With Budget 2020 fast approaching, what – if anything – could be on the table from a tax perspective? By Peter Vale & Oliver O'Connor At the time of writing, the Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, had already flagged that we can expect little by way of tax cuts in the upcoming Budget. So, from a tax perspective, are we looking at a damp squib or could there be a mix of tax cuts and increases that net to zero? And if so, who are the winners and losers likely to be? Income tax In the authors’ view, we will see some modest tax cuts next month benefiting primarily lower and middle income earners, with higher earners likely to see some of this cut back – perhaps via a restriction in tax credits. Depending on the scale of the adjustment for higher earners, this could mean they see a net decrease in take-home pay with all other taxpayers seeing a modest increase. So, in summary, we don’t expect to see much either way in terms of income tax adjustments, with lower and middle income earners likely to be the main beneficiaries of any cuts. We also don’t expect to see any longer term statement committing to a reduction in our high marginal tax rates of 52% and 55% for employees and self-employed respectively. Nor should we expect to see a broadening of the tax base; indeed, successive budgets have taken more and more people out of the tax net. The concept of broadening the tax base was a recommendation of the Commission on Taxation report almost 10 years ago, but it has not been embraced by governments since. While the idea of more people paying a little has merits, it is unlikely to be a vote winner. Pensions and investments On the investment side, we are all aware that deposit rates are derisory at present and unlikely to increase any time soon. We are also very keenly aware (as is the Government) that there is a potential pensions time-bomb in the coming decades. The auto-enrolment regime, planned for the early 2020s, is a step towards ensuring that people are more sufficiently funded from a pension perspective and thus, not as dependant on State support in their later years. To this end, it is crucial that the current pension rules are not adjusted (downwards) but rather, that all are maintained at a minimum. A possible concession, which would be of long-term benefit to all, would be to increase the net relevant earnings from the current €115,000 to even €125,000. Entrepreneurs Entrepreneurs would ideally like to be given an increase in the Entrepreneur Relief from €1,000,000 to a more substantial figure. As importantly, they would like to know that there is a roadmap over the coming three to five years to bring this relief more in line with our near neighbours, which is 10 times greater than our current level. We pride ourselves in being the best small country in which to do business, enabling this crucial economic grouping to thrive and create yet more economic prosperity for the country as a whole. Corporate tax We know for certain that new transfer pricing legislation will be introduced in October. The new provisions will implement 2017 OECD guidelines into Irish law and also make certain other changes. While the nature of the other changes is still uncertain, it is very likely that transfer pricing will be extended to non-trading transactions, in particular where tax is being avoided. Certain grandfathering provisions for arrangements in place in 2010 will be removed while it is also possible that transfer pricing will be extended in some form to SMEs. Ireland is also obliged under EU law to bring in anti-hybrid legislation on 1 January 2020, which broadly prevents deductions for payments that are not taxed elsewhere. A further change required under EU law is to restrict tax relief for interest to 30% of a company’s EBITA. At the time of writing, it is still unclear whether this legislation will be in place at 1 January 2020. It should be noted that there will be a de minimis limit (expected to be roughly €3 million), group provisions and certain other carve-outs from the scope of the new legislation. Other changes We don’t expect to see significant changes in the VAT space. There isn’t the fiscal space to provide a VAT reduction to a specific sector (similar to the lower rate previously provided to the hospitality sector), while our headline rate is already relatively high and hence not likely to be used as a revenue-raising measure. It would be positive to see some targeted tax reliefs introduced in the Budget, despite the negative press that some of these reliefs have received in the past. However, sensible tailored reliefs have a role. Improvements to some of the existing reliefs should also be considered. Overall, it is possible that this Budget will be seen as a damp squib. But the devil will be in the detail and there is an opportunity to make changes that will bolster key sectors of our economy. Peter Vale FCA is Tax Partner at Grant Thornton. Oliver O’Connor FCA is Partner, Private Client and Wealth Management at Grant Thornton.

Large customers are good for business, but can stretch your cash flow.  By Peter Brady Have you recently received a ‘polite letter’ from your US multinational corporation (MNC) customer advising of a stretch in your credit terms from 30 days to 90 plus? Or, indeed, from any of your MNC customers? In recent years, the extension of MNC credit terms has become business as usual across the globe but for SMEs, it is anything but business as usual. Think about it. How would an extension of credit terms impact on your cash flow and projections this year? And what are the implications for your growth strategy in 2020 and beyond? Winning a contract with a large MNC is a measure of success for established SMEs. However, an extension of credit terms can feel like a double-edged sword as it puts excessive strain on cash flow. Why does it matter? A strain on your cash flow can have many implications, all of them negative. The first impact is on your suppliers – they expect payment in 30 days. There is an immediate gap in cash flow and you are unlikely to have sufficient sway with your suppliers to realign. This could mean: You are not in a position to fund the initial costs of fulfilling contracts; Pressure is placed on your existing supplier relationships in the form of increased risk around quality, timely delivery and higher prices; Capacity to deliver on-time to customers is affected; and Ability to grow the business at pace is limited. The lost opportunity  It may seem obvious, but having cash tied up in debtors with long credit terms is a fundamental challenge for most SMEs. If SMEs could access this cash early, it would give a distinct competitive advantage when negotiating terms with key suppliers. Think of what you could do if your invoices were paid on day one, not day 90. First, you could pay your suppliers early, enhance the relationship and ultimately secure better terms. Second, you could deploy funds into driving new customer acquisition and fund new business tenders with the comfort of cash flow certainty. So what do you do? You have two options: 1. You could try to negotiate: know where you stand in your customer’s eyes. Do your products or services play an important role in their success? Is your product or service critical to their delivery? Even so, unless you are the sole producer of a key strategic element, there’s another company out there to potentially replace you. Alternatively, your customer might offer softer credit terms in exchange for a pricing discount – but cutting margins is an extremely expensive source of finance and unlikely to be recovered. This course of action doesn’t make good business sense, as it is a race to the bottom. 2. Look at funding options to bridge the gap: the financial market is developing all the time to reflect the needs of business. For decades, when Ireland’s SMEs needed to fill the cash flow gap left by extended credit terms, they had limited choices – commercial overdrafts, short-term lending or an invoice discounting facility. That may have been adequate in the past but such is the success, ambition and global reach of Irish SMEs across all sectors today, this range of funding options falls short of their requirements. Commercial overdrafts are harder to secure and are generally seen as an unreliable method of funding, not directly aligned to the changing requirements of a business. Similarly, short-term lending is onerous to put in place and comes with significant levels of conditionality. An invoice discounting facility continues to plug the cash flow gap for many SMEs in Ireland. However, invoice discounting facilities are operationally clunky and carry significant fixed and hidden costs and limitations. They are therefore not really fit for purpose for today’s SMEs. Many SMEs often have a small number of key strategic customers in their sales mix. Supported by government bodies such as Enterprise Ireland, Ireland’s SMEs have a global footprint. Exporting is crucial to scalable business success, and not just to Western Europe. SMEs are securing contracts across the globe – US, Canada, EMEA and Asia. Invoice discounting facility For years, the invoice discounting facility has serviced working capital funding requirements. However, the facility comes with three major limitations: The facility limit; Geographical restrictions; and Debtor concentration risk limits. The facility limit At the outset, SMEs are subjected to a long and onerous process to get approval for the invoice discounting facility. Fair enough, you may say, as this is effectively a loan and it follows that the bank providing it decides how much the facility is for. SMEs must enter into a long-term commitment, often saddled with non-usage charges or exit fees. SMEs must also pay credit insurance and sign a personal guarantee – something entrepreneurs have grown to fear. Geographical restrictions Exporting to the UK? Great. Exporting to United States (US)? Not so great. Country risk and the law of the land plays a major role in how traditional lenders assess the risk and granting of facility limits. If the country in which your customer is located is outside of what is considered in banking terms to be palatable, funding limits and exclusions will apply. Debtor concentration risk limits The most common reason for restricting funding under an invoice discounting facility remains customer or debtor concentration. It applies when an SME becomes over-exposed to a single debtor. The debtor could be a large household brand name, but traditional lenders must impose facility limit restrictions. For SMEs, it is somewhat ironic that the more business you do with a key customer, the more your funding is limited. So, back to your US multinational extending its credit terms. You’ve worked tirelessly to win this business, but you can’t sustain 90 days’ credit and this customer accounts for over 60% of your debtor book. Your business needs: Consistent certainty of funding, without any limit relating to geography or debtors; Funders who recognise the strength of your business model and the substance of the underlying transactions; and Access to working capital to scale your business globally. Market and product innovation Invoice, purchase order and recurring revenue trading are collectively known as “receivables trading”. Receivables trading ticks all the boxes. It enables SMEs to leverage their customer relationships. By selling invoices and future invoices (purchase orders) to a pool of capital market funders, SMEs can access finance when they need it. What difference do capital market funders make? The funders are capital market institutional funders, pension funds, corporates and sophisticated investors – and there is a large pool of these funders. The fact that there is not just one entity, but a pool of funders purchasing the receivables (invoices or purchase orders) eliminates the requirement for imposing concentration or geographic limits on the SME. It extinguishes the need for any commitment, lock-ins or fixed costs. At no stage is there an ask for a personal guarantee. This funding solution puts control back into the hands of SMEs and allows them to decide when they need to access funding on their terms – a liberating benefit. How does it work? Receivables trading is available via an online platform. A pool of institutional funders (the buyers) are members of the platform. SMEs (the seller) uploads their invoice or purchase order and the buyers purchase them. The model is ideally suited to established SMEs with MNC or sovereign debtors. The SME can use the online platform in conjunction with their existing facility by carving out specific debtors from the invoice discounting facility. In conclusion Business is constantly changing and working capital funding has caught up. Alternative funding where sellers and buyers connect directly via an online platform is fast becoming the norm. With this funding solution, SMEs can tender for business of any scale globally – confident that they can fund the upfront costs. It’s a gamechanger for most. According to the Central Bank Survey of SMEs, which was published in January 2019, the top two reasons for credit applications were working capital, and growth and development. ISME’s quarterly business survey reveals that 70% of Ireland’s SMEs still rely solely on traditional bank funding. In Europe, it’s only 30%. Alternative funding is the future of funding. Peter Brady FCA is Co-Founder and CFO at InvoiceFair.

