A new report published by the OECD reflects on the importance of the international tax agenda for African economies. The report was commissioned at the request of the G7 president, Japan, to inform discussions at the G7-Africa Ministerial Roundtable held in October.

The OECD has published a new convention on implementing Amount A of Pillar One. Amount A of Pillar One sets out rules for the reallocation of profits of the largest and most profitable multinationals to countries regardless of their physical presence. As such, it is seen as a key measure in bringing international tax policy into the modern era. The OECD has forecasted that the proposals could produce global annual tax revenue gains of as much as €32 billion with the greatest gains flowing to low and middle-income countries.

In Irish news, CCAB-I sets out its concerns regarding the commercial impact of the revised tax treatment of GMS income of GPs in a submission to Revenue. In UK news, read our update in relation to the meeting last week with HMRC on the end of the VAT margin scheme for second-hand cars from 31 October. In International news, the OECD has reached agreement on the Pillar Two “Subject to Tax Rule”. Ireland The Institute, under the auspices of CCAB-I, has set out its concerns regarding the commercial impact of the revised tax treatment of GMS income of GPs in a submission to Revenue. The September Exchequer returns indicate risk to the public finances as corporation tax falls behind target. UK Read our update in relation to the meeting last week with HMRC on the end of the VAT margin scheme for second-hand cars from 31 October. In this week’s miscellaneous updates, HMRC has issued a reminder about the end of the certificates of tax deposit scheme on 23 November 2023. International The OECD has reached agreement on the Pillar Two “Subject to Tax Rule”. 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.  

A new Tax Advisor Liaison Committee (“TALC”) subgroup is to be established by Revenue in the coming weeks which will focus on identifying any opportunities “to simplify and modernise the administration of business supports”, an area the Institute has been lobbying for for many years. In the area of compliance, the Budget 2024 Tax Policy Changes publication confirms that Revenue will conduct a range of targeted compliance management activities in 2024. The Terms of Reference of the new TALC subgroup (which is a meeting of Revenue and representative bodies including the Institute under the auspices of CCAB-I) will be agreed at TALC with a report on the recommendations expected to be delivered during the course of 2024. In respect of the targeted compliance activities in 2024, it is expected that additional Exchequer receipts will arise from increased taxpayer compliance in the areas of eCommerce, payroll and expenses reporting and the cash/shadow economy. In addition, Revenue estimates that €180 million in refunds could potentially be due to taxpayers for 2022 alone. As a result, the Minister announced that an extensive public information campaign will be launched shortly by Revenue in order to raise awareness of the range of tax credits and reliefs available to PAYE taxpayers, in order to ensure people can avail of their full entitlements and receive any refunds that are due.  

Recognising the continuing vital importance of farming across Ireland, a number of agricultural reliefs which were due to cease at the end of 2023 have been extended, including the scheme for accelerated capital allowances on farm safety equipment. The Minister also increased the maximum aggregate lifetime limit of a number of farm-related reliefs to the maximum allowable under the new EU Agricultural Block Exemption Regulation. The VAT flat rate for unregistered farmers is also being reduced. Consanguinity relief (stamp duty) This relief is being extended for a further five years to 31 December 2028. The relief reduces the rate of stamp duty applicable to intra-familial transfers of farmland from 7.5 percent to 1 percent. The Government also published “Review of Consanguinity Relief (2023)” which makes a number of recommendations in relation to the relief, including the five year extension which is to be implemented. Accelerated capital allowances on farm safety equipment This scheme, which provides for accelerated capital allowances of 50 percent per annum in respect of  eligible equipment, and which was due to end on 31 December 2023, is being extended for three years to 31 December 2026. The expenditure must be certified by the Minister for Agriculture, Food and the Marine. Once certified, the expenditure can be written off at a rate of 50 percent per annum over two years rather than at the normal rate of 12.5 percent over eight years. Reliefs for Young Trained Farmers and Succession Farm Partnerships Stock relief for young, trained farmers, relief for succession farm partnerships and young trained farmers stamp duty relief are all being amended to increase the aggregate lifetime amount of relief available to a person under these reliefs from €70,000 to €100,000 from 1 January 2024. Stock Relief (Registered Farm Partnerships) Stock relief for registered farm partnerships is being amended to increase the threshold from €15,000 to €20,000 in the case of qualifying periods commencing on or after 1 January 2024. Flat-rate VAT compensation percentage The Minister announced that the flat-rate compensation percentage of VAT for farmers will be reduced to 4.8 percent (a reduction of 0.2 percent) from 1 January 2024. This scheme compensates unregistered farmers on an overall basis for VAT incurred on their farming inputs. According to the Budget publications, the decrease is based on macro-economic data received for the period 2021-2023.

