The Minister for Finance, Michael McGrath TD has signed the Commencement Order to implement Finance Act 2022 amendments, providing for an increase of the effective tax rate for the Knowledge Development Box (KDB), with effect from 1 October 2023.  The KDB provides relief from corporation tax on income arising from qualifying assets such as computer programs, inventions protected by a qualifying patent, or certified inventions for SMEs. The amendments are in line with the implementation of Pillar Two Solution of the OECD agreement and demonstrate Ireland’s continued commitment to agreed international tax reforms.  Commenting, Minister McGrath said:  “This is an important step in the implementation of the OECD Two Pillar agreement. Ireland is fully committed to agreed international reforms. Work is continuing to transpose the EU Minimum Tax Directive in Ireland in the Finance Bill this autumn, to provide for the 15 percent minimum effective corporation tax rate element of Pillar Two.”   

The Department of Finance has published the Fiscal Monitor incorporating the Exchequer Statement for August 2023. Tax receipts to end-August were €53.1 billion, up €3.3 billion, or 6.6 percent on an annual basis.   Income tax receipts remained robust at €20.7 billion to end-August, up 8.2 percent on the same period last year and reflecting the strength in the labour market. VAT remains ahead of the same period last year, up by €1.4 billion, or 11.2 percent. While cumulative corporation tax receipts to end-August were €12.7 billion, up by €0.9 billion on an annual basis; August receipts were €1.8 billion which is €1 billion less than collected in August 2022. Although a decline was expected, and there may be timing issues at play, the magnitude of the decrease is larger than had been anticipated, highlighting the inherent volatility in corporation tax receipts.  Commenting on the figures, the Minister for Finance, Michael McGrath TD said:  “The tax data to end-August return remain broadly positive, with tax revenues €3.3 billion ahead of the same period last year. However, the €1 billion drop in corporation tax this month, compared with the August 2022 figures, serves as a timely reminder of the underlying vulnerabilities that still remain in our public finances.  This is a risk that I have highlighted many times, and Government has taken a number of steps to mitigate our exposure to this volatile revenue stream. €6 billion in windfall corporation tax receipts has been transferred to the National Reserve Fund, and work is ongoing in relation to establishing a longer-term investment fund. Government has also committed €2¼ billion in windfall receipts to fund increased capital investment over the period 2024-2026, enabling us to use some of these temporary revenues to fund permanent improvements to our economy and society.  As we approach Budget 2024, the fall in corporation tax reinforces the importance of striking the correct balance between continuing to invest in our public services and maintaining the long-term sustainability of our public finances.” 