Three years after its commencement, Construction Contracts Act, 2013 continues to provide a pathway to cash flow in the construction sector. By Pat Breen TD This innovative and important legislation for the construction sector, which was commenced in 2016, regulates payments and particularly the timing of payments under construction contracts. While many businesses in the construction sector are aware of this legislation, some businesses may not be fully aware of the detailed statutory protections and obligations set out in the Construction Contracts Act, 2013. One of the key objectives of the legislation is to provide payment certainty for subcontractors, who were considered vulnerable in the payment cycle in the construction sector. As the construction sector continues to expand, cash flow is critical and it is cash flow that is at the core of the Construction Contracts Act, 2013. Therefore, construction businesses should ensure that their payment practices comply with the terms of this legislation. I consider that members of the accountancy profession are uniquely placed to encourage construction businesses across the country to review their payment practices to ensure that they comply with this legislation. I welcome the opportunity provided by Accountancy Ireland to highlight this legislation, and a brief summary of the main provisions of the Act is set out below. Further information on the Act is available on the website of my Department at www.dbei.gov.ie. Applicability of the Construction Contracts Act, 2013 to construction contracts The Construction Contracts Act, 2013 applies to certain construction contracts entered into after 25 July 2016, but not to all such contracts. For example, it excludes: Contracts of a value of not more than €10,000; or Contracts that relate only to a dwelling of not greater than 200 square metres where a party to such a contract occupies, or intends to occupy, the dwelling as his/her residence; or Contracts between a State authority and its partner in a public private partnership arrangement. All other construction contracts must comply with the provisions of the Act and the parties may not seek to exclude a contract from the legislation under any circumstances, whether the contract is an oral contract or a written contract. Construction contracts to which the Act applies must provide for the following contractual terms: The amount of each interim and final payment, or an adequate mechanism for determining those amounts; The payment claim date for each amount due, or an adequate mechanism for determining it; and The period between the payment claim date and the date on which the amount is due. Main contracts and subcontracts Main contractors are at liberty to agree their contractual terms with their clients, subject to adhering to the mandatory provisions required by the Act as outlined above. However, if a main contract fails to fully incorporate the mandatory provisions, then the Act imposes the applicable contractual term or terms set out in the Schedule to the Act, terms which are also applicable to subcontracts. The Act stipulates that all subcontracts must at least provide the following payment claim dates: 30 days after the commencement date of the construction contract; 30 days after the payment claim date referred to above and every 30 days thereafter up to the date of substantial completion; and 30 days after the date of final completion. The date on which payment is due in relation to an amount claimed under a subcontract shall be no later than 30 days after the payment claim date. The Act permits the parties to a subcontract to make more favourable provision for a subcontractor than the above contractual terms. Payment claims An executing party – the party which carries out the work under a construction contract – is required to submit a payment claim notice to the other party no later than five days after the relevant payment claim date. If the other party disputes the amount claimed by the executing party, that party is required to respond to the executing party in writing no later than 21 days after the payment claim date setting out the reason(s) why the amount claimed is disputed and the amount, if any, that it proposes to pay to the executing party. It may be possible for the parties to reach an agreement on the amount to be paid to the executing party. However, if no such agreement is reached by the payment due date, the other party is legally required to pay the executing party the amount, if any, which the other party proposed to pay in its response to the contested payment claim notice from the executing party. This payment shall be made no later than the payment due date in accordance with Section 4(3)(b) of the Construction Contracts Act, 2013. Statutory adjudication of payment disputes The Construction Contracts Act, 2013 also introduced, for the first time in Ireland, a statutory right to refer a payment dispute for adjudication. A ‘notice of intention’ to refer a payment dispute for adjudication must be served by one of the parties to the payment dispute. The parties may then jointly agree to appoint an adjudicator of their own choice, within a five-day period. However, if the parties cannot reach agreement on who to appoint, an application may be made after the five-day period to the Chair of the Construction Contracts Adjudication Panel, Dr Nael Bunni, to request the appointment of an adjudicator to the dispute. The appointed adjudicator, whether appointed by agreement of the parties or by the Chair, is required to reach a decision on the dispute within 28 days. This period may be extended in certain circumstances.   Pat Breen TD is Minister of State at the Department of Business, Enterprise and Innovation.

Businesses in Ireland are working towards a low-carbon future, but the transition to a low-carbon economy needs to urgently accelerate. By Kim McClenaghan & Dr Luke Redmond Irish businesses are responding to the climate action challenge and to date, 47 companies in Ireland have signed Business in the Community Ireland’s (BITCI) Low Carbon Pledge. Signatory companies have committed to reducing their direct carbon intensity by 50% by 2030, and to report on their progress on an annual basis. The pledge companies operate in traditional carbon-intensive sectors such as agribusiness and energy/utilities, along with a range of other cross-sectoral companies from pharma/med-tech, beverages, transport, retailing, communications, technology and professional services. The pledge aims to demonstrate the commitment of Irish businesses to supporting the country’s transition to a low-carbon economy. The Low Carbon Pledge requires companies to reduce the intensity of their Scope 1 and Scope 2 carbon emissions by 50% by 2030. Scope 1 emissions refer to emissions produced directly from sources owned and controlled by a company, such as fuels used in boilers or vehicles, for example. Scope 2 emissions refer to those produced during the generation of electricity purchased by a company. The narrowing window of opportunity PwC was commissioned by BITCI to produce the inaugural Low Carbon Pledge Report. This work was conducted against a backdrop of mounting evidence that points to a rapidly closing window in which business and society can successfully tackle climate change and its principal driver: carbon emissions. The Environmental Protection Agency’s most recent pronouncements warn that Ireland faces an unfavourable emissions reduction environment due to ongoing challenges in successfully decoupling economic and emissions growth. Ireland is not on track to meet its 2020 and 2030 EU emissions reduction targets, and failure to achieve the 2020 target could result in financial penalties of up to €150 million. What’s more, the latest Intergovernmental Panel on Climate Change report estimates that countries and businesses have a window of just 11 years in which to successfully tackle the carbon challenge. Meaningful progress According to the PwC report, signatory companies have engaged positively with the decarbonisation challenge and have already delivered meaningful emissions reductions. The 47 pledge signatory companies have achieved an overall reduction of 42% in their absolute carbon emissions between the baseline period and 2018, and are on course to secure a 50% decrease in carbon intensity by 2030. Pledge companies have achieved a 36% reduction in average emissions intensity, in part by reducing their electricity usage by 60 million KwH between the baseline period and 2018. This equates to a cost saving of roughly €6.6 million. Energy efficiency-focused rationalisation and strategic investment programmes, coupled with an increasing use of electricity generated from renewable sources, has underpinned the emissions reduction activity to date. Upping the ante The PwC report, and the dataset that underpins it, provides a benchmark against which to assess the future carbon reduction efforts of the signatory companies. With an ever-increasing awareness of the risks of climate change and the importance of accelerating abatement activity, it is critical that the ambition of the Low Carbon Pledge also evolves. While the initial pledge group of 47 signatories is a significant achievement, it will be important to grow this number while extending the carbon commitment scope. Because of the significant intensity reductions over the baseline period to 2018, BITCI has upped the scope and ambition of the 2030 greenhouse gas reduction targets. A critical challenge for companies will be sustaining such reduction efforts and focusing on the delivery of further intensity improvements up to the 50% target and out to 2030, or an earlier date. Enhanced robustness To maintain the integrity of the Low Carbon Pledge, it is critical that businesses seek external assurance of their non-financial data. This is critical to enhancing the robustness of the emissions reduction actions and commitments reported as part of the Low Carbon Pledge. Seeking third-party assurance also provides companies with another opportunity to demonstrate their commitment to decarbonisation, while at the same time enabling companies to prepare for a transition to an increasingly onerous and transparent reporting environment. Scenario analysis The Low Carbon Report analysed four companies – Gas Networks Ireland, Dawn Meats, ESB and Heineken Ireland – to examine how companies are seeking to enhance the sustainability and decarbonisation of their business operations. The analysis found that senior management leadership is central to driving a meaningful response to the challenges of decarbonisation. Businesses should seek to embed decarbonisation and sustainability policies and actions in their business strategy, from both risk mitigation and value-enhancing perspectives. To test corporate strategies, scenario analysis should consider, for example, a high future carbon price, climate change impacts on global and regional GDP growth rates, or climate disruption within the supply chain. Evolving target-setting, coupled with the use of energy management systems and data analytics, can help ensure that companies make informed energy efficiency investment decisions. Strong leadership can help businesses prepare for a carbon-constrained world and ensure that their businesses are aligned with an increasingly carbon-conscious investor and consumer. While delivering carbon reductions through the procurement of electricity generated from renewable sources represents a positive mitigation action, companies could further enhance the integrity of such actions by procuring green-certified renewable electricity. Decisions by senior management to embed renewable energy sourcing targets, underpinned by green certificates, into company strategy could act as an important catalyst for driving further decarbonisation efforts. The case study analysis identifies investors as being increasingly interested in companies’ financial and non-financial metrics. For companies to truly demonstrate a commitment to decarbonisation and sustainability, it is important to place equal emphasis on their financial and non-financial reporting. Leading companies also seek to align the publication of their sustainability and annual financial reports. Such actions demonstrate that sustainability has become an integral part of the company’s core strategy, and associated metrics form part of the business’s key performance indicators.   Kim McClenaghan is Partner in Consulting and Energy, Utilities and Sustainability Lead at PwC. Dr Luke Redmond is Senior Manager, Strategy Consulting at PwC.

