Latest Tax news

In Irish news, we bring an update from the recent meeting of the Tax Administration Liaison Committee Collections subcommittee and Revenue publishes updated guidance on the small benefit exemption for the purposes of enhanced reporting requirements. In UK news, the Autumn Finance Bill 2023 has been published and in this week’s miscellaneous updates, read about the DIY housebuilder’s scheme going digital. In International news, the European Commission has published a report on the energy solidarity contribution.  Ireland Read the update from the recent meeting of the Tax Administration Liaison Committee Collections subcommittee. Revenue publishes updated guidance on the small benefit exemption for the purposes of enhanced reporting requirements. UK The Autumn Finance Bill 2023 has been published. Read about the DIY housebuilder’s scheme going digital. International The European Commission has published a report on the energy solidarity contribution. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter. Subscribe to the Tax News by updating your preferences in MyAccount. You can also read this week’s EU exit corner here.          

The Institute, under the auspices of the CCAB-I, made representations on behalf of members at last week’s meeting of the TALC Collection subcommittee. Among the issues discussed, Revenue provided updates on the implementation of the Enhanced Reporting Requirements for employers, the Debt Warehousing Scheme and the vacant homes tax. Revenue also reminded the group of the costs to which the VAT flat rate farmer scheme applies. Revenue is aware of an issue in the Statement of Net Liabilities process and will be contacting the affected taxpayers.  Enhanced Reporting Requirements for Employers (EER)   Despite the CCAB-I's concerns over the introduction of ERR, Revenue has advised us that the requirements will enter force from 1 January 2024. In the meantime, Revenue intends to go live with the reporting portal in the second week in December. In the meantime, Revenue will continue to hold information webinars up to 14 December 2023 on the new  requirements for employers for agents and employers.   Revenue issued e-Brief 254/23 this morning referencing an update to Revenue’s guidance on the small gift exemption, which include examples of how ERR will apply.   A recent snap poll of our members last week has indicated that 60 percent of organisations are not ready for the Enhanced Reporting Requirements. As the 1 January 2024 deadline approaches, we continue to meet with Revenue to discuss implementation and guidance. We will continue to keep members updated via Chartered Accountants Tax News.   Debt Warehousing Scheme   Revenue reported that the total debt warehoused in the scheme was €1.8 billion consisting of over 57,000 businesses, 67 percent of which owe less than €5,000 each. Over 5,500 businesses owe a combined €1.5 billion, each owing in excess of €50,000. Revenue is continuing its telephone outreach campaign contacting businesses owing in excess of €50,000.   The Debt Warehousing Scheme is currently in Period 3, running from 1 January 2023 to 1 May 2024, with interest accruing at 3 percent per annum on the unpaid debt. The 3 percent interest charge will be incorporated into the phased payment arrangement (PPA) for its duration. Where there is no PPA, the interest will be charged retrospectively.   Taxpayers have until 1 May 2024 to agree a PPA with Revenue and are reminded that they can make interim payments during this period, and also request for the offset of any refunds owing against the balance of tax warehoused.   To assist taxpayers and their agents in quantifying the PPA instalments and interest payments, Revenue is providing a PPA calculator on its website. Revenue is encouraging taxpayers to engage now in the PPA process as there is flexibility in terms of payment terms, amounts and downpayments. In addition, payment breaks can be arranged once the PPA has been commenced. A nominal downpayment amount of 0.1 percent of tax and interest can be input using the online application system to commence the process of engagement and negotiation with the caseworker.   Revenue has prepared a number of ‘How to” videos in relation to the PPA process which are now available on the Revenue website (link to videos).   Vacant Homes Tax  Revenue provided current statistics on the Vacant Homes Tax (VHT) that was due to be reported on by 7 November 2023. Of the 50,000 properties reported to Revenue, only 5,000 properties were declared vacant. Revenue wishes to remind property owners that there is only an obligation to file a VHT return where the property is vacant.  Of the 5,000 declared to be vacant, 2,000 properties have been claimed to be exempt VHT. The VHT liability on the remaining 3,000 properties is due for payment by 1 January 2024.  Earlier in the year, Revenue wrote to owners of some 25,000 properties to advise them of the actions they needed to take, where the data available to Revenue indicated that the recipient may have a liability to Vacant Homes Tax (VHT). Revenue received responses from 45 percent of this cohort. Revenue intends to review the non-responders after the due date for payment of VHT, 1 January 2024.  Statement of Net Liabilities  Revenue is aware of some 1,000 instances in the Statement of Net Liabilities process where an offset of 2022 Income Tax refund against 2023 Preliminary Tax was selected but the refund issued, resulting in an underpayment of 2023 preliminary tax. Revenue will be contacting the affected taxpayers.  VAT Flat Rate Farmers Scheme  Farmers who are not registered for VAT are not, in the normal course, entitled to credit for, or repayment of, VAT incurred by them on their business inputs. However, a flat-rate farmer, who would not otherwise be entitled to reclaim VAT on costs incurred for the purpose of their farming business, can reclaim VAT on certain costs in accordance with Value-Added Tax (Refund of Tax) (Flat-rate farmers) Order 2012. Revenue wishes to remind farmers, and their agents, that VAT reclaimable is that VAT paid in relation to costs incurred only on:  (a) the construction, extension, alteration or reconstruction of that part of the building or structure which was designed solely for the purposes of a farming business and has actually been put to use in such a business carried on by him or her,  (b) the fencing, drainage or reclamation of any land which has actually been put to use in such a business carried on by him or her, or  (c) the construction, erection or installation of qualifying equipment for the purpose of micro-generation of electricity for use solely or mainly in his or her farming business.  It is to be noted that outlay for other purposes, such as on the acquisition of milk bulk tanks, feed bins, milking parlour equipment, automatic scrappers and automatic calf feeders do not come within the scope of this refund order. 

