Latest Tax news

In Irish tax developments, Revenue provides responses to members Temporary Wage Subsidy Scheme (TWSS) reconciliation questions and the employer guide on TWSS reconciliations is updated. On the UK front, read the latest updates on HMRC administered COVID-19 supports. While in international tax, the Made In America Tax Plan released by US Treasury includes clear commitment to a global minimum tax for corporations.     Ireland Revenue provide responses to members TWSS reconciliation question and the employer guide is updated; Revenue consider the CCAB-I submission saying employers need more time to pay employees TWSS liability; UK Read the latest updates on HMRC administered COVID-19 supports; The SME Brexit Support Fund is open for applications; and International The Made in America Tax Plan impacts significantly on the work of the OECD/G20 Inclusive Framework under the BEPS 2.0 project, as the Biden administration commit to a global minimum tax for corporations. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter.  

Many workers in the construction industry returned to work on Monday. The Pandemic Unemployment Payment (PUP) is taxable in real-time in 2021. This means that there are tax implications for workers returning to work after being on the PUP for the last number of months. The worker is allocated zero tax credits on a week one basis until the Department of Social Protection (DSP) exchanges information with Revenue confirming that the worker’s PUP claim is closed. At that point, Revenue will issue a revised Revenue Payment Notification to the employer reinstating the employee’s full tax credit and rate band on a week one basis.  The worker should close his/her pandemic unemployment payment application on the DSP website on the first day he/she returns to work. It will take at least two weeks for the DSP to issue Revenue notification that the worker is no longer claiming the PUP. When Revenue has the relevant notification, it will then issue an updated RPN to the employer. Employers should avoid running payroll in advance of the pay date for the purposes of working off the most up to date RPN which gives the worker his/her full credits on a week one basis. A full example with dates and timelines is set out in a presentation by Revenue. 

Our member feature in My Tax Journey this month is Sinéad Colreavy.  Sinéad grew up in Portmarnock, Dublin and graduated in Accounting and Finance in Dublin City University.  She started her career as a tax trainee in 2000.  Sinéad joined EY in 2010 and went on to promotion as Partner in October 2020.  Sinéad works with a wide range of banking, capital markets and asset management clients assisting and challenging them to think of new ways to manage their local and international tax risk. Sinéad is a member of Chartered Accountants Ireland and the Irish Tax Institute and is co-chair of Irish Funds International Tax Committee and vice-chair of basis.point disbursement committee. How has your work and home life changed since the onset of the coronavirus pandemic? Like many, my work life has totally changed to remote working over the past year. However, I was very thankful that I could work from home.  I’m not sure how I would have coped if I had no work and was confined to my 2k! I miss the structure of going into the office, the social interaction and meeting face to face with my team and clients.   I’ve always been pretty good at separating work from home.  However, it has been harder in the pandemic, simple things like taking zoom calls in my leggings blurs the separation between home and work.  I try to keep to a routine, get out before logging on and get out again after logging off.  My home life seems like a bit of a blur when I look back over the last year, the usual family events, travel, holidays, social life, the things we plan and look forward to are not there. Saying that, I have spent more time with family and friends and have had some great covid times. What pandemic-related challenges are your clients facing? A lot of my clients are looking at their workforce and the related tax implications of working remotely and abroad.  It is clear what started as a response to the pandemic has now become more permanent and remote working is certainly going to be key to many employers operating models post pandemic. What do you see as the biggest challenge and opportunity for the FDI sector in Ireland on foot of international tax reform at EU and OECD level? Ireland has historically used tax to attract investment in order to create employment. International tax reform has real potential to impact on Ireland’s competitiveness. I believe Ireland has managed international tax reform well and is well positioned to adapt to the further developments being implemented in the EU and globally. We have a low corporate tax rate with an open and transparent tax system, and this is recognised internationally. Ireland is firm in its stated position on the need for more globally coordinated policy responses. The reform has meant that many international organisations are increasing their substance and footprint in Ireland.  The full impact of the UK's departure from the EU will take years to materialise and we are likely to feel the loss of support in connection with tax reform in the EU.   Ireland must be adaptable to ensure that it continues to be one of the most attractive locations for foreign direct investment and play its part in shaping the international tax landscape of the future. What has changed for the better in the profession since you started working as a professional? One of the biggest things for me has been the shift towards diversity and inclusion in professional services.  It is firmly established that a diverse team brings better results.  Better financial results as well as better well-being for employees.  From my own experience, EY’s internal focus and accountability for diversification and inclusion has provided me with opportunities to develop professionally and personally.  I strongly believe that a diverse team promotes better problem solving, improves work experience, builds better working teams and importantly allows individuals to bring their whole selves to work. What is the most rewarding aspect of your role? For me, the development of people is a really rewarding part of my role.  As a leader I feel it is important to empower people to allow them to achieve their full potential.  I was fortunate to benefit from leaders who saw potential in me and invested time in me to make that happen.  I try to give opportunities to help people stretch and develop skills.  My approach is to gently push people outside of their comfort zone, with encouragement and support.  I believe challenging people is important as it is how they develop new skills and gain confidence in their own abilities.  I am a big advocate of social inclusion and seeing people succeed in roles they thought they were not able for gives me a great sense of pride.  I also take on mentoring roles for younger females in my industry and see this as an important, as well as rewarding role.  What tax policy issue would you most wish the Government to tackle in 2021? I would love to see the Government take on climate change through tax policy. Climate change and green investing will be key to our continued growth and development internationally. It would be great to see Ireland being bold and leading the way on climate change through tax policy and attracting sustainable finance to Ireland. 