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

Could joint audit help improve audit quality and reduce market concentration? By Tommy Doherty Joint audit is a proven means of facilitating the emergence of a diverse audit sector and, in the case of France, has already led to the creation of the least concentrated audit market of any major economy. If undertaken in a spirit of collaboration, it can reinforce governance arrangements on the conduct of audits and deliver real improvements in audit quality. What is a joint audit? In a joint audit, two separate audit firms are appointed by a company to express a joint opinion on its financial statements. It is fundamentally different from a ‘dual’ or ‘shared’ audit, whereby one audit firm (or sometimes more) audit parts of a group and reports to another audit firm, which ultimately signs off on the group audit. Statutory joint auditors must belong to separate audit firms. Joint audits usually involve two audit firms, but a small number of companies have decided voluntarily to appoint three audit firms to perform their joint audit. Joint audit, audit tendering and rotation The 2014 EU Audit Regulation introduced incentives to encourage the adoption of joint audit by allowing joint auditors to benefit from a longer rotation period (i.e. a maximum tenure of 24 years with no tendering required). By contrast, sole audits are subject to tendering after 10 years and a maximum tenure of 20 years. The preamble to the Audit Regulation states that: “The appointment of more than one statutory auditor or audit firm by public interest entities would reinforce the professional scepticism and help to increase audit quality. Also, this measure, combined with the presence of smaller audit firms in the audit market, would facilitate the development of the capacity of such firms, thus broadening the choice of statutory auditors and audit firms for public interest entities. Therefore, the latter should be encouraged and incentivised to appoint more than one statutory auditor or audit firm to carry out the statutory audit.” Nine member states have decided to encourage joint audit through an extension of the maximum tenure allowed, including (in addition to France) Germany, Spain, Sweden, Finland, Norway, Belgium, Greece and Cyprus. Joint audit has long been regarded as a French peculiarity. But in the context of significant corporate failures and unsustainably high levels of market concentration, the UK’s competition regulator, the Competition and Markets Authority (CMA), is now recommending the introduction of mandatory joint audit. In April 2019, it published The Future of Audit report, recommending mandatory joint audit as part of a broader reform package for most FTSE 350 companies with at least one of the joint auditors being a non-Big Four auditor. The benefits of a joint audit From the company’s perspective, joint audit: Enables companies to benefit from the technical expertise of more than one firm; Encourages “coopetition” (cooperation and competition) between joint auditors, resulting in improved quality of service; Leads to a real debate on technical issues and offers additional scope for benchmarking; Allows for the smooth and sequenced rotation of audit firms, where appropriate; and Retains knowledge and under-standing of group operations, which minimises the disruption caused when one audit firm is changed. How joint audit works in practice The practice of joint audit is well-established in France, as it has been a legal requirement there for over 50 years and has gone through several phases of evolution to reach a level of maturity ‘signed off’ by the market. The following steps explain how the joint audit of consolidated financial statements works for the audit of large French listed groups like BNP Paribas, and how it could work in Ireland and deliver similar benefits. Joint audit of consolidated financial statements is the most common form of joint audit, and a professional French auditing standard exists (NEP-100). Step 1 Determine the annual audit approach: the yearly audit approach is jointly determined and includes the preparation of a joint risk-based audit plan. A single set of joint audit instructions (i.e. a manual of the audit procedures to be applied on a coordinated and homogeneous basis to the group’s subsidiaries by each joint audit firm or network) is issued. In practice, both joint audit firms contribute to these documents, which are consolidated before joint approval of the overall audit approach. The audit approach is almost invariably the subject of a combined annual presentation to the group’s audit committee by the joint auditors. Step 2 Overall allocation of work between the joint auditors: whatever the basis of appropriation, a balance between each of the joint audit firms is sought. This is provided for by NEP 100, which stipulates that the audit work required should be split between the joint auditors on a balanced basis and reflect criteria that may be quantitative or qualitative. If a quantitative basis is used, the split may be by reference to the estimated number of hours of work required to complete the audit. If a qualitative basis is adopted, the split may be by reference to the level of qualification and experience of the audit teams’ members. Step 3 Allocation of work on the different phases of the audit: for the accounts of consolidated subsidiaries, for joint and single audit, the parent company’s auditors are deployed as widely as possible over its subsidiaries worldwide. The allocation of subsidiaries to one or other of the joint auditors may be based on business, product or geographical location criteria. When geographical criteria are used (countries, zones, etc.), each joint auditor is deployed over one or several territories. In the case of significant groups, the joint audit approach is often applied within each of the group’s businesses to ensure oversight by ‘two sets of eyes’ for each business line. Step 4 Levels of group audit reporting: up to four levels of group audit reporting are distinguished: individual entities; geographical zones or business lines (aggregating several entities); group financial and general management; and those charged with governance. For individual entities, for example, the auditor in charge of each entity is responsible for reporting the audit conclusions by way of audit summary meetings with the local management and for expressing an audit opinion on the entity’s consolidation package. Step 5 The group audit opinion on a joint audit: the joint auditors prepare a joint audit report addressed to the group’s shareholders, which is presented during its annual general meeting. The audit opinion expressed is a single joint opinion. Special provisions exist in the event of disagreement between the joint audit firms as to the formulation of their audit opinion. In practice, they are rarely needed.  Step 6 Joint and several responsibilities: each joint auditor is jointly and severally responsible for the audit opinion provided. The exercise of joint and several obligations implies that each joint auditor performs a review of the work performed by the other. The sharing and harmonisation of the audit conclusions and the audit presentation prepared for the audited entity constitute the first step in that review. In addition, the audit summary memoranda and working paper files for the engagement are subject to reciprocal peer review. The two most common criticisms of joint audit relate to the cost and the additional risks involved. However, most of the tasks brought about by a joint audit situation are highly value adding as they are dedicated to the ‘professional scepticism’ necessary to express an audit opinion. In practice, the additional cost is borne by the audit firms involved rather than being passed on to the audited entity. The UK as a benchmark In 2020/21, the EU audit reform will be up for review. The UK reform will strongly influence the dynamic of this debate. Given the importance of its financial market, decisions in the UK will also have an impact beyond Europe. The Commonwealth countries look to the UK for best practice financial regulation and adopt rules that they consider beneficial for their markets. More countries are therefore likely to seriously consider joint audit as a measure to diversify their audit markets. Mazars believes that the UK will go ahead with the reform and that other countries will start to seriously consider joint audit for large corporates as part of a package of solutions to improve audit quality and reduce market concentration. Interestingly, on 28 May 2019, the prospect of Ireland preparing a similar report on The Future of Audit was raised at a Joint Committee on Finance, Public Expenditure and Reform. As an audit firm with a proven track record in joint audit, we believe that this is a solution than can provide tangible benefits to all stakeholders.   Tommy Doherty FCA is Head of Audit and Assurance at Mazars Ireland.

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

Could the fall in interest rates result in an economic ice age for western economies? By Cormac Lucey Across the developed world, interest rates have collapsed over recent decades. Yields on German government 10-year bonds fell below -0.7% this month while yields in Japan were hovering at -0.3%. Japan has struggled to combat low growth and low interest rates for 30 years. Only America, where rates on government bonds remain at about 1.6%, has avoided Japanification. So far. The trouble is the US may be headed that way too – its rate has halved since last October. Why have interest rates fallen so far, and where might they now be headed? Several factors influence underlying interest rates. The first is the rate of inflation. In theory, real interest rates (after we exclude the inflation factor) should be relatively stable. So, if inflation drops sharply, we would expect a sharp drop in interest rates. And inflation has indeed dropped sharply in western countries over recent decades since it peaked in the inflationary 1970s. Nonetheless, in recent times real interest rates have also dropped. It used to be the case that bank depositors got a rate of interest that exceeded the rate of inflation and provided them with real capital appreciation. That is no longer the case. Today, depositors get negligible or nil rates of interest income even though inflation persists and erodes the underlying value of their savings. There are other factors at play. The biggest cause of ultra-low rates is weak economic growth. If growth rates are high, there is substantial demand for investment funds which stokes demand for deposits (so that banks will have sufficient funds to lend) and supports higher interest rates. Low economic growth pushes interest rates down. Over the twentieth century, productivity per worker grew in the developed world at about 2% per annum. Since the turn of the century, underlying growth amounts to half or less than half of that rate. This problem has been described as “secular stagnation”. There has been extensive academic debate on the subject, but nobody has come up with a convincing explanation for this drop in underlying economic growth. Ageing populations are another factor propelling interest rates downwards. The longer we anticipate our life after retirement will be, the more we need to save to fund our retirements. If the supply of savings increases then, all other things being equal, we would expect the price of savings (i.e. the rate of interest) to fall. There are several problems with interest rates being this low. Central bankers have less interest rate-cutting ammunition with which to fight the next recession. It is notable that the European Central Bank is already contemplating monetary policy relaxation to fight the next downturn without having once felt able to increase its base rate of interest during the economic recovery since 2010. Commercial banks also have big problems as a significant element of their profits – interest income generated from current account deposits on which they pay no interest – has dried up in today’s low interest rate environment. That helps explain why the index of euro area bank equities has fallen in value by over 40% since January 2018. Albert Edwards, a strategist with the French investment bank, Société Générale, has long predicted this fall in interest rates and an economic ice age for western economies. He recently asked: “Do market participants really believe fiscal stimulus and helicopter money will save us from a gut-wrenching global bust that will make 2008 look like a picnic?” He argues that the current government bond rally is not a bubble, but an appropriate reaction to the market discounting the next global recession. This means that “the bubbles are not in the government bond market in my view. They are in corporate equities and corporate bonds”. Ouch! Cormac Lucey FCA is an economic commentator and lecturer at Chartered Accountants Ireland.