Revenue has updated the VAT Tax and Duty Manual on the VAT treatment of portfolio management services has been updated to provide further guidance s in line with the judgement in the Court of Justice of the European Union (CJEU) Deutsche Bank case (C-44/11).  

Revenue has updated the Tax and Duty Manual regarding the payment and receipt of interest and royalties without deduction of tax. The guidance has been updated:  in respect of the application of interest withholding tax to interest paid to Irish partnerships and foreign tax transparent entities (section 5.3), and  refers to the European Stability Mechanism (ESM) and the ESM acting through a subsidiary body or sub-entity (section 8).  In addition, instructions on how to report availing of the practice in section 9 for Form CT1 2021 and Form 11 2021 have been deleted. 

Revenue has updated the Tax and Duty Manual regarding the appointment of experts to assist in the audit of the Research & Development (R&D) Corporation Tax Credit. The manual has been updated:  to reflect the start date of the new independent expert panel on 8 August 2023,  to reflect an increase in the fee to be paid to the independent experts to €1,000,  miscellaneous minor revisions to the text and updates to references.  Each year Revenue establishes a panel of experts who may be called upon to assist with reviews of claims for either the R&D Tax Credit or R&D Corporation Tax Credit.  

The time limit for making a claim under the Temporary Business Energy Support Scheme (TBESS) expired on 30 September 2023. Revenue has published preliminary statistics which provide breakdowns of TBESS approved claims and payments by economic sector, employment size, trade and county. In total, 25,132 businesses made TBESS claims, receiving direct payments and tax liability offsets to the value of €150.5 million. Revenue has also published the list of businesses that received payments under the TBESS. 

Revenue has published a new Tax and Duty Manual to provide guidance on the VAT treatment of certain independent groups of persons commonly referred to as Cost Sharing Groups (CSG). In certain circumstances, an exemption from VAT applies to the supplies by a CSG that would otherwise be taxable.   The exemption applies when two or more persons with exempt and/or non-business activities who operate in the public interest join on a co-operative basis to form a separate, independent group of persons to supply themselves with certain services at cost and exempt from VAT. It is designed to help businesses to collaborate and to share resources without being deterred by the cost of VAT on any recharges. The exemption does not apply to the supply of goods or to the supply of VAT exempt activities not in the public interest, such as insurance or financial services.   The VAT treatment on the Exemption for Certain Activities in the Public Interest TDM has been marked as no longer relevant. 

Last week the Autumn Finance Bill 2023 was published and had its first reading in the House of Commons. The Bill contains many of the measures announced by the Chancellor in the Autumn Statement the previous week. A date for second reading of the Bill has not yet been scheduled.  HMRC also sent the below message about the announcements in the Autumn Statement in relation to the cash basis:-  “As you hopefully will have seen, at Autumn Statement the government announced that it would be proceeding with the proposals set out in the consultation on expanding the income tax cash basis, which was launched earlier in the year. I would recommend reading the Summary of Responses and Tax Information and Impact Note for further details of these changes, but in summary the government will:  remove the turnover thresholds for businesses to use the cash basis  set the cash basis as the default method of calculating taxable profits, with an opt-out for accruals  remove the £500 limit on interest deductions in the cash basis, aligning the rules with accruals  remove the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.  Thank you for your valuable feedback as part of this consultation, and in particular for your feedback on the interest and loss relief restrictions that the government has decided to remove entirely, rather than slightly relax.  Yesterday the Finance Bill was published, which includes legislation to give effect to the expansion of the cash basis at section 16 and schedule 10. I’d encourage you to look over this legislation and let me know if you have any questions or feedback on how it might operate, or if you can see any significant issues or problems with the legislation which would mean that it wouldn’t work as intended.  You may also notice in the legislation that we have removed the need for a business to show that there is a change in circumstances relating to the trade before withdrawing an election to use GAAP (cash basis in the current legislation, section 31D(3)(a)). The election to use GAAP is also particular to a trade, rather than a person as a whole. This better reflects the reality of tax returns showing a box to use the cash basis (in the future, GAAP) per self-employment and partnership page, and allows for a greater degree of flexibility in an individual being able to use GAAP for some of their trades and cash basis for others.  The government has also published a description of the legislation in the accompanying Explanatory Note to the Bill, which provides some extra background for the legislation.”  If you have any feedback in relation to the changes to the cash basis, please get in touch. 

