s Autumn Statement was clearly delivered with one eye on a general election next year. More cash in people’s pockets after the cuts in national insurance take effect from January and April next year are positive and will also help reduce the cost of employment. But today the Chancellor did not deliver the same level of tax supports that we know many small businesses urgently need and want as they continue to grapple with high inflation. Confirmation that companies will be able to fully expense the cost of capital investment in new plant and machinery against profits permanently, and beyond the original end date of 31 March 2026, is a bold move and will provide the certainty needed for major investment plans, which in turn will bolster the economy and productivity. But this is only of real benefit to larger companies".  What’s needed is targeted incentives and supports for small and medium businesses. For example, Northern Ireland’s hospitality sector could have benefited from a reduction in the 20% VAT rate. Just a few miles down the road in Ireland, the rate is 13.5% and many other European countries have much lower rates than the UK. When coupled with high food prices, this makes it very difficult for Northern Ireland hospitality businesses to compete.   Paul Millar, Chairman of Chartered Accountants Ulster Society added:  “The relief available to SME companies which incentivises R&D activity was reduced by almost 34% from April this year. We urge the Chancellor not to further reduce relief this for genuine innovation activity as part of the plans announced today to merge the two current schemes. This is just another example of where the Chancellor could have taken the opportunity to set out a detailed roadmap for this relief which would have provided certainty to those investing in R&D.  In recent years Northern Ireland businesses have shown how adaptive and resilient they are. This was highlighted at the recent investment conference which showcased the brightest and the best we have to offer. But more needs to be done. The Government needs to recognise and reward this by establishing a pipeline of tax supports and incentives to enable businesses to truly grasp the entrepreneurial mindset which we know would help Northern Ireland crystallise all the opportunities that are there for the taking. Let us not forget that Northern Ireland also has legislation potentially within its grasp to reduce its corporation tax rate to match that in the Republic. Innovation, creativity, and a more entrepreneurial approach will benefit all here by driving economic growth, and job creation.  The time is ripe to help Northern Ireland level up. But this cannot begin until we have our politicians back in Government. Once again, we urge them to look at the bigger picture. We echo the recent sentiment that political decisions should not affect operational decisions. But this equally applies to the business of doing what is needed to help grow our economy, and ultimately benefit all of our citizens.” Other information:- The main tax announcements by the Chancellor today were as follows:- National insurance contributions for the self-employed will reduce by 1% from 6 April 2024; Employee national insurance contributions will reduce by 2% to 10% from 6 January 2024; The 100% deduction available to companies for investments in new plant and machinery is being made permanent and will not end on 31 March 2026; and The UK’s SME and large company R&D tax relief regimes are being merged into one scheme which will commence from 1 April 2024.

Against the backdrop of the Government meeting its own target to reduce inflation below 5 percent in the final three months of 2023, and a more optimistic economic outlook from the Office for Budget Responsibility, Chancellor Jeremy Hunt today delivered his second Autumn Statement. With one eye squarely on the General Election expected to take place in 2024, the main focus was on announcing some tax cuts via reductions in national insurance contributions (“NICs”) and confirmation that full expensing for companies, which provides 100 relief for new investments in plant and machinery, is being made permanent. Mr Hunt also further reformed the UK’s R&D tax relief regimes which will be merged into one scheme from 1 April 2024. But will taxpayers be fooled? Fiscal drag created in recent years by the freezing of numerous tax allowances and thresholds means that for many taxpayers, the cash benefit of any NIC reduction is likely to have already been outweighed by the additional tax that they are already paying because of frozen allowances/thresholds. However, a cut to income tax in the Spring 2024 Budget has not been ruled out. Read the Institute’s Press Release reacting to the Autumn Statement. The analysis herein is based on the publications of HMRC and HM Treasury. A more detailed analysis of the tax announcements will feature in Monday’s edition of Chartered Accountants Tax News.