Caroline McGroary went to Riyadh for four months, but stayed for six years – and her adventure isn’t over yet. How did you end up volunteering to go overseas? In August 2013, while working for Dublin City University (DCU) as a Lecturer in Accounting, I had the opportunity to travel to Riyadh in Saudi Arabia after DCU signed a partnership with Princess Norah Bint Abdulrahman University (PNU). PNU is the country’s foremost female educational institution and the largest women’s-only university in the world, with capacity for 60,000 students. DCU established a division of DCU Business School within PNU, delivering two undergraduate degree programmes in Finance and Marketing and one postgraduate degree programme in Business Administration. Eager to be part of this project, I volunteered as a member of an initial team of four DCU staff who relocated to Riyadh to initiate the collaboration. What did the role entail? My initial four-month appointment was as Programme Director at PNU and I also held the position of Lecturer in Accounting, Finance and Business Strategy. The task of establishing a women’s business school in a foreign country was in many ways similar to a start-up business venture. Leaving the cultural differences and language barrier aside, we assumed responsibility for all business school operations as well as lecturing responsibilities. We were required to train our Saudi academic colleagues and to liaise with the senior management of PNU, on behalf of DCU, on a regular basis. Navigating the challenges of the first semester required immense teamwork and organisation. At the end of the term, I took the decision to extend my contract for the remainder of the academic year. Six years on, having overseen the graduation of over 500 students with DCU degrees, I am still living in Riyadh and embracing the opportunities and experiences that this collaboration continues to offer. What in particular struck you about life in Saudi Arabia? Saudi Arabia is routinely portrayed in mainstream Western media in a negative light, primarily due to its strict legal, religious, cultural and societal norms. However, the experience of living in Riyadh at a time when the country is undergoing dramatic economic and societal change has given me a very different perspective on life here. Through my position, I’ve both educated and worked alongside Saudi women and I’ve witnessed first-hand my Saudi students and colleagues undergo increased empowerment and social participation, contributing fully to the development of their country. How did you benefit as a result? While there are many highlights from my time here so far, there are a number of key experiences that have benefited me both professionally and personally. First, the most notable has been educating young, bright, tenacious Saudi women, which is an extremely rewarding experience. Second, participating in initiatives such as setting up the Irish Business Network in Saudi Arabia (IBN-SA) in partnership with the Irish Ambassador, His Excellency Tony Cotter has served as an important platform for my professional engagement with the Irish business community, the Saudi business community and other communities in the Kingdom. This has led to many other opportunities, such as working with high-profile companies and governmental bodies on projects that have had educational, economic and social impact, with much of this work achieving international recognition. You took up some non-profit work while in Riyadh. What was your experience of volunteering overseas? Since moving to Saudi Arabia, I have actively sought out ways to give back to the local Saudi and Irish communities. I am one of the founding members of the IBN-SA and I volunteer with the local Gaelic Athletic Association (GAA) club (Naomh Alee), teach Irish dance classes, engage in charity events – including the ‘Riyadh Darkness into Light’ event which raised funds for Pieta House in Ireland – and regularly create opportunities for my students to engage in local community events, such as the promotion of physical activity among their local communities and engaging with local charities. What advice would you give someone who is considering moving overseas? The prospect of moving overseas can be very daunting. However, my time in Riyadh has taught me to be open-minded about new experiences and to use challenges as a platform for growth and development. Personally, my time living in Saudi Arabia – one of the most conservative countries in the world – has been the experience of a lifetime. Not only has it allowed me be part of a historical movement centred around the empowerment of women through education, it has also afforded me the opportunity to immerse myself in a new culture, contribute to the local community and to travel extensively. The experience has enabled me to meet people from so many different backgrounds and cultures, which has been an incredible personal as well as professional journey. For these reasons, I’m a strong advocate of gaining international experience and I actively encourage anyone who has this opportunity to embrace it.   You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Having lived and worked in six countries, I have realised that there is a price to be paid for being an average networker. By Kingsley Aikins At its core, networking is about taking three key actions: changing our attitudes, altering our behaviours and learning new skills. In a world where life is a game of inches, we need to see networking as the key difference- maker. One introduction or conversation can change your life, but they don’t happen when you are lying in bed or sitting at your desk – they happen when you are in motion, when you are out and about, when you develop a reputation and put your talents on display. Networking is the key to career progression – the future leadership of your organisation will not consist of unknown people. The challenges However, there are some real challenges with networking. First, most people say they hate it and it tends to get a pretty negative press. It is sometimes seen as an inelegant way of using people and is regarded as both insincere and manipulative. We tend to mix up networking and sociability, and assume that the most sociable person is the best networker. In fact, it can be the exact opposite. Shy, introvert types can be better at networking than extroverts because they do it with decency, authenticity and integrity – and that comes across. They ask questions and are better listeners. Second, networking is not taught at school and college. Companies don’t have strategies for it, yet everybody says that it’s really important. A third problem is that many people don’t realise that, as their career progresses, the skills and qualifications that enabled them to get their job in the first place become less important (because everyone has them and you can’t compete with what everyone else has). Relationships therefore become more important. Finally, people don’t ask themselves the brutal question – is my network good enough for where I want to be in the next five years? Give and take Key then is to put networking front and centre of your personal and professional life and to realise that there is a process to networking – a learned process which, if followed and implemented, will give you a better chance of success. The bedrock to this is to accept a key foundational concept which, at first glance, might appear counter-intuitive. Networking is all about giving rather than getting. Most people think they have to focus on networking because they want to get something for themselves such as a new job or a new sale. What I am saying is the exact opposite. Think first how you can help other people – how you can put your network at the disposal of others. This is based on a very simple and fundamental premise: in life, the more you give, the more you get. When you give consistently to individuals, it comes back from the network. Networking is not about any one big thing – it is about a lot of small behaviour changes which, when implemented on a daily basis, become habits and, eventually, rituals. They then become the way you lead your life.  A personal asset A harsh reality in life is that you can’t go it alone; you have to network your way to success. The way to opportunities you don’t know is through people you do. Networking can obviously have practical returns in terms of getting more business, staff and investors. However, research shows that people who build strong and diverse networks live longer, are stronger mentally and physically, earn more money and are happier. In a world where people are constantly changing jobs, networking is the way to get your next one – the vast majority of good jobs are not advertised. Also, companies want to ‘hire and wire’ – hire people and wire into their network. Now, when you are being interviewed, people want to know about your qualifications and experience, but they also want to know who you know. We live in a world where it is not what you know or who you know, but who knows you. Networking is the way to get out of your silo and get to know people from different backgrounds. Research shows that if your organisation doesn’t reflect the diversity of the economy in which you operate and the society in which you live, then you, as a company and as an individual, underperform. Also, your network is portable. You own it. It’s part of your personal asset base. When you move, it goes with you. Networking abroad Having lived and worked in six countries, I have found networking to be the glue that makes everything happen and I realised that there was a price to be paid for being an average networker. Having observed good networkers in action, I now realise that they have certain things in common. They work hard at it, they don’t brag about it, they don’t keep score. They are confident it works, even if they are not quite sure how. They understand the power of asking and referrals. They think like farmers who plant a seed in the spring, water and nurture it and look after it, confident that there will be a harvest.  They understand the importance and potential of technology in networking, but also realise the power of personal face-to-face connections. In that sense, they are hi-tech and hi-touch. They are curious and they ask questions. Great networkers are great salespeople because they create a vast and spreading sphere of goodwill around them and they constantly add value to the people they meet. There is a precise four-phase process to networking, which is about research, cultivation, solicitation and stewardship. If you follow this process, there is a greater chance of success than if you don’t. Kingsley Aikins is CEO at The Networking Institute.   You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