Revenue has published a new Tax and Duty Manual which provides guidance on the exemption of certain profits arising from production, maintenance and repair of certain musical instruments.  Section 216F TCA 1997 provides for an exemption of up to €20,000 from income tax for certain profits from the production, maintenance and repair of certain musical instruments. The exemption is available to individuals who are chargeable to income tax in respect of profits arising from the production, maintenance and repair of early Irish harps, Irish lever harps, and uilleann pipes.  This section does not exempt the income from PRSI and USC, which are chargeable in the usual manner. 

In last month’s Autumn Statement, it was announced that the “undertaxed profits rule” (“UPR”) will take effect in the UK for accounting periods beginning on or after 31 December 2024. This is to be legislated for in a future Finance Bill, although draft legislation is available in a policy paper. The UPR aims to ensure that any top-up taxes that are not paid under another jurisdiction’s Pillar Two rules are brought into charge in the UK.  In addition, the Government is legislating for the technical amendments published in draft in July and September in the Autumn Finance Bill 2023.  Pillar Two aims to ensure that Multinational Enterprises (“MNEs”) will be subject to a minimum 15 percent effective tax rate in every jurisdiction in which they operate and will apply to in-scope groups’ accounting periods beginning on or after 31 December 2023.  As it is important that the UK implements Pillar Two to a similar timeline as other countries, the Government will continue to monitor international developments on implementation.  

The Central Statistics Office has published the quarterly National Accounts for the third quarter of 2023. GDP was down 1.9 percent, continuing the trend of recent quarters, while Modified Domestic Demand was unchanged relative to the preceding quarter. Consumer spending increased by 0.7 percent..  Commenting on the figures, Minister for Finance, Michael McGrath T.D., said:  “GDP fell by -1.9 percent in the third quarter compared to the previous quarter, continuing a trend we have seen in recent quarters. As is widely acknowledged, GDP is not a useful measure in assessing the living standards of domestic residents, given the outsized role the multinational sector plays in our economy.  That said, the decline reflects, in no small part, the ongoing fall-off in demand for Covid-related pharmaceutical products. We are also seeing a marked softening in global economic conditions, with the OECD this week projecting weak growth for next year – if realised, this would be the lowest rate of global growth since the Global Financial Crisis with the exception of the first year of the pandemic.  However, it’s not all bad news on the external front, with services exports recording solid growth and reaching a new record level.  In terms of the domestic economy, Modified Domestic Demand – my preferred metric – was unchanged in the third quarter, with growth in consumer spending and a fall in investment spending largely off-setting each other.  Encouragingly, personal consumer spending increased by 0.7 percent in the third quarter, broadly in line with pre-pandemic norms and up 2½ percent on an annual basis. Continued growth in consumer spending is supported by strong employment growth – figures published last week showed that employment increased by 27,000 in the third quarter – and by the easing of inflation, which has slowed to 2.3 percent in November, its slowest rate of increase since July 2021.  I am cognisant that many households continue to be impacted by price pressures and Government continues to play a key role in protecting those most acutely impacted. Measures introduced in Budget 2024 will help to support households that continue to be impacted by cost-of-living pressures, with many of these measures hitting people’s pockets earlier this week.  Importantly, investment in new residential dwellings grew strongly, up 14 per cent in the third quarter year-on-year. I expect continued momentum in housing supply in the months ahead, with just under 31,000 new units commenced in the twelve months to October. We should see these units come on-stream throughout the next year.”   

From investing in HMRC’s ability to manage tax debts, to construction industry scheme reforms, to tougher consequences for promoters of tax avoidance, we outline below the key announcements in this area. Disappointingly, no additional investment was made to tackle HMRC’s ongoing poor service levels. HMRC debt management capability   The Government is investing a further £163 million with the aim of improving HMRC’s ability to manage tax debts. The aim of this is “to allow HMRC to better distinguish between those who can afford to settle their tax debts, but choose not to, from those who are temporarily unable to pay and need support.”   HMRC will also be expanding its debt management capacity to “support both individual and business taxpayers out of debt faster and collect debts that are due”.   Construction Industry Scheme (“CIS”) reform to gross payment status  The Government is introducing reforms in the Autumn Finance Bill 2023 to the CIS which will add VAT to part of the Gross Payment Status (“GPS”) compliance test. The objective is to give HMRC more power to remove GPS immediately in cases of suspected fraud. Alongside this, the Government also announced simplifications to other aspects of the scheme, which will be subject to technical consultation.   Promoters of tax avoidance   Legislation is included in the Autumn Finance Bill 2023 to introduce tougher consequences for promoters of tax avoidance schemes. These include a new criminal offence for those who continue to promote avoidance schemes after receiving a notice requiring them to stop, and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. These changes will take effect from the date of Royal Assent of the Autumn Finance Bill 2023.   Improving the data HMRC collects    As previously announced, the Autumn Finance Bill 2023 includes legislation that will require employers, company directors, and the self-employed to provide additional data to HMRC. These changes will take effect from the tax year 2025/26.