The main measures announced were the now usual annual Budgetary increases in excise duty for tobacco products, and an extension to the current excise reductions for fuel. There were no increases in alcohol duty. Fuel excise The Minister deferred the final tranche of the various fuel duty excise increases which will now take place in two equal instalments, with the first taking place on 1 April 2024. Therefore the temporary excise rate reductions which apply to diesel, petrol and marked gas oil, and which were due to expire on 31 October 2023, are being extended. 4 cents, 3 cents and 1.7 cents will be added to petrol, diesel and marked gas oil respectively on both 1 April 2024 and 1 August 2024. Tobacco excise Excise duty on tobacco products is being increased by 75 cents, inclusive of VAT, on a pack of 20 cigarettes in the most popular price category. Pro rata increases will apply to other tobacco products. According to the Budget 2024 Financial Resolutions, this change will take effect from midnight tonight. E-cigarettes and vaping   In the context of public health interests, delays to the revision of the EU’s Tobacco Products Tax Directive and the Government’s commitment to tax e-cigarettes and vaping products, the Minister is proposing to introduce a domestic tax on these products in next year’s Budget. According to the Minister, this will involve considerable preparatory work by both the Department for Finance and the Revenue Commissioners in drafting this legislation.

Budget 2024 saw the announcement of a further €338 million to the core spending budget of the Department of Children, Equality, Disability, Integration and Youth. Included in the package is a planned increase to the National Childcare Scheme hourly subsidy from €1.40 to €2.14, effective from September 2024. Also included in this budget allocation is a €10.5 million commitment designed to improve pay and conditions for childcare workers, enhance sustainability for providers and maintain current fee freezes. Also included are measures to reduce the costs of both the school and further education cohort. Additional family related measures introduced in Budget 2024 include: funding to extend the Free School Books Scheme to all junior cycle pupils in recognised post-primary schools within the Free Education Scheme from September a €400 lump sum payment will be made to recipients of the Working Family Payment and an increase of the income threshold by €54 per week a €100 lump sum payment will be made to each child in receipt of the Qualified Child Increase an extension of the fee reduction on school transport services for a further year an extension of the fee waiver for students sitting state exams a once-off reduction of the student contribution fee by €1,000 for free fees’ students an extension of Parents Benefit to 9 weeks from August 2024 an extension of the Child Benefit payment to 18-year-olds in full time education