More and more people are returning to Ireland having worked abroad for a number of years. More often than not, this process also involves starting a new job and, inevitably, paying Irish tax. With that in mind, this article aims to provide a practical guide to some of the tax and pension issues our members should think about as they plan their return home. By Bríd Heffernan Back to basics First, let us briefly cover some of the basics of the Irish income tax system. Employees pay tax through the Pay As You Earn (PAYE) system which, since 1 January 2019, operates in real time. This means that income tax, pay-related social insurance (PRSI) and the universal social charge (USC) are deducted at source by your employer and subsequently paid to Revenue. As an employee, you can manage your taxes online through Revenue’s MyAccount system. If you have a new job, you will need to register your new role with Revenue in order to be taxed correctly. On your return to Ireland, one of the first practical steps to take is to apply for a Personal Public Service Number (PPSN). As a returner to Ireland, you should already have one but your children (if they were born abroad) or your partner (if he or she is not an Irish citizen) will require one. The PPSN will provide access to social welfare benefits, public services and information in Ireland. Tax residence  On returning home, your liability to Irish tax depends on your residence, ordinary residence and domicile position in Ireland. Residence for tax purposes depends on how many days you spend in the country. Even if you are not actually resident in a particular year, Ireland can still be your ordinary residence as this term refers to the country where you are usually resident over a number of years. The country that is your permanent home is known as your domicile. If you are tax resident in Ireland for a tax year, you pay Irish tax on your worldwide income and any gains you make in that year. Worldwide income is the total income that you earn anywhere in the world. Residence and domicile are taken into account for a number of taxes including income tax, deposit interest retention tax, capital acquisitions tax and capital gains tax. For more information on determining your residence status in any year, visit www.revenue.ie. Tax reliefs You may return to Ireland mid-way through a tax year and therefore, have income on which you may have to pay Irish and foreign tax. In this instance, it may be possible to claim relief from the foreign country if it has a double taxation agreement (DTA) with Ireland. Or, you can avail of a tax relief called “split-year treatment” for the year you return to Ireland. Split-year treatment has the benefit of taxing employment income for only part of a year (any foreign employment income earned before returning to Ireland and becoming tax resident again is not subject to Irish tax), while affording the full range of tax allowances and credits and rate bands of a resident. To avail of this treatment, you will need to contact Revenue in writing. Another relief available to individuals returning home is the Special Assignee Relief Programme (SARP). This provides income tax relief for certain people who are assigned to work in Ireland from abroad up to the year 2020. A number of conditions must be met in order to claim SARP and where you qualify, a proportion of your employment earnings are disregarded for income tax. To claim this relief, your employer must send Form SARP 1A to Revenue within 90 days of your return to Ireland. Social security and pension considerations There may be significant differences between the Irish social security system and the system in the country you are moving from. It is therefore worth familiarising yourself with these differences in order to protect your social security entitlements. In the EU, each country has its own social security laws. However, EU rules coordinate national systems to ensure that people moving to other EU countries do not lose security cover and can amalgamate their contributions from member states when applying for a pension. If you are returning to Ireland from a country within the EU or EEA, you should bring an E104 and U1 form back with you as it will provide details of the insurance contributions you made in that country. Ireland also has bilateral agreements with a number of countries outside the EU including the USA, Canada, Australia and New Zealand. Consequently, contributions paid in these countries can be added to your Irish social insurance contributions. When it comes to protecting your pension contributions made in Ireland or abroad, there are a number of things to consider. While working abroad, you may be able to claim Migrants Members Relief. This provides relief on pension contributions paid to a pre-existing qualifying pension scheme. If you have made contributions to a foreign pension fund while living abroad, it is important to note that the rules for transferring or accessing the pension’s funds when you return to Ireland are usually determined by the foreign country. Each country will have different rules for such transfers, and you should contact your pension administrator in the foreign jurisdiction to discuss the options available to you. In general, Revenue will allow foreign pensions to be transferred to an approved occupational pension scheme or Personal Retirement Savings Account (PRSA) provided a number of conditions are met. Conclusion These are just some of the tax, social security and pension considerations to think about on your return to Ireland. It’s important to be familiar with these issues to avoid situations where you could end up paying double tax and to ensure that you protect your social security and pension contributions. Bríd Heffernan is a Tax Manager at Chartered Accountants Ireland. You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Chartered Accountants considering a career abroad can benefit from a number of mutual reciprocity agreements with fellow Institutes worldwide. Chartered Accountants Ireland, through the Common Content Project (CCP), has been working with leading European Institutes to develop a new education benchmark for professional accountants that is fully EU and IFAC compliant and which supports auditor mobility within the EU. Following the agreement of the new benchmark, the Institute’s own education and assessment processes were assessed, confirming compliance with the CCP requirements. If you are a registered auditor in Ireland, you can gain audit rights (and depending on the country, membership rights) through the passing of a local law and tax examination. Further details are available about the project at www.commoncontent.com.   Other agreements include: Access to membership Chartered Accountants Ireland has mutual reciprocity agreements (MRAs) with a number of other leading global Institutes, which allow Chartered Accountants Ireland members to apply for membership of those bodies and allow members of those Institutes to apply to Chartered Accountants Ireland for membership. Applicants to Chartered Accountants Ireland will usually have access to membership without examination. To do so, you will need to contact the relevant reciprocal body and provide evidence of good standing and pay the requisite fee. Retention of membership is a requirement of this process. Practice rights Access to practice rights is not automatic and will normally require the passing of local company law and taxation (or similar) exams. Should you wish to gain practice rights, it is suggested that you should preferably gain rights in Ireland before seeking rights overseas. In those jurisdictions where practice rights and membership are synonymous, an examination must be passed. Audit rights are not automatically covered by these agreements as there can be specific local requirements in some cases.  Irish Chartered Accountants who are planning on gaining audit practice rights should gain Irish audit rights first before leaving home.   Chartered Accountants Ireland has MRAs with the following Institutes: The American Institute of Certified Public Accountants (AICPA)/National Association of State Boards of Accountancy (NASBA). This agreement provides access to membership, practice rights and audit rights subject to members meeting the specific entry criteria and the passing of the IQEX examination. NASBA administers the IQEX and issues the AICPA license; Chartered Accountants Australia and New Zealand (CAANZ, formerly the Institute of Chartered Accountants of Australia and the New Zealand Institute of Chartered Accountants); Chartered Professional Accountants Canada (CPA Canada, formerly the Canadian Institute of Chartered Accountants); The Hong Kong Institute of Certified Public Accountants (HKICPA); The Institute of Chartered Accountants of Scotland (ICAS). No examination is required to gain practice rights); The Institute of Chartered Accountants in England & Wales (ICAEW). No examination is required to gain practice rights; The Institute of Chartered Accountants of Zimbabwe (ICAZ); The Institute of Singapore Chartered Accountants (ISCA); and The South African Institute of Chartered Accountants (SAICA). For more information, contact Paula Dreelan on +353 1 637 7216 or email registry@charteredaccountants.ie. For any technical queries, contact Ronan O’Loughlin, Director of Education and Training at ronan.oloughlin@charteredaccountants.ie or 01 637 7329. You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Lured by Ireland’s rudely healthy economy and the superior quality of life offered by their native land, an increasing number of Chartered Accountants are choosing to return home to Ireland. Barry O’Leary looks at some of the practicalities involved. Wanting to come home and actually making it happen are two very different things. Many people who yearn to bring up their families in Ireland and have also had the opportunity to do so, haven’t yet made it back. This is usually because of something quite simple, which could have been addressed with some advance planning. The best way to approach this life-changing move is to treat it as a project and plan accordingly. The first stage is to investigate the job market and assess the opportunities that may or may not be there. This is a relatively simple process and a routine scan of recruitment websites, as well as those of reputable recruitment specialists, will give a fair indication of the roles available. This should be backed up with further research to establish the quality of the opportunities. The Leinster Society Salary Survey will give an indication of salary scales, for example. Also, contact friends and reach out to LinkedIn contacts to hear what they have to say about the climate back home. Before you apply… If the results are positive, the next natural step is to start applying for roles. However, a few pieces of the jigsaw need to be put in place first. The first step is to figure out what you are going to do if you do get a job. Clearly, if you are going to start a job in Ireland, you are going to need a place to live, schools for children and so on. Of course, buying a house or even renting one back in Ireland while still living overseas and before you have even landed a new job is an expensive – and possibly unnecessary – step to take. Better to consult with family and friends first and establish if there is a possibility of staying somewhere temporarily, say for three months, while you get settled in the new job and make arrangements for your family to follow you back. That gives you the breathing space to sell up property and other assets overseas while going house-hunting in Ireland. Another essential early step is to speak to the banks about your prospects of getting a mortgage. Having preliminary approval in place will guide the house search. Next is to talk to estate agents and get them looking out for suitable homes. None of this costs money, but it can save a lot of time and heartache in the long run. The other issue to take care of at this point is insurance. Many Irish people returning home are surprised at how difficult, and expensive, it can be to get motor insurance. Shop around the insurance companies to get some prices to avoid nasty shocks later. That can also influence your job search as a company car can suddenly become a lot more alluring. Interview stage The next thing to think about is interview availability. People living in the UK might be able to hop on a Ryanair flight at fairly short notice to attend an interview and be there and back in a day but for those living further afield, more advanced planning is required. One option is to arrange to spend a week at home a month and inform prospective employers of your availability during that time window. Generally speaking, if they are sufficiently interested in you, they will do their best to accommodate you. Having gone through all of that, it’s time for the job hunt itself. This starts with updating your CV and your LinkedIn profile. It might be worth getting advice from a fellow professional or a recruiter back home at this stage. They can help with the design of the CV and what aspects to highlight in the context of the prevailing jobs market. After that, you’ve got to decide on the type of role you’re looking for, and where. Is it practice, industry, or the public sector? If it’s industry, what sector? And where? If it’s Dublin, can you afford housing and can you find schools for your children? You also have to consider your partner at this stage. Will they also be seeking a job when they return home? What area of the country and what sectors best suit them? Dealing with these questions probably requires the assistance of on an Ireland-based recruitment consultant who can help with the job search and move back home.  They can offer independent advice on the process and help ensure that you make the right decisions in all circumstances. The first job offer is not always the best one, and the best paid offer is not always the right one – an experienced consultant can help match the right role to the right person as well as assisting with some of the more practical aspects of the move, such as recommending insurance brokers, mortgage lenders and so on. If you follow this basic roadmap, you will give yourself a much better chance of making a successful move back to the auld sod. Barry O’Leary is the Co-Founder of ACCPRO. Taxing times One of the problems most frequently encountered by accountants returning home is personal taxation. If you want to avoid being subject to Emergency Tax of up to 41%, give your employer your PPS number (Irish people generally have one before returning home) so they can request a Revenue Payroll Notification (RPN) from Revenue. The RPN will show your total tax credits, tax rate band and USC rate band so your employer can make the correct tax deductions from your pay. If you are starting your first job in Ireland, you must register online though Revenue’s myAccount where you can view your personal tax record. You can read more about living and working overseas in Chartered Accountants Abroad, the publication from Accountancy Ireland for Chartered Accountants Ireland members abroad.

Blockchain represents both an end and a beginning for the accountancy profession. By Fearghal McHugh and Dr Trevor Clohessy Transparency can be considered the holy grail of governance best practice. The codes, acts and markets demand it as it enhances the view of corporate transactions, which has in turn affected issues such as environmental and sustainability reporting. Transparency is the core of blockchain, which will affect accountancy while satisfying this core principle and driver of good corporate governance. The difference is that it will not take the blockchain elements outlined below as long to become mainstream as it has taken to impact on environment and sustainability concerns. The consensus is that blockchain and its technologies will change the people skills, the processes, the systems and the structure of accounting practice currently applied to any transactions involved in the recording of any information. This has big implications for those in the sector but, significantly, gives a market opportunity to those who are not. Indeed, this opportunity is further enhanced when artificial intelligence integrates with blockchain. Scale of disruption The potential disruption is on the same scale as Amazon, which competes with all retail shops in the country. The first to market with the ‘Accountazon’ brand, named here first, will dent the current position of large or small practices. Accountazon requires accountants, but the ability to scale, integrate and generate output based on fully transparent and rules-based decision-making at the lower level of processing while, at the upper level, having the decision-making and knowledge base of a collective of highly-paid accountants will affect the accounting industry. This can drive the accounting industry to build on specialisation and value proposition offerings at a higher level than those currently generating income. In other words, intelligent computer systems will do what accountants currently do. The impact will force the industry to seek a new place away from rudimentary transaction-type roles of fundamental audit and tax processes. This will require in-depth knowledge (which artificial intelligence can replace) to pure decision-making; in essence, the better the decision-making, the higher one’s revenue and reputation. The purpose and role of accountants will remain, but will be implemented at a higher knowledge application and analysis level and further away from the current operations position and perspective. A personal approach There is no need for panic yet. As with Amazon, retail shops have continued in business but the pricing, delivery, support, convenience and speed we enjoy from the online retailer may also need to be addressed in the accountancy industry; we need to make accountancy accessible, friendly, convenient, productive and transparent. Either the market or the technology will drive the change, or the accountancy industry will embrace it first and deliver value. A Ryanair approach, encouraging a more direct business model using technology, could be applied in the accountancy industry and is more likely now with blockchain and artificial intelligence. The middleman remains the accountant, however, and if it is deemed that a lot of processes don’t add value, the middleman needs to present a value proposition that cannot be offered by the system itself in order to add future value. In the Ryanair model context, so many travel agents adjusted and seem to have found that personal service, customisation and the time taken to provide a tailored travel package for customers is what many consumers want. The drive for digitisation An example of a driver of this type of change arose earlier this year when the then-head of the IMF, Christine Lagarde, urged central banks to launch digital currencies to satisfy public policy, financial inclusion, security, consumer protection and privacy in payments. While blockchain is mostly linked with cryptocurrencies, digitisation policies embraced by companies like Nestlé, Guinness and Glanbia are being encouraged by stakeholders but embraced in a controlled manner. Blockchain technology is part of the cryptocurrency system that actually worked. It is becoming embedded in many industries from manufacturing to web-based services, facilitating faster and more secure transactions on a growing scale. When companies and consumers have a better, easier, faster and more transparent way to do business, they will select it as time is a critical factor in corporate life. The practical elements and approaches to blockchain, as highlighted below, will be seen by clients as having the potential to reduce charges and the time involved in accountant reviews and advice, which Revenue could see as a means of speeding up returns. Public versus private Blockchain is not a mobile application, a company or a cryptocurrency. In its simplest terms, blockchain is a ledger that records transactions digitally and records details about the transaction. These details are recorded in multiple places on the same network. Blockchain comes in two flavours: public and private. A public blockchain allows anybody on the network to input transactions and data onto the blockchain. No single entity controls the network. A public blockchain operates like Wikipedia in that users have a composite view that’s constantly changing. Bitcoin, the tradename used to represent the familiar digital currency along with another called Ethereum are examples of public blockchains. Private blockchains work in a similar fashion to public blockchains, but with access restrictions that control who has access to the network. One or multiple entities control the network. Think of this in terms of a traditional database system that can only be accessed by specific authorised employees. Two features differentiate blockchain digital ledgers from traditional ledgers. First, the assets and transactions recorded in these digital ledgers are secured through cryptography. As an example, in season four of the Netflix drama, Narcos, Guillermo Pallomari’s financial ledgers records are taken as evidence by the Drug Enforcement Authority (DEA). However, due to the complicated coding system deployed by Pallomari within these financial ledgers, the DEA is unable to decipher the transactions and/or assets in order to use them as evidence. Pallomari holds the encryption key, which would enable the DEA to crack the code. In terms of blockchain, this also holds true. Due to sophisticated encryption keys, the transactions and assets are secure, immutable and unforgeable. Second, blockchain encompasses the disintermediation of traditional financial intermediaries (e.g. banks, brokerages, mutual funds). This disintermediation is made possible by smart contracts, which are complex algorithms that execute the terms and conditions of a traditional contract without the need for human intervention. This leads to a superior ability to prove custodianship and ownership of assets, which could potentially improve efficiency and enhance transparency while also reducing costs and income in the accountancy profession. Complexity and novelty Today, a number of multinational technology organisations enable businesses to implement blockchain practically. For instance, Microsoft currently offers a blockchain development solution that combines the advantages of cloud computing (e.g. virtualisation, scalability, pay-as-you-go pricing model) and blockchain. This service is called Blockchain-as-a-Service (BaaS) and comes with a set of development templates (e.g. smart contract development and integration) that users can deploy and configure with minimal blockchain knowledge. However, prior to diving into the blockchain sea, accountancy organisations should adopt a caveat emptor mantra. History suggests that two dimensions impact on how a new technological trend and its business use can evolve. The first is complexity, which is represented by the level of coordination required by the organisation to produce value with the new technology. The second dimension is novelty, which describes the level of effort a user requires to understand the problems that the new technological trend can solve. The more novel a concept is, the greater the learning curve. Accountancy organisations can develop adoption strategies that map possible blockchain implementations against these two dimensions. Complexity and novelty can vary from low to high in terms of the stage of technology development. For instance, accountancy organisations that are new to the blockchain concept may want to introduce a pilot initiative that is low in novelty and low in complexity. One such initiative could encompass the inclusion of cryptocurrency transactions in a firm’s transactions processes. New skills While blockchain is spread across many systems, it is not public. It protects transactions because they are shared and copied on many parts of storage devices, and would require all parts and copies of the transaction to be amended and/or deleted to have an effect. Deleting a transaction in one place is easy, deleting it from several locations and tracking each one – while not impossible – would require some work. This capability could potentially scare some in that transactions cannot suddenly be erased, but it is encouraging for others. Apply this concept first to the level of payments and receipts and build that up to management reporting, budgets and strategic reports to ensure a higher level of accuracy and clarity. This will eventually lead to a sense of integrity, another governance ideal. With reference to speed, this can move business from reliance on past information to live analysis and if it’s faster, it will be cheaper in the long-run to produce. While a positive for business, it will not require the skill of a finance professional but a computing-finance professional. In a 2018 Irish industry report, one of the authors, Trevor Clohessy, identified that IT/education providers must do more to demystify blockchain and expedite the learning process. The report outlined how the core competencies and skills required for blockchain are broader than the core technology and encompassed skill sets, which fall under the following categories: Foundational technology (e.g. cryptography, public key architecture); Distributed ledger technology (e.g. mining, consensus algorithms); Forensics and law enforcement (e.g. money laundering, dark-net); Markets, economics and finance (e.g. business modelling, cryptonomics); Industrial design (e.g. supply chain, Internet of Things); and Regulations and standards (e.g. smart contracts, governance frameworks). From an accountancy perspective, it is envisaged that certain traditional skills relating to accountancy will be eliminated or reduced (such as reconciliations or provenance assurance, for example). Blockchain transactions will enable new value-adding activities but while the range of extant skills required will change, this change need not be Byzantine. It is envisaged that the markets and regulations categories outlined above will be important for bridging the blockchain literacy gap between various business and technology stakeholders. Looking ahead, accountancy practices can examine their business models in order to derive value from blockchain. Janus, the Roman god, contained both beginnings and endings within him. That duality characterises blockchain too. It will put an end to traditional ways of doing things and usher in a new era for business and for the world at large. It will be divisive, pervasive and transformational all at the same time, and will encourage accountancy professionals to look ahead and not base their operations and decision-making on past data. The blockchain future is one with present and predictive transacting data systems with in-built transparency and integrity.   Fearghal McHugh is a lecturer in Chartered Accountants Ireland and GMIT. Dr Trevor Clohessy is a researcher and lecturer in GMIT.