Class 1 employee NICs are to be reduced by 2 percent from 12 percent to 10 percent from 6 January 2024. The NICs payable by the self-employed will also be reduced. From 6 April 2024, the main rate of Class 4 NIC, which is applied to trading profits between £12,570 and £50,270, is being reduced by 1 percent from 9 percent to 8 percent. And Class 2 NIC is being abolished from 6 April 2024. From the same date, self-employed taxpayers with profits above £12,570 who will no longer be required to pay Class 2 NICs, will continue to receive access to contributory benefits, including the State Pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the State Pension, through a National Insurance credit without paying NICs as they do currently. Those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits will continue to be able to do so. The government will set out next steps on Class 2 reform next year. Broadly, the cuts to Class 4 and Class 2 NIC together amount to a tax saving of £350 a year for the average self-employed person on £28,200. According to official documents, it’s expected that some 2 million self-employed individuals will benefit.

Continuing with the theme of reform to the UK’s R&D tax relief regime which began in the 2022 Autumn Statement, the SME and large company regimes are to be merged, as planned, from 1 April 2024. However, the Chancellor did not specify the rate(s) of relief which will be available under the merged scheme, which is likely to be announced in the 2024 Spring Budget. In our submission to the House of Lords Finance Bill Sub-Committee inquiry into draft Finance Bill 2023/24, Chartered Accountants Ireland recommended that the commencement date for the introduction of a single unified scheme be deferred beyond 2024 to allow for a longer period of consultation to be undertaken on the potential options available. Other changes to the R&D tax relief regimes were also announced today. The intensity threshold in the R&D intensives scheme is to be reduced from 40 percent to 30 percent for accounting periods that commence on or after 1 April 2024. A one-year grace period will also be introduced which will allow companies who dip under the 30 percent threshold to continue to receive relief as an R&D intensive company for a further year. More details of the changes to R&D tax relief announced are available in a HM Treasury policy paper with confirmation that all changes come into effect in respect of accounting periods beginning on or after 1 April 2024.  

Full expensing was announced in the 2023 Spring Budget and replaced the 130 percent super deduction which came to an end on 31 March 2023. The relief is only available to companies incurring expenditure on new plant and machinery (with some exclusions) and was originally scheduled to last for a three-year period until 31 March 2026. The Chancellor announced today that full expensing is being made permanent.  Although this is being badged as the biggest tax cut in modern British history, in reality it is only of real benefit to larger companies who have the capacity to invest in more than their annual investment allowance limit, which already provides 100 percent relief for such assets, up to a maximum of £1 million.

Although not featured in the Chancellor’s speech, buried in the Autumn Statement 2023 publications is the outcome of HMRC’s recent small business review. This comprises what is referred to as a “package of changes to simplify the design of Making Tax Digital”. A separate corporate report with more detail was also published which provides details of further work and next steps. The package of changes announced includes maintaining the current MTD turnover threshold at £30,000 and design changes which aim “to simplify and improve the system”. These changes will take effect from April 2026 when MTD for income is initially scheduled to commence for self-employed business and landlords with turnover of more than £50,000. Earlier this year, Chartered Accountants Ireland met with HMRC to discuss the review and highlighted several concerns, including the need for HMRC to increase the exemption threshold. We are pleased to see that HMRC has decided, at present, to maintain the turnover limit at which MTD will be mandated to £30,000, effectively increasing this from the original exemption limit of £10,000. Taxpayers with turnover from £30,000 to £50,000 are still mandated to join MTD from April 2027. However, the government will keep under review the turnover less than £30,000 population. These changes specifically:- simplify the requirements for all taxpayers providing quarterly updates, and for taxpayers with more complex affairs, such as landlords with jointly owned property; remove the requirement to provide an End of Period Statement; exempt some taxpayers, including those without a National Insurance number, from MTD; and enable taxpayers using MTD to be represented by more than one tax agent.      