On foot of feedback on the TWSS reconciliation process, Chartered Accountants Ireland contacted Revenue with several questions on the process.  Among a number of points of clarification, Revenue confirmed that employers with a balance of TWSS due for repayment have until 30 June to make the repayment and can accept the reconciliation before 30 June without triggering an early payment obligation.  Revenue also provided guidance for tax agents and employers having difficulty viewing the reconciliation file on ROS.  Revenue’s “Employer Guidance for the Temporary Wage Subsidy Scheme (TWSS) reconciliation” was updated on 29 March. Question: Some employers are worried about repaying TWSS and will delay accepting their reconciliation until such time as they have sufficient cash to make the payment or until 30 June. Can Revenue confirm that it will not ask employers for any payments until after the 30 June?  This message may encourage employers to accept the reconciliation sooner rather than later. Answer: Once employers accept the reconciliation balance, the TWSS liability will be automatically warehoused for employers who are: managed by Revenue's Business or Personal Divisions; or already availing of debt warehousing. Other employers may still apply for debt warehousing if they meet the general criteria. Employers, not in the debt warehousing scheme, can pay any outstanding reconciliation balance on ROS at any time up to 30 June. This payment can be made after they have accepted their reconciliation.  Where an employer has difficulty in paying the outstanding balance the employer may apply for a Phased Payment Arrangement. After 30 June 2021, any outstanding balances will be subject to the standard Revenue collection processes. Question: We understand that Revenue upgraded TWSS to a tax registration (in line with EWSS), but some agents with a ROS sub-certificate do not have automatic permission for the registration which means the tax agent cannot view a client’s TWSS CSV file. Answer: An updated TWSS Employer Guidance was published on 29 March and included further information on ROS sub-certificates. (See Section 4.2) Question: If an employer has made any payments towards their liability, these payments are not shown in the TWSS reconciliation file.  The payment shows after the employer accepts the reconciliation and then the payments shows on the Statement Of Liability. Some employers are reluctant to accept the statement because it does not include their payments and they do not realise it will show up on the next step. Answer: Employers will have received a ROS inbox acknowledgement of RevPay payments. The TWSS Employer Guidance explains how the reconciliation and employer payments are combined on the statement of account – to understand their net position employers can deduct any repayments already made from the “Reconciliation Balance”. Question: Some employers are having difficulty reconciling the CSV back to the payments they received from Revenue. They see that the money received was more than the CSV file indicates but some employers do not understand how income tax/USC refunds interacts with their Monthly Statement. Answer: The payments made to the employer are visible on their PREM statement of account where the “Wage subsidy payment” and “Wage Subsidy Tax Repayment” are separately itemised.  FAQ 5.7 explains the Employer PAYE Statement of Account and shows examples. Revenue’s Employer Guidance for the Temporary Wage Subsidy Scheme (TWSS) reconciliation was updated on 29 March for the following updates: Section 5.3, details on payslips that should not have a subsidy payable value. Section 5.4, additional information on interpreting the reconciliation detail CSV file. Section 7.1, additional details on subsidy paid information. Section 8, additional reconciliation example on an associated payslip.

As previously reported in Tax News, Chartered Accountants Ireland, under the auspices of the CCAB-I, made a submission to Revenue on several TWSS related issues which include seeking an extension to the June deadline for an employer to pay an employee’s TWSS tax liability without the imposition of PAYE.  The CCAB-I also highlighted challenges facing employers and employees to establish the tax liability arising on the TWSS payments to the employee.  We have followed up with Revenue however we understand Revenue is still considering the submission. 

Tax and Duty Manual Part 42-04-70 - Recoupment of Overpayments of Salary by an Employer from an Employee - has been amended to provide updated examples for recoupment of 'in-year' and 'out of year' salary overpayments and to incorporate updates effective from 1 January 2019 concerning realtime PAYE data.  For full details see Revenue eBrief No. 080/21.

Tax and Duty Manual Part 42-04-59 - Credit in respect of tax deducted from emoluments of certain directors and employees has been amended in section 5 - Allocation of payments between Tax, USC, PRSI and LPT and in Section 6 - Information on debt warehousing. For full details see Revenue eBrief No. 079/21.

The Local Property Tax Direct Debit Guidelines has been amended to include the UK in the SEPA Monthly Direct Debit Scheme and the LPT Helpline phone number is updated to: 01 738 36 26.For more information see Revenue eBrief No. 077/21.