When in a professional crisis, it’s difficult to see the wood through the trees. Resolving this inflection point as a business leader can take a different set of skills not yet in your arsenal, explains Brian Fowler. An inflection point is a period when an organisation must respond to disruptive change in the business environment effectively or face deterioration but, in practice, it’s a rare but decisive moment that marks the start of significant change – often in crisis. These moments not only affect organisations and industries, but they also impact on careers, too. At an inflection point, we are in a situation where the expectations placed upon us have so fundamentally altered because of the changes in the profession or working environment that if we don’t adapt, ourselves or the business will fail. When managing senior appointments, I am in contact with executives facing career challenges every day. The different types of situation are so vast that I couldn’t outline them easily, but pending redundancy after being a part of an organisation’s long-term senior leadership team or an executive transitioning from the safe zone of their current position to a different organisational role are not uncommon. If it’s a job move, many recruiters will introduce you to great opportunities.  However, it’s important to remember that a recruitment consultant’s primary task is source a candidate for a particular job and requirement for their client. If you are at a career inflection point, not only do you need a job, but you need proper career advice.  Who can help? There is a saying “That for every will, there is a relative!” and, in business, for every problem, there is an advisor, both competent and incompetent. It’s human nature to start the discussion with people within your network, whom you feel could be a good advisor. Your family and friends know you, but do they understand your business strengths and achievements, and how you have coped and tackled challenges?  Soundboarding with your peers seems intuitive but is often detrimental. Similarly, there are brilliant people in academia, but they may not have been at the coal face of business. It would be best to talk to executives who have a successful business track record, and whose only objective is to support and advise you.  Finding the answers When a professional hits a career inflection point, feeling inadequate is not uncommon. As a business leader, you may find that the skills and training that have brought you to this point in your career may be insufficient to bring you into the next development phase. The approach you will want to take may be a continuation of how you have resolved usual day-to-day business issues in the past, but you must remember that you are at an inflection point, and possibly heading into unchartered territory. Professional support and guidance will pay dividends.  Working with an executive coach can be an eye-opening experience. Great coaches are masters at asking questions that help them understand exactly what you are grappling with, but more importantly, they will help you view your situation through a new lens. Coaches don’t have the answers, but their questions can guide towards the answer that will best suit you.  People experiencing a dramatic change, in work or life, tend to keep asking themselves the same questions over and over. These questions are within their comfort zone, but the inflection point problem needs a different approach. The executive needs to start asking a different set of questions to come up with a plan to resolve the situation. An executive coach is the person who can teach you what questions to ask. Interacting with a coach should not only help you develop tactics to overcome today’s issues but help you gain skills to overcome future challenges. You will need to come up with better answers when facing professional challenges, and those answers will come more easily if better questions inspire you.  Brian Fowler is the Founder and Managing Director of financial recruitment specialists, Accountancy Solutions.

