This year, key measures for businesses operating in Ireland were announced. The increase in the R&D tax credit to 30 percent as well as a scheme of business supports worth €250 million (of which more detail is to be provided) were welcome. While it may seem like Minister McGrath has made limited announcements on the corporation tax front, legislation implementing the monumental Pillar Two rules will be included in Finance (No. 2) Bill 2023 and will be wide-ranging and complex and will be the most significant changes to Irish tax legislation in the history of the State. Minister McGrath also reaffirmed the Government’s commitment to introducing a participation exemption for foreign sourced dividends. This is part of a territorial system of taxation which the Institute has been calling for in successive Pre-Budget Submissions. This commitment will be most welcomed by Irish businesses. Research and Development (R&D) Tax Credit The R&D Tax Credit remains one of the most successful tax expenditures in Ireland. In 2021, 1,629 companies claimed an R&D Tax Credit totalling €753 million. The R&D Tax Credit is calculated as a percentage of qualifying expenditure. In his speech, Minister McGrath announced an increase in the rate from 25 percent to 30 percent. In addition, there is a payment limit on the amount which can be paid to a claimant in the initial year of a claim. The Minister announced an increase in this threshold from €25,000 to €50,000. In our response to a Government consultation on the R&D Tax Credit in 2022, we recommended the acceleration of the payment of tax credits. We also recommended that the Government activate measures to introduce a 30 percent rate for the credit. Accelerated Capital Allowances – Energy Efficient Equipment The Accelerated Capital Allowances (ACA) scheme for Energy Efficient Equipment (EEE) is being extended for a further two years to 31 December 2025. In our Pre-Budget 2024 Submission, we recommended extending this measure as it is a particularly useful measure in encouraging businesses to choose EEE, where possible. ACAs are net neutral in terms of overall cost to the Exchequer. Section 481 Film Relief Film relief provides for a corporation tax credit for the qualifying costs of certain audiovisual productions. The cap on qualifying expenditure is being increased to €125 million. Employment Investment Incentive (EII) The EII scheme provides for income tax relief for investment in qualifying small and medium sized businesses.  From 1 January 2024, all investments made will be subject to a four-year holding requirement and the limits on investments which qualify for relief is to increase to €500,000. In our Pre-Budget 2024 Submission, we noted that amendments to the EU General Block Exemption Regulation require further updates to the EII scheme. Minister McGrath announced that the necessary amendments will be included in the Finance Bill, once published. Key Employee Engagement Programme (KEEP) The Minister announced that State-Aid approval has been received for the 2022 amendments to the KEEP scheme. The amendments include the extension of the scheme to the end of 2025 and a doubling of limit for the total market value of issued but unexercised qualifying share options from €3 million to €6 million.

Looking beyond headline corporation tax receipts to the health of the corporate sector is key Budget 2024 is a first step towards meaningful support for entrepreneurs Use of tax policy as a lever to encourage landlords to remain in rental market will work for society and the economy   High time for childcare to be recognised as part of critical infrastructure     10 October 2023 – Reacting to today’s Budget speeches, Chartered Accountants Ireland has highlighted the importance of supporting enterprise across the country. The Institute represents over 32,700 members, two-thirds of whom work in business.   Supporting enterprise   Director of Public Affairs, Dr Brian Keegan commented  “A healthy corporate sector is critical to Ireland’s economic growth. Without it, the state simply doesn’t have the tax receipts to effect change across so many areas of the economy and society.    “It’s positive to see the focus switching away from the headline corporation tax receipts and the enterprise sector being singled out and supported. These businesses create significant local employment and deserve the support announced today of a €250 million fund to help meet the increased cost of doing business in 2024.   “We hope that the scheme is introduced in a timely manner as businesses are already grappling with additional costs of statutory sick pay, impending pension auto-enrolment and a significant uplift in the minimum wage to €12.70.”  Supporting entrepreneurism   The Institute has also noted the uplift in the R&D credit from 25% to 30% as well as an enhanced capital gains tax relief for angel investors. It states that these measures send the signal that Ireland is open for business and wants to support entrepreneurism.  Dr Keegan continued  “The R&D tax credit has been hugely successful in encouraging research and innovation and creating employment. New capital gains tax reliefs for angel investors should result in early funding being made available to businesses when they need it most – at inception. There have been few new initiatives for the corporate sector in the past decade, and it was positive today to see recognition of the sector to Ireland’s economy.”   Tackling housing  The lack of adequate, affordable, reasonably located housing for staff is one of the biggest barriers to expansion reported by Chartered Accountants Ireland members. The Institute said that today’s tax break of €600, rising to €1,000 over three years, announced for small, private landlords if they remain in the rental market will help to boost Ireland’s housing supply. Cróna Clohisey, Tax and Public Policy Lead said  “Small landlords are an essential feature of a fully functioning residential property market, and properties owned by these landlords are more likely to be in regional, less densely populated parts of the country, providing much needed rental stock in areas that are not as attractive to institutional investors.  “Today’s announcement for landlords will help stabilise the rental market and give more certainty to tenants but also importantly make it more attractive for a small private landlord to enter the rental market. Combined with an increased rental tax credit, the measures will go some ways to helping people access housing, and it will work for society and the economy.”  Childcare as a critical infrastructure issue   Today’s announcement of an increase in the national childcare subsidy (NCS) from €1.40 to €2.14 as well as extending the NCS to certain childminders will help with the cost of childcare but will not address significant capacity constraints within the market.   Clohisey continued  “The cost of childcare is unaffordable for many working parents and today’s announcement to increase the NCS from September 2024 is welcome. However, a survey of our membership last month shows that in addition to cost, the biggest challenge working parents face is a lack of available childcare places.      “While a commitment was made today to address supply issues through core funding, we are asking government to recognise that childcare provision is part of the critical infrastructure necessary for a functioning economy. The crisis needs to be addressed with a long-term strategy with children at the forefront, that adequately funds the sector, increases capacity, and supports working parents.”    ENDS      