On 17 November 2023 HM Treasury published guidance on Ownership and Control: Public Officials and Control guidance. The guidance sets out that the Foreign, Commonwealth and Development Office  does not generally consider designated public officials to exercise control over a public body in which they hold a leadership function, such that the affairs of that public body should be considered to be conducted in accordance with the wishes of that individual. However, if there was sufficient evidence to demonstrate that the designated individual exercises control over the public body within the meaning of the relevant regulations, then the relevant legal test under UK sanctions regulations may be met. The guidance follows on from a notable decision of the UK Court of Appeal Mints & Ors v PJSC National Bank Trust & Anor [2023] EWCA Civ 1132 which was handed down 6 October 2023. Please click here for our recent news item on the judgment. Please also see the recent UK High court case of 15 November 2023 Litasco SA Claimant, Der Mond Oil and Gas Africa SA and Locafrique Holding SA. There the High court judge appears to create a test that distinguishes between actually existing control and prospective control, stating his belief that the better interpretation of Regulation 7(4) is that it is concerned with an existing influence of a designated person over a relevant affair of the company …. not a state of affairs which a designated person is in a position to bring about. Were matters otherwise, it would follow that President Putin was arguably in control, for Regulation 7(4) purposes of companies of whose existence he was wholly ignorant, and whose affairs were conducted on a routine basis without any thought of him. Readers can also listen to a recent (20th Nov 2023) interesting webinar on the subject entitled “Webinar with UK government on sanctions ownership/control”. The webinar was hosted by UK firm Peters & Peters and the UK deputy director of sanctions David Drake and deputy director in OFSI Beth Davis spoke on the topic. Acknowledgement that any links to BAILII website (above) are free. This information is provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.    

Later this week, Chancellor Jeremy Hunt will deliver his second Autumn Statement on Wednesday 22 November. On the day, the Institute will be reporting on key tax announcements with detailed analysis to follow in next Monday’s Chartered Accountants Tax News. It has also been confirmed that the 2024/25 Scottish Budget will take place on 19 December 2023 and the Welsh Government has announced that it is planning to publish the outline and detailed draft budgets on 19 December 2023, with the final Budget scheduled for 27 February 2024. In last week’s cabinet reshuffle, Nigel Huddleston MP was appointed as Financial Secretary to the Treasury.  The recent King’s speech provided little insight into what the government’s future tax policy may look like, though perhaps this is not unexpected as a UK general election looms in 2024. However, one thing we do expect to hear about on Wednesday is the outcome of HMRC’s review into Making Tax Digital for income tax for the smallest businesses. Earlier this year, Chartered Accountants Ireland met with HMRC to discuss the review and highlighted several concerns, including the need for HMRC to increase the exemption threshold. 