Paul Smith breaks down the three most significant changes in the latest edition of Revenue’s R&D tax credit scheme guidelines. In a recent Oireachtas debate, Deputy Mary Butler asked the Minister for Business, Enterprise and Innovation: “What is being done to ensure we reach the EU average spend? Will Ireland meet the 2020 target to spend 2.5% of GNP on research and development annually?” To which the Minister replied: “It is unlikely that many European countries will reach the target of 2.5%. Where Ireland stands and how well we are doing, we can only go on the European and global statistics we get. Under the heading, Excellent Science, a report from Science Foundation Ireland (SFI) noted that Ireland is tenth in the global scientific ranking. A few examples of our global rankings in different areas are: second in animal and dairy, immunology, and nanotechnology; third in material science; fourth in agricultural science; fifth in chemistry; and sixth in basic medical research… I have been all over the world and our 18 research centres are recognised as being par excellence throughout Europe and the world. We are doing exceptionally well.” A key part of Ireland’s national development strategy is to develop “a strong economy supported by Enterprise, Innovation and Skills”. The research and development (R&D) tax credit scheme forms part of the overall corporation tax offering aimed at fulfilling this strategy. The primary policy objective behind the tax credit is to increase business in Ireland, as R&D is considered an important factor for increased innovation and productivity. Reflecting these considerations, the Government’s Innovation 2020 Strategy aims to achieve the EU 2020 target of increasing overall (i.e. public and private) R&D expenditure in Ireland to 2.5% of GNP by 2020. The R&D tax credit scheme is administered by the Office of the Revenue Commissioners, which issued its latest guidelines on 6 March 2019. It is almost four years since the previous guidelines were published (April 2015) and in the interim, a number of significant events relating to the wider research, development and innovation (RD&I) landscape have happened: The Knowledge Development Box was introduced in 2015; The updated OECD Frascati Manual was issued in 2015; The Department of Finance reviewed the R&D tax credit scheme in 2016; An R&D Discussion Group was formed in 2017; and The Department of Business Enterprise and Innovation’s Disruptive Technologies Innovation Fund was introduced in 2018. It was expected that the latest guidelines would provide additional clarity on issues set out in previous ones, insight from the increased number of audits, and recommendations for continued best practice. There are 14 changes in all, most of which are relatively minor, and are therefore not discussed in this article. I will instead evaluate the more significant changes and briefly comment on the upcoming Department of Finance review of the R&D tax credit scheme. Change 1: Suggested file layout for supporting documentation An important consideration is that in defending a claim, the burden of proof is on the claimant to evidence their entitlement to tax credits. It should therefore come as little surprise that the principal focus of many audits is on supporting documentation. Although the legislation is silent on the nature of the documentation required to support an R&D tax credit claim, Revenue conducts audits using its own guidelines and provides a copy to the experts appointed to assist Revenue. The guidelines give indications of records that should be maintained to satisfy the science and accounting tests. The latest guidelines have, for the first time, introduced a “suggested” file layout for supporting documentation. This should be of benefit to existing claimants who have inadequate record-keeping and who are considering upgrading their systems and processes to be audit-ready. It may also be of benefit to potential claimants who are assessing what must be done to prepare a robust claim and, in time, defend it – the adage being that “your first step to claiming is also your first step to audit”. Revenue also benefits by potentially standardising the audit process and its inherent costs. At a recent audit this author attended, the Revenue inspector commented: “If we knew then what we know now, there may have been less need for the audit”. With Revenue’s increased adoption of e-auditing, a standardised R&D file structure could reduce the time and cost of on-site audits for both Revenue and claimants. Although the suggested file layout has advantages, it could be costly and administratively difficult for claimants to adopt. Furthermore, although the words “suggested” and “non-obligatory” are used, we can but assume that in time it could become a de facto requirement. This raises the question as to whether claimants would be disadvantaged in not using it or in having an incomplete file. In addition, claimants frequently receive an Aspect Query (Revenue’s R&D questionnaire, comprising 23–25 questions) into their claim in advance of a full audit. In answering the Aspect Query, a report setting out one’s entitlement to claim is typically furnished. That report is often laid out in the same format as the Aspect Query and although additional questions may be raised, the reports are not generally rejected by Revenue. Therefore, if reports in the Aspect Query format are broadly acceptable to Revenue, a suggestion is for Revenue to consider amending its Aspect Query rather than asking claimants to amend their processes. The R&D tax credit was introduced to defray the cost for claimants in the carrying on of R&D activities. There is no tax credit for the costs of record-keeping or file management. Change 2: Eligibility to claim for sub-contracted R&D activity The guidelines have reversed Revenue’s position that “outsourced activity must constitute qualifying R&D activity in its own right”. In the past, outsourced activities needed to be the R&D of the company carrying on the activities. With this change, they now must be the R&D of the claimant. This is constructive as it considers entitlement to tax credits from the claimant’s standpoint and reflects the reality of sub-contracting where the claimant lacks specific expertise and requires outside assistance to support its in-house R&D activity. The positive impact of this change will be the confidence it gives claimants to include sub-contracted activities that may previously have been omitted from claims, as the claimant could not determine whether the outsourced activities constituted R&D when performed by the contracted party. Change 3: Materials used in R&D activities, which may be subsequently sold R&D tax credit/relief schemes in other jurisdictions (such as Canada, Australia and the UK) have a legislative requirement to deduct from claims saleable products resulting from R&D activities. In Ireland, there is no such legislation, but the 2015 guidelines introduced this requirement without worked examples. The latest guidelines have updated the wording to read “where it is reasonable to consider that there will be a saleable product” and have provided three examples. Revenue is effectively placing the onus on the claimant to assess, based on a “reasonable to foresee” test, whether the materials were utilised “wholly and exclusively in the carrying on by the company of R&D activities”. This assessment seems to be at odds with the legislation, wherein other than a requirement to make a deduction for expenditure met by grant assistance, there is no reference to eligible expenditure having to be reduced for income from the sale of materials or saleable product derived from R&D. In the author’s opinion, whether materials have a post-R&D resale value should not detract from the fundamental and legislative reason for which their cost was incurred – namely, to carry on R&D activities. Guidelines do not make the law, and are but an aid to its interpretation. Department of Finance Review The Department of Finance has a duty of care over public expenditure and this year, in co-operation with the Office of the Revenue Commissioners, it will conduct its triennial review of whether R&D tax expenditure remains fit for purpose. The R&D tax scheme benefits not only claimants, but wider society also through development, employment, education and so on. However, the R&D headline cost figures do not reflect the full cost of the scheme to the Exchequer. It will be a full review (unlike 2016, which was economic only) and will cover four pillars – relevance, cost, impact and efficiency – to determine if the scheme remains valid. It will be conducted along two strands: A cost-benefit analysis (statistical in nature); and A tax policy unit analysis, involving a public consultation. It is encouraging that since the last review:  There has been no change in the R&D legislation; The OECD-compliant Knowledge Development Box scheme has come into operation; Ireland is ranked tenth in the 2018 Global Innovation Index; Ireland is ranked ninth in the 2018 European Innovation Scorecard; and Ireland is ranked fourth in the OECD Tax Database in terms of R&D tax incentives (tax and grants). Conclusion The expectations of the latest guidelines have largely been met, and hopefully the R&D Discussion Group will function as a collaborative forum to influence future updates.Yes, there is increased focus on supporting documentation, but broadly, the status quo remains. For now, you could say of the RD&I landscape in Ireland and the R&D tax credit guidelines respectively: “You rock. You rule!” The big three The three significant changes to Revenue’s R&D tax credit guidelines of which claimants should be aware are as follows: Change 1:  Suggested file layout for supporting documentation. The layout will benefit existing claimants who have inadequate record-keeping and who are considering upgrading their systems and processes to be audit-ready. A standardised R&D file structure could also reduce the time and costs of on-site audits for both Revenue and claimants. Change 2:  Eligibility to claim for sub-contracted R&D activity. The guidelines have reversed Revenue’s previous position that “outsourced activity must constitute qualifying R&D activity in its own right”. This is constructive as it considers entitlement to tax credits from the claimant’s standpoint and reflects the reality of sub-contracting, in that the claimant lacks specific expertise and requires outside assistance to support its in-house R&D activity. Change 3:  Requirement to deduct the cost of materials used in R&D and having resale value. The guidelines update the wording and provide three examples regarding saleable materials used in R&D activities. Revenue is effectively placing the onus on the claimant to assess, based on a “reasonable to foresee” test, whether the materials were utilised “wholly and exclusively in the carrying on by the company of R&D activities”. Paul Smith is Senior Tax Manager, Global Investment & Innovation Incentives (Gi3), at Deloitte.

David Duffy highlights the latest VAT cases and discusses recent VAT developments. Two-tier VAT registration In eBrief 114/19, Revenue announced the introduction of a “two-tier” VAT registration process which took effect from 15 June 2019. The purpose of this change is to help speed up VAT registration applications for most businesses while also protecting against fraudulent traders obtaining VAT numbers that would allow them to buy-in goods or services from abroad VAT-free. Under the new system, applicants must specify whether they are applying for a ‘domestic-only’ or ‘intra-EU’ VAT registration number. Businesses that trade in goods or services with counterparties in other EU member states should apply for intra-EU registration. Other businesses should apply for domestic-only status. It is our understanding that domestic-only and intra-EU numbers will follow the same format. However, only intra-EU numbers will be valid on the EU’s VAT Information Exchange System (VIES) website. The VIES website is intended to allow suppliers to validate their customers’ VAT numbers for the purpose of intra-EU trade. Domestic-only VAT registration numbers will not be valid on the VIES website. For new applicants to obtain an ‘intra-EU’ VAT registration, additional information will be required, including details of due diligence undertaken to establish whether their suppliers are genuine traders and the arrangements for the cross-border transport of goods (if applicable). Less information will be required for domestic-only applicants, but these applicants may at a later time apply for intra-EU status, at which time they will be required to provide additional information on their intra-EU activities. All VAT registrations in effect prior to the introduction of the two-tier system will be automatically treated as having intra-EU status and there is no requirement to contact Revenue in this regard. Further changes are expected to be introduced in September 2019 to accelerate the processing times of VAT registration applications. EU VAT updates Recovery of VAT incorrectly charged In the case of PORR Építési Kft (C-691/17), the Court of Justice of the European Union (CJEU) confirmed that the Hungarian tax authorities were entitled to disallow a claim by the taxpayer, PORR, in respect of VAT incorrectly charged to PORR by the supplier of motorway construction services. This was on the basis that PORR should instead have self-accounted for VAT under the reverse charge procedure. The CJEU confirmed that in such circumstances, the customer must pursue the supplier for a reimbursement of the VAT incorrectly charged in the first instance. It is only if reimbursement from the supplier is impossible or excessively difficult (e.g. if the supplier is insolvent) that the customer can address their application to the relevant tax authority. However, the CJEU confirmed that the tax authority is not required to ascertain whether the relevant supplier can adjust the VAT before rejecting a claim by the customer for a deduction of VAT incorrectly charged. This case highlights the importance of adopting the correct VAT accounting mechanism in order to claim recovery of the VAT arising on the supply. VAT bad debt relief In A-PACK CZ case (C-127/18), the CJEU held that a tax authority cannot deny a supplier’s claim for a VAT adjustment on bad debts, simply as a result of the debtor ceasing to be VAT registered. The VAT legislation in the Czech Republic appears to have included a condition that a VAT bad debt adjustment could not be made in these circumstances. In addition to confirming that this condition was incompatible with EU VAT law, the CJEU went on to say that the fact that the customer is no longer VAT registered because of insolvency proceedings is, in fact, supportive of the position that it is a bad debt and that the supplier should, therefore, be entitled to an adjustment for the VAT previously remitted on those supplies. There is no equivalent condition in Irish VAT law, but confirming the principle of an entitlement to claim VAT bad debt relief when it is clear that the debt will almost certainly not be collected is helpful. VAT exemption for granting of credit Vega International Car Transport and Logistic (C-235/18) was an Austrian company which had a number of subsidiaries throughout the EU. Vega provided fuel cards to drivers employed by its subsidiaries to allow them to purchase fuel for the purpose of providing transport services. Vega paid for the fuel purchased with the fuel card and at a later date, on a monthly basis, passed on the cost of the fuel to its subsidiaries plus a surcharge. Accordingly, Vega allowed its subsidiaries to obtain the use of the fuel but only pay for that fuel at a later date, in return for an additional charge.  Vega sought to argue that this should be considered a VAT-exempt service to its Polish subsidiary of the provision of credit. The CJEU agreed with this analysis as it concluded that Vega had not bought and resold the fuel, but had instead provided it subsidiaries’ employees with an instrument to allow them to purchase fuel. The judgment reconfirmed a principle established in other cases that the VAT exemption for the granting of credit is not limited to loans or similar products granted by banks and financial institutions, but can in principle apply to other circumstances where an additional charge is levied for deferred payment. VAT recovery on investment activities The University of Cambridge case (Case C 316/18) asked whether there is any entitlement to recover VAT connected with activities that are outside the scope of VAT, if those activities could help generate funds for other VATable activities.  The University in this case provides VAT-exempt educational services as well as VATable services, such as commercial research, and therefore has a partial VAT recovery position on its general overhead costs. However, the University also received donations and endowments, which it invested through a fund. It was accepted that this investment activity was non-economic activity, i.e. outside the scope of VAT. The CJEU was asked whether the University could recover VAT on the management costs of the fund at its general overhead recovery rate.  The CJEU concluded that, based on the facts of the case, there was not the necessary direct and immediate link between the fund management costs and VATable output activities, and therefore the costs did not form part of the University’s overheads. Consequently, as the fund management costs instead related to an activity that was outside the scope of VAT, there was no entitlement to recover VAT on the fund management costs. David Duffy FCA, Chartered Tax Advisor, is a VAT Partner at KPMG.