At the September meeting of the TALC Direct and Capital Taxes Sub-committee, practitioners noted issues arising when filing returns for Reliefs for Investment in Corporate Trades (RICT). RICT returns are due for filing by 30 April each year and an error arose in respect of the 30 percent spend fields in the Return.  In a recent email from Revenue, they have advised the following:  “Further to our recent guidance in relation to the issues experienced by users which prevented the upload of the RICT return ahead of the filing deadline of 30 April 2023 due to errors arising whereby the provision of a date by which 30 percent of the investment was spent on a qualifying purpose was required in order to complete the return for investments made on or after 1 January 2022, we wish to provide the following update:  The ‘lock’ that is currently placed on the return which does not allow for filing of the return for 2022 investments after 30 April 2023 is to be lifted within the next week following which it will be possible to file returns in relation to 2022 investments. We will send a further update when that has happened.    The resolution of the 30 percent spend issue outlined above will however take longer to complete.    Once the lock has been lifted, and pending the resolution of the 30 percent spend issue, companies and practitioners may insert the date of share issue as the date of having met the 30 percent spend requirement to allow for completion and uploading of the RICT return and the generation of Statements of Qualification.” 

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 registrations, approved claims and payments by economic sector, employment size, trade and county. In total, 31,309 businesses registered for the scheme, with 62,478 approved claims valued €145.32 million. 

Revenue is aware that its online services are not suitable for some taxpayers due to either ability or access issues. To assist taxpayers that cannot use its online services, an Access Supports Marker is available to taxpayers on an opt-in basis. This marker will be applied where taxpayers advise that they have a need for additional supports and assistance in managing their tax affairs.   Guidelines for the application and use of the Access Supports Marker for taxpayers who have difficulty in accessing Revenue's digital services are contained in a new Tax and Duty Manual recently published by Revenue. 

As previously reported, the size of individual files that can be uploaded as part of the eCG50 process is increased to 11 MB. In this regard, Revenue has published an updated Tax and Duty Manual to advise users how to split or compress files (which exceed the maximum file upload size). Further details are available in eBrief No.207/23. 

Revenue has updated the Stamp Duty Manual that provides guidance on a number of exemptions and reliefs from the charge to stamp duty. Section 86A SDCA 1999 provides for an exemption from stamp duty on the transfer of stocks or marketable securities admitted to the Euronext Growth Market operated by Euronext Dublin. The guidance has been updated in paragraph 18 to reflect the fact that this exemption is an EU State Aid, granted under the general de minimis Regulation, and therefore must comply with the rules set out within that Regulation. 

Revenue has updated the Tax and Duty Manual that provides guidelines for Phased Payment Arrangements (PPAs) as follows:  The debt warehousing link has been updated to include payment options for warehoused debt repayments (paragraph 2).  Completion of the ePPA1 form is a mandatory requirement for all PPA applications. Paragraph 4 sets out changes to supporting documentation required to be uploaded with the application, depending on the value of debt is outlined.  Personal Insolvency Arrangements guidance has been updated to reflect current work practices (paragraph 14).   The letter to Personal Insolvency Practitioner, previously at appendix 5, has been removed as it is no longer in use. 