The Minister announced changes to the rules for capital acquisitions tax for foster children and a new capital gains tax relief for angel investment. In addition, the Minister announced some welcome enhancements to Retirement Relief, increasing both the age-limit and the asset-value limit. Capital Acquisitions Tax Foster children are to be able to avail of the Group B capital acquisitions tax lifetime tax free threshold, currently €32,500, based on their relationship to their foster parents. Capital Gains Tax (“CGT”) Retirement Relief In line with Government policy on the age of retirement, from 1 January 2025 the upper age limit for capital gains tax Retirement Relief is to be extended from 65 until the age of 70. The reduced relief which was available on disposals from age 66 onwards will now apply from age 70. Also from 1 January 2025, there will be a new limit of €10 million on the relief available up to age 70 for disposals to a child. Angel Relief A new CGT relief is also being introduced to encourage angel investment innovative start-ups, in line with the recommendation from the Commission on Taxation and Welfare. The relief will be available to an individual who invests in an innovative start-up small and medium enterprise (SME) for a period of at least 3 years.  The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €10,000 and constituting between 5 percent and 49 percent of the ordinary issued share capital of the company.   The scheme will include a certification process, which will  be  carried  out  by  Enterprise  Ireland,  to ensure  the  relief  is  targeted  at  innovative SMEs that can  demonstrate  financial  viability  and compliance with the requirements of the EU General Block Exemption Regulation. Qualifying investors may avail  of  an  effective  reduced  rate  of  CGT  of  16 percent,  or  18 percent  if through  a  partnership, on a gain up to twice the value of their initial investment.  There is a lifetime limit of €3 million on gains to which the reduced rate of CGT will apply.  

The Minister announced a one-year extension to the reduced VAT rates for gas and electricity, increases in the VAT registration thresholds for both goods and services, and the zero-rating of audiobooks, ebooks, and solar panels for schools. For the hospitality sector, the 13.5 percent VAT rate, which recommenced from 1 September 2023, remains unchanged. The Revenue Commissioners will shortly launch a public consultation examining how digital advances can be used to modernise Ireland’s VAT invoicing and reporting system. Gas and electricity The 9 percent VAT rate for gas and electricity (normally 13.5 percent), which was originally due to end on 31 October 2023, is being extended for an additional 12 months until 31 October 2024. The 9 percent reduced rate first took effect from 1 May 2022. The extension is expected to cost €315 million in 2024. VAT registration thresholds From 1 January 2024, the current VAT registration thresholds are being increased from €37,500 to €40,000 for services, and from €75,000 to €80,000 for goods. According to the Minister’s speech, although the increases are modest, they are targeted at small businesses whose turnover is close to the current thresholds. The increases aim to bring the thresholds broadly in line with forthcoming EU VAT registration thresholds. Audiobooks, ebooks, and solar panels for schools From 1 January 2024, the VAT rate for audiobooks and ebooks will be reduced from 9 percent to zero percent (to bring the rate in line with paper books), at a full year cost of €3 million, according to the Budget 2024 publications. From the same date, the VAT rate for the supply and installation of solar panels installed in schools will also be reduced to zero percent. Charities VAT compensation scheme From 1 January 2024, the total annual capped fund for the Charities VAT compensation scheme is being increased from €5 million to €10 million. The scheme aims to reduce the VAT burden on charities and partially compensate for VAT paid by the charity and applies to VAT paid on expenditure from 1 January 2018.