Unconscious bias isn’t going away – and neither is the pressure for diverse and inclusive workplaces, writes Dr Annette Clancy. Companies are under increasing pressure to improve gender equality, level the pay gap and generally change their approach to workplace inclusion. Part of this demand stems from equality legislation, but there is also growing public pressure to act. However, research tells us that we prefer to be in the company of people who are similar to us. We assume that we will have more in common, that we will be understood and liked, and that there will be minimal conflict. Of course, most of these assumptions are in the realm of fantasy – we all know people who are very similar to us but with whom we have fractious relationships. We also assume that the opposite will be true when it comes to people who are dissimilar to us. Consider, for example, the many stories in the US media of white people calling the police to complain about black people going about their business in their neighbourhoods. Head over heels? Freud went one step further and told us that the relationship between leaders and followers was like the act of falling in love or the state of trance between hypnotist and subject. What Freud was getting at was that we are unconsciously predisposed (in our personal and work lives) to choose people with whom we have a strong emotional attachment. At first glance, none of that makes for very good practice when it comes to increasing diversity, improving recruitment practices or searching for a new job. Hiring the most qualified candidate based on their CV and how they interview for a position seems straightforward enough, but it isn’t just what’s written down or their skills that will always convince the panel to appoint a candidate. Biases based on gender, race and other factors can present unconsciously and influence the decision, even when the panel has the best of intentions. Quick judgements Unconscious bias refers to a bias that we are unaware of and is out of our control. Our brain makes quick judgements about people and situations, and our culture, experiences and background influence these judgements. Everyone has unconscious bias and although training can increase awareness, research suggests that it has a limited effect on behaviour. One of the reasons why training is limited in its effectiveness is because the bias is ‘unconscious’. One afternoon’s worth of instruction is not going to eradicate a lifetime and a society-worth of unconscious programming. What has shown some promise is holding managers, teams and companies to account for the decisions they take. Other strategies include regular discussions on bias, making it an ordinary reflection point and not a ‘once-off’ conversation that is forgotten as soon as it happens. A good starting point for discussion is Harvard’s Project Implicit Tests, which will give you immediate feedback on your biases towards a wide range of issues. Mitigating bias Biases can affect your expectations of different groups. In hiring processes, it’s important to ask if you hold male, female or non-binary candidates to different standards. Assessing candidates ‘blind’ by concealing their name, for example, is another way in which organisations can mitigate bias. Likewise, as a jobseeker, do you have biases towards particular companies that are out of your conscious awareness and may be hindering your search? Biases can also affect how you manage your staff and may be a contributory factor as to why you retain or lose staff. Do you, for example, welcome challenges to your management style? Is it possible that you harbour different expectations of male and female staff members? How open are you to questioning your own unconscious bias? Unconscious bias isn’t going away, and neither is the pressure for diverse and inclusive workplaces. Bringing both of these topics right into the mainstream might be the first step towards having the conversation.   Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.

Trainees are the lifeblood of the profession and rather than expect conformance, accountancy firms must  continually evolve to meet their needs. By Sinead Donovan In today’s environment, the role and route to becoming an accountant has changed compared to when I initially started my training contract. I don’t mean in respect to the professional exams or length of training contracts, but more the expectation of the future accountant in their day-to-day work environment and, likewise, in the expectation we have from them. In fact, the question I am asking is: what is the primary role of an accountant? Wikipedia defines an accountant as “a practitioner of accounting or accountancy, which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources”. The rounded accountant Technically, as accountants, we need to be able to provide the above services – but this is no longer our sole role. Today, we need to be experts in project management, forensic accounting, cybersecurity, fintech, negotiation settlements – the list  goes on. To service these needs, it is becoming increasingly critical that we train very rounded and evolved accountants, and that we arm ourselves in our teams with skillsets to build a sustainable relationship with the client, have the foresight to envisage what they need, and be able to address their needs. An evolving industry We are all aware that the professional service environment is changing at rapid speed. To meet these changes, there is a high expectation from the future generation of accountants. This future generation of accountants will be key to the evolution of the professional services industry. We want and need our accountants to have vast experience and other interests, and we want to see how this can be used and applied in our changing environment. This requirement is well served by trainee accountants who come through the non-traditional accounting route and often have a primary degree in something completely different – science, arts, engineering or marketing. Their unique skill will add to the learning experience they will encounter and give a different perspective on the work being performed for clients. Trainees’ concerns Trainees want to learn, but they also want to be supported throughout their career to ultimately achieve the goals and targets they set for themselves. They are not afraid to address issues or concerns they may have. Sometimes we may bemoan this as a millennial or Gen X requirement. However, it should be welcomed and embraced. These students are headstrong, determined and not afraid to voice their opinion. They want a fully rounded experience and the opportunity to get involved in other aspects of the business. We as training firms need to be positioned to address their needs – and there is no doubt that we are being interviewed by the students. A number of things are important to them, not least company polices in respect of CSR, career progression, the different service offerings we provide as professional services firms and how we keep up-to-date with change and technology. They are also keenly driven by the work-life conundrum, which can be difficult to navigate as a trainee accountant. Our responsibility And indeed, accountancy firms must simultaneously pivot their own expectations of trainees. We need to: Help them set stretch goals and put supports in place to enable the achievement of these goals; Keep pace with changes in technology and develop our service offerings to support our clients and our trainees; Communicate and share our strategies and objectives with them – they need to understand what their investment can reap; and Be open to being challenged and questioned. Most importantly, we need to do all this while remembering that ethics is the cornerstone of our profession – a fact that, thankfully, hasn’t changed. Sinead Donovan FCA is a Partner in Financial Accounting and Advisory Services at Grant Thornton.

Jonathan Ginnelly outlines the main stamp duty considerations for those acquiring commercial property in the Republic of Ireland. The stamp duty rate on non-residential property in the Republic of Ireland was increased to 6% in Finance Act 2017. Since this rate increase, stamp duty has become a real and significant cost when it comes to property acquisitions and, in some cases, it can be a deal-breaker. While stamp duty is a cost for the purchaser, the increased rate will inevitably have an impact on the purchase price paid to the vendor so as to manage the overall cost of the acquisition. Specific provision was also introduced to ensure that the increased rate also applies to certain property holding entities, such as companies, which might have been used to transfer property indirectly to avail of lower stamp duty rates. In addition to introducing the higher rate of stamp duty on non-residential property, Finance Act 2017 introduced a new provision to allow for a partial repayment (up to two thirds) of the stamp duty paid for land that is to be developed for residential purposes. This article will look at where the 6% rate can apply to property holding entities and provide a brief overview of the refund scheme for relevant residential developments. Property holding entities Where property is held through a company (including foreign companies), a partnership or an Irish Real Estate Fund (IREF), the higher rate of stamp duty (6%) can apply on the transfer of shares, interests or units of such entities. The higher rate should only apply in the following circumstances: Where the property was acquired by the entity with the sole or main objective of realising a gain on disposal; Where the property was, or is, being developed with the sole or main objective of realising a gain on disposal when developed; or Where the property was held as trading stock. Where one of the above conditions is met, the higher rate will apply on the transfer of shares, interests or units – but only where such a transfer results in a change of control, either directly or indirectly, over the immovable property. In addition, any contract or arrangement resulting in a change of ownership and control which might not ordinarily be ‘stampable’ will also be subject to the higher rate. Where minority interests are being transferred, such that control does not change, the higher rate should not apply. However, attempts to transfer several minority interests to a person or persons acting in concert will not escape the provisions. The provision should not apply to shares in companies that hold property where the property was not acquired for the purpose of realising a gain on disposal, for development purposes, or held as trading stock. For example, companies owning and operating a hotel or nursing home, or property rental companies (where the property was acquired for the purpose of generating rental income) should not be caught by the provision. Stamp duty refund scheme To encourage the development of residential property, a refund scheme was introduced in tandem with the increased rate to effectively reduce the 6% rate by two-thirds where the land acquired is to be developed for residential use. When a greenfield site or a site with existing non-residential property is purchased for development, this would not be considered “residential” property at the date of acquisition and, as such, is subject to the 6% rate. However, post-acquisition, a refund of up to two-thirds of the stamp duty paid may be available where the property is to be developed into residential units. Such developments can be carried out in either a single phase or in multiple phases. The refund (subject to a number of conditions) is available once construction operations on the residential development have been commenced pursuant to a commencement order issued by a relevant building authority. A phased development will have a number of commencement notices attaching to the various phases of construction. The key points to remember are: The first phase of construction operations must commence within 30 months of the date of execution of the instrument of transfer; The refund for a phased development can be claimed on a phased basis, or on completion of the entire residential development; On a multi-phase development, separate commencement notices will be required for each phase; There is a two-year time frame for completion. This two-year period runs separately for each phase; and If the residential development is not carried out in a phased manner, the full two-thirds refund can be claimed following commencement of construction operations – but the entire development must be completed within two years of the commencement notice. A refund claim for each phase can be made after the issuance of the relevant commencement notice and once construction operations have commenced. The refund will be for the proportionate amount of stamp duty relating to that phase. In a multi-phase development, there could be a number of phases commencing and finishing at various stages throughout the overall development. It is important to bear in mind that the 30-month time period in which the developer must commence construction runs from the date of execution of the instrument of transfer. If the development is carried out in phases, the legislation states that the construction operations in respect of the first phase must be commenced within 30 months of the date of the instrument of transfer. The last commencement notice and respective construction operations must commence before 31 December 2021 in order to fall within the scope of the relief. As such, the latest possible date for completion of qualifying construction works is 31 December 2023. Given the very specific timeframes involved, any development needs to be carefully managed to ensure all relevant dates are complied with. If any condition or timeframe is breached, a claw back of the refund can arise, leaving the taxpayer open to additional costs such as interest. Practical issues in claiming the refund Since the introduction of the refund scheme, certain practical difficulties have arisen in the refund application process. The stamp duty return may be filed by the solicitor dealing with the property conveyance, for example. However, when it comes to the refund scheme, taxpayers may opt to use the services of their tax advisor. In such cases, the advisor must liaise with Revenue to have the stamp duty records for that particular case transferred to the advisor’s ROS certificate. This can take some time to arrange, resulting in delays in the issuance of refunds. Where there are critical cash flow issues with a development and the taxpayer is relying on the stamp duty refund for financing purposes, early engagement with the tax advisors and Revenue is advisable. In conclusion, given the growth in property prices over the last number of years, the increased stamp duty cost now constitutes a significant part of the financing of acquisitions and developments. Accordingly, care should be taken to ensure that acquisitions and related development operations are structured so as to avail of the residential refund scheme where appropriate.   Jonathan Ginnelly is Tax Director at Grant Thornton Ireland.