The Minister for Finance, Michael McGrath TD and the Minister for Public Expenditure and Reform, Paschal Donohoe TD, will announce Budget 2024 on Tuesday 10 October 2023. We will issue our Budget 2024 newsletter tomorrow evening covering all the main points. You can keep up-to-date with the announcements by visiting the Institute's Budget 2024 landing page.  

Last week the Institute met with HMRC’s VAT policy team to discuss in detail feedback received from our members and their clients that the 31 October 2023 deadline for selling second-hand cars bought from Great Britain and moved to Northern Ireland before 1 May 2023 should be extended. Under the current rules, such vehicles will not be able to use the VAT margin scheme if these vehicles are sold after 31 October 2023 meaning VAT must be charged on the full selling price. HMRC’s current view is that 31 October 2023 is still the deadline and dealers should make all attempts to sell these vehicles before that date. The Institute pressed HMRC to consider an extension and also said that if an extension is granted, this decision should be made and announced as soon as possible.  If your car dealer client has not yet sent in supporting evidence to demonstrate the ongoing difficulties being experienced in selling these vehicles, HMRC is still willing to accept such evidence which can be emailed to the Institute. We would recommend that this is done as soon as possible. By way of reminder, the information requested by HMRC is details or estimates in respect of the following:- The numbers of second-hand vehicles dealers in Northern Ireland had in stock on 1 May 2023 that were sourced from Great Britain;  How many of these remain unsold at present, and their estimated value;   How many are likely to be unsold on 31 October 2023, and their estimated value; and   If there is any category of vehicle that may be particularly affected by having a cut-off date of 31 October 2023 after which the margin scheme could no longer be used.   The Institute wishes to thank those members and their clients who have already provided information to support the need for an extension.   

The September Exchequer returns show tax receipts to end-September were €61.4 billion, up €3.5 billion, or over 6 percent higher, than the same period last year. Overall an Exchequer surplus of €1.1 billion was generated to end-September. This compares with a surplus of €7.9 billion for the same period last year, with the bulk of the difference generated by the transfer of €4 billion of windfall tax receipts to the National Reserve Fund earlier this year.   Corporation tax receipts were €14.4 billion to end-September, €0.6 billion, or 4.5 percent, higher than the same period last year but significantly behind profile by €0.7 billion. The underlying volatility in corporation tax is highlighted by the fact that this is the second consecutive month in which corporation tax receipts have declined on a year-on-year basis.  Reflecting a labour market that is operating at full employment, income tax receipts to end-September were €23.1 billion, up 8.2 percent on the same period in 2022 and in line with expectations. VAT receipts to end-September totalled €16.8 billion, up €1.5 billion, or 9.7 percent on the same period last year but slightly below profile.   Commenting on the figures, the Minister for Finance, Michael McGrath TD, said:  “The tax data to end-September demonstrate the need for caution as we finalise Budget 2024. The underlying strength of our economy remains evident in the steady growth in income tax and VAT receipts. However, the sharp underperformance of corporation tax is more evidence that, as I have warned many times, these receipts cannot be relied upon.  This Government has taken a number of important steps to address our exposure to corporation tax receipts, including transferring €6 billion in windfall receipts to the National Reserve Fund and committing €2¼ billion of windfall receipts to fund capital projects. In addition to this, work is at an advanced stage on proposals for a longer-term investment fund that will enable us to use some of these receipts to prepare for future fiscal pressures.  Ultimately, however, the best way to guard against exposure to windfall receipts is by pursuing a budgetary policy that strikes the correct balance between addressing the challenges of today and ensuring our public finances remain sustainable over the medium-term: it is on that basis that Budget 2024 will be framed."   

At the end of September, the UK government published additional draft legislation which contains further amendments to the UK’s Pillar 2 draft legislation. Representations on the amended draft legislation, including the additional updates (summarised below), should be made by 25 October 2023. It is also confirmed that officials are reviewing comments already received, which do not need to be resubmitted.  According to an email from HM Treasury, the amended draft legislation reflects stakeholder observations on the draft Finance Act and July 2023 L-Day publication on this draft legislation, in addition to the OECD administrative guidance released in February and July 2023. This includes amendments in respect of the following areas:-   Currency conversion rules;  Tax credits;   Substance-based Income Exclusion;   Qualified Domestic Minimum Top-up Tax (“QDMTT”); and   QDMTT and Transitional UPTR (Under Taxed Profits Rule) Safe Harbours.