This week we bring you news about new Guidelines for Compliance in relation to R&D tax relief claims and read HMRC’s email about new letters being sent in relation to R&D tax relief claims. HMRC has also published updated guidance on refunds of Section 455 tax on loans made by close companies to participators/associates, and, as previously advised, 23 November 2023 is the date by which action must be taken in respect of certificates of tax deposit. The latest Employer Bulletin is available which includes a timely reminder on reporting PAYE information in real time when payments are made early at Christmas and the November 2023 Agent Update has been published. HMRC performance statistics are now available for the quarter end September 2023 and HMRC has also recently launched a new marriage allowance tool.  R&D Guidelines for Compliance  On 31 October, HMRC published several Guidelines for Compliance (“GfC”) to help potential claimants check if work qualifies as R&D for tax relief purposes. References to claims for tax relief in the GfC mean either:- claims to additional deductions for R&D expenditure under the SME regime; or  claims to the R&D expenditure credit under the “large” company regime.  According to HMRC, the examples included therein aim to help companies understand general principles that apply to all R&D claims and have also been designed to help avoid common errors made when identifying and submitting R&D relief claims.    The GfC’s objectives are therefore to assist claimants to:-  find out if work may qualify as research and development for tax purposes;  understand HMRC’s expectations of those making claims;   better understand HMRC’s view of who is considered a competent professional;  be able to judge if a project is seeking an advancement in science or technology;  understand the meaning of ‘scientific or technological advance’ for tax purposes;   decide where the project begins and ends for the purposes of an R&D claim; and  understand the level of evidence relating to a qualifying project that HMRC may want to see.  According to HMRC, the publishing of these GfCs is an indication of HMRC’s commitment to improve and publish guidance that helps and supports claimants. In the coming months, HMRC is aiming to introduce further new guidance for potential R&D tax relief claimants.  HMRC also recently updated their directions under Regulations 3 and 10 of Income and Corporation Taxes (Electronic Communications) Regulations 2003 (SI 2003/282) in respect of the Additional Information Form (“AIF”) which must be submitted for all R&D tax relief claims from 8 August 2023. In limited circumstances, the updated regulations allow HMRC to accept the AIF to be submitted by email.   R&D letters  HMRC has sent the below email to Chartered Accountants Ireland which sets out details of new letters being sent out in relation to R&D tax relief claims which HMRC believes to be incorrect. Read the email below.  Email to Chartered Accountants Ireland  “In ‘HMRC’s approach to Research and Development tax reliefs’, we set out the scale of non-compliance in the regime, and the related need to use the full range of investigative and compliance techniques to address this.   One element in this is the use of paragraph 16 of schedule 18 to Finance Act 1998 where it’s appropriate for us to do so.   Paragraph 16 sets out:   “16(1) An officer of Revenue and Customs may amend a company tax return so as to correct–   (a) obvious errors or omissions in the return (whether errors of principle, arithmetical mistakes or otherwise), and   (b) anything else in the return that the officer has reason to believe is incorrect in the light of information available to the officer.”  We are correcting returns to remove Research and Development (R&D) tax relief claims where there is reason to believe they are incorrect, based on the information available to us. In these circumstances HMRC issues letters to help customers understand the reasons why we believe an R&D tax relief claim is not valid. This is aimed at claims where we’ve received information about the claim, but we believe it to clearly not be a valid claim (where there is any uncertainty an enquiry will remain the best option).   We wanted to highlight this approach to you in case you have had questions from your members.  New Letters  Additionally, we would also like to inform you of two letters the R&D Anti Abuse Unit (AAU) will be issuing imminently in response to claims being received that have a high risk of being invalid based on the information available to us:  The first letter will be issued where we suspect no advance in science or technology has been sought by the business, but where they may be advancing their own state of knowledge only.  The second letter will be issued in similar circumstances to the above but where the company is in a specific business sector where we wouldn’t normally expect R&D for tax purposes to have taken place, for example, hairdressers, beauticians, and personal trainers. Whether a company is in a specific business or trade sector is not the only consideration. This information is used in conjunction with other methods of identifying the correct customer base, so that we can reach as many companies as possible who may be approached by less than scrupulous R&D sales agents.   Both letters will request that the claimant reviews HMRC’s R&D tax relief guidance to see whether the activities they have claimed does qualify for relief. After reviewing the guidance, if the claimant finds that their activities does not qualify, they will be asked to amend their return with the R&D claim removed. If the claimant still believes they qualify, the letter will ask for them to provide further information to evidence the claim.”  Why are we issuing these letters  Reinforcing HMRC’s commitment to tackle error and fraud in the R&D tax reliefs system, the Anti Abuse Unit was set up in July 2022. The team’s aims include increasing compliance activity to quickly and effectively identify deliberately incorrect claims. The AAU also aims to increase HMRC’s efforts to educate, encourage and facilitate genuine businesses to get it right first time, reducing error as well as tackling abuse.  These letters are intended to both educate and reduce error, by informing businesses of the correct meaning of R&D for tax purposes, and tackle abuse of the system by ensuring clearly unqualifying claims are scrutinised."  Agent Update 114  Agent Update: issue 114 is available now. Get the latest guidance and information including:- electric charging of company cars and vans at residential properties;  property business arrangements involving hybrid partnerships – Spotlight 63;  second-hand motor vehicle VAT margin scheme deadline extension;  electronic sales suppression a year on: HMRC continues clamping down on major till fraud;  tips for when you must use post; and  the Income Record Viewer’s coding data extension from current year-only to include the previous 4 tax years.  Marriage allowance tool   We recently notified readers that at a recent meeting HMRC advised that although the marriage allowance online form is not currently mandatory, using the form may mean that claims are processed quicker. HMRC has now launched a new tool to help taxpayers calculate their potential tax saving if they claim the marriage allowance. Both parties to the relationship will need their national insurance numbers to use the tool which only works in simple cases.   If a taxpayer is in receipt of other income such as interest, benefits in kind or dividends, they will not be able to use the tool and should instead call the Income Tax helpline. 