The Institute, under the auspices of the CCAB-I, made representations on behalf of members at last week’s meeting of the TALC Collections subcommittee. Among the issues discussed, Revenue provided updates on the implementation of the Enhanced Reporting Requirements for employers, the Debt Warehousing Scheme and the non-resident landlord withholding tax. Revenue also informed the group that interest charges on the late payment of tax, suspended since March 2020, is to recommence this month.  Enhanced Reporting Requirements for Employers  Revenue intends to hold information webinars commencing 14 September 2023 on the new enhanced reporting requirements for employers for agents and employers. Invitations to attend the webinars will be delivered to the employer’s ROS inbox and an email notification is also to be provided.  We will continue to keep members updated via Chartered Accountants Tax News.  Debt Warehousing Scheme  At the end of July 2023, the total debt warehoused was €1.9 billion consisting of over 60,000 businesses, 42 percent of which owe less than €500 each, with 66 percent owing less than €5,000 each. Just under 6,000 businesses owe a combined €1.6 billion, each owing in excess of €50,000. Revenue initiated a telephone outreach campaign in July, commencing with 600 businesses that each owe in excess of €500,000.   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 date there have been 2,200 agreed PPAs from the Debt Warehouse Scheme valued €100 million.   Revenue is encouraging taxpayers to engage now in the PPA process as there is much 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.   Arrangements will be subject to review of supporting documentation contained in the Form ePPA1. For amounts exceeding €50,000 supporting bank statements are required to be uploaded, other documents such as cashflow statements and management accounts will also be required where the debt exceeds €100,000.   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). The topics covered include:  PPA Application  Defer your Next Payment  Apply for a Payment Break  Consolidation  Change Bank Details  Change Payment Date  Pay in Full  Revenue would encourage taxpayers to view these videos in advance of applying for a PPA to assist taxpayers to become familiar with the PPA online facility and understand the range of flexible payment options that are available to suit their individual circumstances.   Non-Resident Landlords   Following the introduction of the new non-resident landlord withholding tax (NLWT) system from 1 July 2023 over 4,300 rental notifications have been made in respect of 2,300 properties by over 1,000 filers in respect of €10 million rental receipts with €2 million withholding tax paid. These figures exclude HAP (circa 1,800 properties).   There will be a further Tax and Duty Manual update in the coming weeks with improved functionality to allow amendments to rental notifications (RNs). Revenue confirmed that there has been an issue with setting up repeat RNs and this is the be fixed in the coming weeks.  Section 216D TCA 1997 micro-generation of electricity Section 216 D TCA 1997 provides for an exemption of up to €200 from income tax, USC and PRSI for certain profits arising to a qualifying individual who generates energy from renewable, sustainable or alternative energy sources for their own consumption and applies from 1 January 2022.   Revenue advise that such income is assessable under Schedule D Case IV net of the exemption of €200. It should be included in Panel G Other Irish Income on the ROS Form 11 or included as non PAYE income ‘fees and commissions’ if filing a Form 12 where relevant.  Interest on late payment  Interest on late payment is a charge provided for in tax legislation, the purpose of which is to encourage timely payments, compensate the exchequer for late payment and to ensure equity for those taxpayers who do make their payments on time.  From mid-September, Revenue intends resuming the collection of interest on late payment, with automated interest warning notices for VAT and PREM late payment issuing for July 2023 periods onwards. Interest charges on late payment were suspended in March 2020 in conjunction with the introduction of certain public health measures. Where subsequent late payments occur following the warning notice, interest will be charged on any future occurrences of late payment, and a standard notice will issue to taxpayers outlining the Interest on late payment charge.   Change to acceptance of certain card types for tax payments   From 1 October 2023, Revenue will no longer accept commercial credit cards for payment of tax. A warning message will display to the taxpayer on the online payment screens to advise that this card type is not accepted. Revenue continues to accept personal debit and credit cards in addition to commercial debit cards. Revenue advises that where a taxpayer is unsure of their card type, they should contact their card provider to confirm their card type.  

The Chancellor of the Exchequer announced last week that this year’s Autumn Statement will take place on Wednesday 22 November 2023. As usual, the Institute will be analysing the tax announcements for members, and any subsequent developments, in Chartered Accountants Tax News.  The Office for Budget Responsibility has also been commissioned to prepare an economic and fiscal forecast to be presented to Parliament alongside the Chancellor’s Autumn Statement. 

If businesses have second-hand motor vehicles in stock that they bought in Great Britain and moved to Northern Ireland before 1 May 2023, the VAT margin scheme can only be used if those vehicles are sold by 31‌‌‌ October 2023. The Institute is discussing the impact of this deadline with HMRC, and the need to extend it.   We are aware that many second-hand car dealers have significant pre-1 May 2023 vehicles in stock which are selling very slowly due to the ongoing inflationary crisis and general economic conditions.   If sold after 31‌‌‌ October 2023, VAT must be accounted for on the full selling price of the vehicles as the conditions for the new second-hand motor vehicle payment scheme, which only applies to eligible motor vehicles moved from Great Britain to Northern Ireland after 30 April 2023, will not be met. 