The Customs Export Procedures Manual is updated to provide further information in light of Brexit and to make minor amendments to the text where necessary. The significant changes include: Amending the list of special fiscal territories Introduction of a new office of export for goods travelling to Great Britain via Northern Ireland Information on preferential origin for trade with the UK Information on voisinage arrangements and fishing procedures for trade with Great Britain and Northern Ireland Changes to the entitlement to the Retail Export Scheme. For more information see Revenue eBrief No. 075/21.

Tax and Duty Manual Part 16-00-02 - Relief for investment in corporate trades - is updated to provide guidance on temporary measures available to companies who may have availed of SURE and for whom the ability to meet the employment conditions necessary to qualify for the relief may be impacted as a result of Covid-19.  For full details see Revenue eBrief No. 074/21.

The US Department of Treasury released the Made In America Tax Plan, the means by which the Biden administration propose to fund the American Jobs Plan, a two trillion dollar investment proposal. The proposals in the Made In America Tax Plan provide a clear commitment to a global minimum tax for corporations impacting significantly on the work of the OECD/G20 Inclusive Framework under the BEPS 2.0 project. The Made In America Tax Plan (the plan) looks to reform the US corporate tax system to address profit shifting and tax incentives. The reforms include: Raising the corporate income tax rate to 28 percent; Strengthening the global minimum tax for US multinational corporations; Reducing incentives for foreign jurisdictions to maintain ultra-low corporate tax rates by encouraging global adoption of robust minimum taxes; Enacting a 15 percent minimum tax on book income of large companies that report high profits but have little taxable income; Replacing incentives that reward excess profits from intangible assets with more generous incentives for new research and development; Replacing fossil fuel subsidies with incentives for clean energy production; and Ramping up enforcement to address corporate tax avoidance. The reform most concerning Irish interests is the move to strengthen global minimum tax on a country-by-country basis. The plan emphasises the offshore incentives established through the provisions for the global intangible low-tax income (GILTI) provisions and the foreign-derived intangible income (FDII) deduction in the Tax Cuts and Jobs Act (TCJA). The GILTI rules impose a minimum tax rate on some controlled foreign companies (CFCs). GILTI is calculated as the total income of the CFC in excess of 10 percent of the CFC’s depreciable, tangible business assets. The total income in excess of that amount is subject to US corporation tax at a rate of 10.5 percent with a deduction being available for 80 percent of the tax paid locally. US multinationals effectively incur less than half a percent of tax in US federal taxes on Irish income under the GILTI rules. The GILTI tax liabilities are calculated on a global basis, so the deduction available for the combined local tax liability provides for the effective elimination of a GILTI tax liability in some cases. The reforms proposed for a global minimum tax for US multinationals includes fundamental changes to the GILTI regime, eliminating the incentive to offshore intangible assets by: ending the tax exemption for the first 10 percent return on the assets held in the CFC; calculate GILTI minimum tax on a country-by-country basis; and end the ability of multinationals to shield income in tax havens with taxes paid in higher tax jurisdictions. The minimum rate of GILTI tax is proposed to increase from the current 10.5 percent rate to 21 percent. The plan does not specifically identify the amount of a deduction or credit available for tax paid locally in the calculation of the reformed GILTI tax liability. Furthermore, deductions for offshoring production would be disallowed with additional provisions to protect against restructuring that would effectively replace the US parent company with a foreign company (corporate tax inversion). These reforms allow for “near-elimination of profit shifting”. The current FDII regime provides for a tax rate of 13.125 percent on income returned above 10 percent of domestic tangible assets in exporting goods and services in an effort to keep intellectual property in the US. The plan will repeal the FDII regime on the basis that it merely provides tax breaks to companies achieving a return on prior innovation. The funds generated in the repeal of the FDII will be allocated to incentivising domestic R&D. Much of the proposals contained in the plan see the US re-entering the OECD’s negotiations on Base Erosion and Profit Shifting and digital tax in a position that ensures the strength of US interests. That being said, much of US policy seems to align with OECD objectives. The plan sees some of Pillar One becoming somewhat redundant. This is not a cause for concern for many as much of the feedback provided through the consultation process called for simplification of Pillar One. However, much of the Pillar Two discussion included reference to a minimum rate of tax at the 12.5 percent rate. The 21 percent global minimum tax rate for US multinationals could reduce Ireland’s attractiveness from a tax policy perspective. The proposals contained in the Made In America Tax Plan are to be considered by the US Congress. Irish concerns will be linked to the differential between the increased US corporate tax rate, currently proposed at 28 percent, and the reformed GILTI rate, currently proposed at 21 percent and the availability of a credit for tax paid in Ireland.

The OECD Secretary-General presented its latest tax report to the G20 Finance Ministers and Central Bank Governors last week. The report notes that the next three months will be decisive for the ongoing negotiations to address the tax challenges arising from the digitalisation of the economy and that the conditions to reach a consensus-based solution have “never been better with the removal of the so-called “safe harbour” proposal by the US.” The report also details other areas of focus for the OECD such as tax policy and climate change and further progress on tackling international tax evasion and avoidance. It also includes an update on countries’ responses to the COVID-19 crisis, examining how tax policies have evolved over the last year and identifying the key tax policy trends across countries. For more information read the report.