Budget 2024 contained a suite of new measures in the context of housing policy including an increase in the rental tax credit, the introduction of a new tax relief for landlords as well as a new scheme of mortgage interest relief for homeowners. In addition, amendments were made to a number of existing measures such as the Help-to-Buy Scheme, Vacant Homes Tax and Residential Zoned Land Tax. Rental Tax Credit  Since its introduction in last year’s Budget, over 290,000 rent tax credit claims have been made with close to €166 million worth of claims made to date. The rent tax credit is now being amended to increase the amount that can be claimed from €500 to €750. As before, the credit will be available to renters who are not already availing of State housing supports. The proposal relates only to tenancies registered with the Residential Tenancies Board and licences for the use of a room in another person’s principal private residence. Eligibility for the credit will now also be extended to parents who pay for their student children’s rental accommodation in the case of Rent-a-Room accommodation or “digs”.  This change will apply retrospectively to the years 2022 and 2023.  Rented Residential Relief In addition to increased supports for tenants, the Budget also introduced a new tax relief for landlords. The new Rented Residential Relief will provide relief, at the standard rate, on a portion of a landlord’s residential rental income. The new relief apply as follows: €3,000 in the tax year 2024; €4,000 in 2025, €5,000 in 2026 and €5,000 in 2027 which is equivalent to a tax credit of up to €600, €800 and €1,000 respectively.  The relief will be clawed back if the landlord removes the property on which relief is claimed from the rental market within 4 years of the initial claim. However, no clawback will apply after the expiry of the 4-year period. The relief will apply only to tenancies registered with the Residential Tenancies Board, or where a landlord lets a residential property to a public authority (including a Local Authority). In the case of joint ownership of a property, the relief will be divided in proportion to the percentage of the rental income to which each owner is entitled.  Mortgage Interest Tax Relief In light of the current high interest rate environment facing many mortgage holders, Budget 2024 has also seen the introduction of a temporary one-year mortgage interest tax relief scheme for homeowners. Relief will apply to homeowners with an outstanding mortgage balance on their principal private residence of between €80,000 and €500,000 on 31 December 2022. Qualifying homeowners will be eligible for mortgage interest tax relief in respect of the increased interest paid on that loan between the calendar year 2022 compared to the calendar year 2023 at the standard rate of income tax (20 percent), capped at €1,250 per property. In order to claim the relief, the taxpayer must file a tax return with Revenue. The relief will operate by way of a credit offset against the taxpayer’s income tax liability for 2023 and may be claimed in early 2024.  Help-to-Buy Scheme  The Minister also announced the Government’s intention to extend the Help-to-Buy (HTB) scheme to the end of 2025. In addition, the scheme is also being amended to reflect its interaction with the Local Authority Affordable Purchase Scheme (LAAP). This  amendment will enable the use of the affordable dwelling contribution received through the LAAP scheme for the purposes of calculating the 70 percent loan-to-value requirement, thereby facilitating greater access to the HTB scheme to all LAAP purchasers. These changes will come into effect from 11 October 2023. Vacant Homes Tax  With a view to incentivising the use of existing housing stock across the country, the Minister has also announced an increase to the Vacant Homes Tax. With effect from 1 November 2023, the rate will be increased from three times to five times a property’s existing base Local Property Tax liability.  Residential Zoned Land Tax Originally introduced in Budget 2022 as a measure “to encourage the use of land for building homes”, the Residential Zoned Land Tax (RZLT) aims to activate suitably zoned and serviced land for housing.  In order to afford affected landowners' sufficient opportunity to engage with the mapping process and ensure that a fair and transparent process is applied when local authorities consider what land should be placed on the RZLT maps, the Minister has announced an extension of the liability date for the tax by one year. The original liability date was 1 February 2024.  RZLT applies at a rate of 3 percent on the market value of land within its scope.  Defective Concrete Products Levy As previously announced last month, this levy is being amended so that it will no longer apply to the pouring concrete used in the manufacture of precast concrete products. A refund scheme is also being put in place to allow those who paid the levy on such concrete between 1 September 2023 and 31 December 2023 to reclaim it.  