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. The latest Trader Support Service bulletin is also available. The Secretary of State for Northern Ireland recently gave evidence on the Windsor Framework to the House of Lords Sub-Committee and the House of Commons Northern Ireland Affairs Committee. Miscellaneous updated guidance etc.   The following updated guidance, and publications relevant to EU exit are available:-  Appendix 2 C21e: Data Element 1/11: Additional Procedure Codes;  Notices made under the Customs (Northern Ireland) (EU Exit) Regulations 2020;  List of customs training providers;  Reference document for authorised use: eligible goods and authorised uses;  Reference Documents for The Customs (Tariff Quotas) (EU Exit) Regulations 2020;  Reference Documents for The Customs Tariff (Preferential Trade Arrangements) (EU Exit) Regulations 2020;  Reference Document for The Customs Tariff (Establishment) (EU Exit) Regulations 2020; and  Reference Documents for The Customs Tariff (Suspension of Import Duty Rates) (EU Exit) Regulations 2020. 

The European Parliament has recently issued a report on EU sanctions implementation and monitoring. It includes recommendations to reinforce the EU’s capacities to implement and monitor sanctions. The think tank writes that the EU should agree on a joint definition of what constitutes a competent national authority, ensure adequate guidance for the EU’s economic operators, enhance the involvement of implementation and enforcement expertise in the planning phase of sanctions regimes, and design a new horizontal sanctions regime to counter circumvention. You can access the think tank summary and the report here.

The consolidation underway in the global accountancy sector is set to continue in the New Year, driven by several factors, writes Mark Butler The global accountancy sector is experiencing a wave of consolidation driven by advances in technology, regulatory developments, succession challenges and the need for firms to enhance their service offering. Larger firms are seeking to increase their market share and capabilities by merging with or acquiring smaller, specialised operators. Hence, we are seeing more consolidation driven partly by the need to embrace digital transformation. This means that the traditional model of individual client acquisition is giving way to a more interconnected, specialist-driven model. Embracing digital tools and diverse distribution channels is becoming increasingly important for accountancy firms that want to stay competitive.  In 2024, we can expect to see a further rise in strategic mergers and greater emphasis on cultural alignment post-merger. Cultural alignment in mergers Merging firms must prioritise cultural alignment to ensure a smooth transition and harmonious collaboration. The success of a merger hinges on the compatibility of organisational cultures, values and work styles. This is especially true in Ireland, where the close-knit business community values relationships and a shared ethos. Client-first approach In Ireland’s accountancy sector, engagement and expertise are crucial for clients and younger professionals seeking to build their career. Being part of a firm where decisions are made locally provides a sense of identity and contributes to the long-term commitment of the merging partners. This trend is particularly evident as younger professionals seek alignment with firms that share their values. Strategic mergers for career growth Younger accounting professionals in Ireland are increasingly aware of the options available to them for career progression, and the potential impact mergers can have on their career trajectory. A merger with the right firm can help to enhance career prospects, leverage a broader client base, and access additional resources. Access to an international network is key to forward-thinking firms keen to ensure they retain clients as they in turn need access to global support.    Leadership trends In addition to digitalisation, consolidation and strategic mergers, firms also need to prioritise the recruitment of leaders who have the multifaceted skills to adapt to the evolving needs of the accountancy sector. Recruiting multifaceted leaders Accountancy firms should actively recruit leaders who have additional skills over and above core technical requirements – such as business development and innovation, for example. The ability of professionals to be willing and open to widening their skill base can help to ensure a firm's agility and adaptability in a rapidly changing environment. Cultivating leaders To drive ongoing growth, a clear view of the market is essential to ensure real, meaningful engagement with a firm’s target market. This targeted leadership approach ensures a deep understanding of evolving client needs and industry trends and, when done well over a sustained period of time, can yield significant benefits. Business development Emphasising business development as a core requirement for professionals leading specific functions within the firm is crucial. Growth doesn’t happen accidentally. Firms focusing on effective pipeline management for recurring revenue and project work tend to maximise opportunities, aligning business development strategies with growth objectives. Thriving in an evolving landscape The accountancy sector is undergoing transformation, led by consolidation, strategic mergers and digitalisation. Professionals and firms that prioritise cultural alignment and strategic growth strategies will likely thrive in this evolving landscape. Embracing change and investing in the right talent and technologies will be essential to navigating the challenges and opportunities that lie ahead and ensuring sustained success for accountancy practices in the future. Mark Butler is Managing Partner at HLB Ireland