In an effort to ease the ongoing cost of living pressures brought about by increased prices and inflation, the Minister for Finance announced a €2,000 increase in the standard rate band, in addition to a €100 increase in the personal tax credit, employee tax credit and earned income tax credit. The home carer tax credit and single person child carer tax credit will each increase by €100, and the incapacitated child tax credit will increase by €200. The middle rate of USC will be reduced from 4.5 percent to 4 percent. Additional measures announced also included changes in the USC to ensure the increased minimum wage remains outside the top rates of the charge. The average worker can expect to pay around €800 less in income taxes. Credits and rate bands changes from 1 January 2024 The income tax standard rate bands will increase as follows: Single, widowed or surviving civil partner from €40,000 to €42,000; Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €44,000 to €46,000; Married couples or civil partners (one income) from €49,000 to €51,000; Married couples or civil partners (two incomes) from €49,000 to €51,000 (with a maximum increase of €33,000). The personal tax credit, employee tax credit and earned income tax credit will all increase from €1,775 to €1,875. The home carer tax credit will increase from €1,700 to €1,800, while the single person child carer credit will increase from €1,650 to €1,750. The incapacitated child tax credit will increase by €200 from €3,300 to €3,500. For example, a single person earning €45,000 will receive at least an additional €767 in their take home pay, when the USC changes (discussed below) are also considered. Those earning below the standard rate band threshold have the opportunity to earn additional income without paying tax at the marginal rate. The estimated cost of these measures is €1.135 billion on a full year basis. USC To ensure that the salary of a full-time worker on the minimum wage will remain outside the new 4 percent rate of USC when the minimum wage increases from €11.30 to €12.70 from 1 January 2024, the ceiling of the 2 percent USC rate band will increase by €2,840 from €22,920 to €25,760.  The 4.5 percent rate will reduce to 4 percent. As a result, the USC rates and bands from 1 January 2024 will be: €0 – €12,012 - 0.5% - no change; €12,013 – €25,760 - 2%; €25,761 – €70,044 - 4% €70,045+ - 8%; and Self-employed income over €100,000 - 3% surcharge. Incomes of less than €13,000 are exempt from USC. The Minister also announced the extension of the reduced rate of USC for medical card holders to 31 December 2025. The estimated cost of these changes in USC is €350 million in 2024 and €400 million per annum thereafter. Benefit-in-Kind on Motor Vehicles The temporary relief of €10,000 on the Original Market Value of vehicles (and vans) in Categories A to D has been extended to 31 December 2024. The amendment lowering the limit of the highest mileage has also been extended to 31 December 2024. Sea-going naval personnel tax credit The sea-going naval personnel tax credit will be extended to 31 December 2024. It applies where a permanent member of the Irish Naval Service spends at least 80 days at sea on board a naval vessel in the previous tax year. In such circumstances, he/she is entitled to a tax credit of €1,500. The cost of the extension of the credit is estimated to be €500,000. PRSI From 1 October next year all PRSI contribution rates will increase by 0.1 percent. Donations of heritage items This tax relief is available to taxpayers who donate heritage items to Irish national collections. A credit equal to 80 percent of the market value of the item donated can be set against donors’ liabilities for income tax, corporation tax, capital gains tax or gift and inheritance tax. Currently, the aggregate value of items that can be donated under the scheme in any one year cannot exceed €6 million; this limit is to be increased to €8 million.

Measures to further the transition to an ever “greener” economy were also announced. While not a tax related measure, perhaps the most welcome announcement on the climate front is the establishment of the Infrastructure, Climate and Nature Fund. The fund is a response, in the words of the Minister, to “the devastating impact of climate change on communities across the globe”. Microgeneration of electricity Microgeneration of electricity is the small-scale production of electricity by consumers in their own homes. Where excess electricity is produced, this can be sold back to the grid. There is a tax exemption from income tax, USC and PRSI where this energy is produced from renewable, sustainable or alternative sources of energy. The Minister announced an increase in this exemption from €200 to €400. Relief for battery electric vehicles The relief from benefit-in-kind on electric vehicles (EVs) was subject to a tapering of relief in recent Finance Acts. The Minister announced a deferral of this tapering until 2026 with the deduction of €35,000 applying until the end of 2025, €20,000 in 2026 and €10,000 in 2027. In our Pre-Budget 2024 Submission, we called on the Government to introduce measures to stimulate the uptake of EVs by Irish consumers. The VRT relief for battery EVs is being extended for a further two years to the end of 2025. This applies to EVs valued up to €50,000. Carbon tax As expected, carbon tax is set to increase again, in line with commitments to raise the rate of carbon tax to €100 per tonne of carbon dioxide emitted by 2030, as per the trajectory set out in Finance Act 2020. From 11 October 2023, the rate per tonne of carbon dioxide emitted for auto diesel and petrol will increase from €48.50 to €56.00. This increase will apply to all other fuels from 1 May 2024.