This year’s Secretary General tax report has been published providing an update on the progress on the OECD’s Two-Pillar Solution. The report also provides updates on recent work on indirect tax, tax transparency, and other areas of focus for the OECD. 

This week we bring you news of an extension to the work of the HMRC taskforce on clearing post more than 12 months old, and advice for finalising 2021/22 Self-Assessment (“SA”) returns which were filed with provisional figures/estimates. HMRC has also published new guidance on “negative earnings” and the regulations which give effect to changes in transfer pricing records have been laid. A new online tool is now available to check your tax code and updated guidance has been published on basis period reform together with the online form to obtain details of overlap relief which was launched today as expected. HMRC has also announced a forthcoming change to the functionality that enables agents to copy across existing VAT clients to their Agent Services Account (“ASA”) and has updated the Agent Standard, which sets out what HMRC expect from agents representing or advising taxpayers. Update on work of HMRC taskforce clearing post more than 12 months old  In July we outlined how HMRC had begun to implement its plans for dealing with agent post more than one year old which had not been responded to, and how agents could contact HMRC to action post more than a year old. Agents are able to use the Agent Account Manager team to escalate these cases via an online form. HMRC has since reviewed progress on this and has decided to continue with this work with no end date specified at present.   We would therefore encourage agents to use this process because although HMRC is identifying such post in its post queues, cases may be missed. We understand that once sufficient progress has been made on post more than 12 months, HMRC will then be seeking to address post in the 10-12 months old category.  2021/22 SA returns with provisional figures/estimates  Last month HMRC began sending letters to agents to encourage them to finalise any 2021/22 SA returns filed with provisional/estimates figures. HMRC is asking that these be amended by 30 November 2023 if actual figures are now available, or by 31 December 2023 if they are not yet available.   It should be noted however that this request does not displace the 31 January 2024 statutory date for amending these returns. Unfortunately, the agent letter does not include a list of affected clients, however HMRC can provide this on request by the agent.  Guidance on negative earnings  For the first time, HMRC has published guidance on negative earnings and clawback of bonuses. The guidance describes how employees may be able to claim an income tax refund.   Transfer pricing regulations  The Transfer Pricing Records Regulations 2023, which give effect to the record keeping requirements in the OECD’s 2022 Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, were laid over the summer. These regulations introduce master file and local file as UK documentation requirements for multinationals with turnover of  €750 million or more and have effect for corporation tax purposes in relation to returns for accounting periods beginning on or after 1 April 2023, and for income tax purposes from the 2024/25 tax year.  New tool to check your tax code  HMRC recently launched a new online tool “Check what your tax code means” which aims to assist taxpayers with understanding their tax code and what it means for them. To check what a tax code means, taxpayers need their tax code to hand together with an estimate of their annual income including details of any benefits and pension income. This new tool also directs taxpayers to the relevant service to change their tax code in specific instances.   As this is a new tool, HMRC is seeking feedback on user experiences via a screen at the end of the tool. Although the new tool is helpful to taxpayers, Chartered Accountants Ireland continues to advocate that HMRC should develop an online process which enables agents to amend taxpayer codes for their clients.  Basis period reform  HMRC has published an updated guidance note on the basis period reform rules which commence with the changes required as a result of the transitional year 2023/24. From 2024/25, the current year basis of assessment will change to the tax year basis. More detailed guidance on basis period reform is available in HMRC’s Business Income Manual.  HMRC has also now launched the online form which enables a taxpayer or their agent to contact HMRC and request details of unused overlap. The need for HMRC to provide taxpayers with details of unused overlap relief was a recommendation of this Institute in its response to the consultation on basis period reform in summer 2021.  Change to Agent Services Account functionality  When using their ASA, agents can currently copy over existing client relationships for VAT and Income Tax Self-Assessment (ITSA) from their old Government Gateway ID. HMRC will be removing the functionality to do so in respect of VAT from October 2023. There is no change proposed to the functionality for copying ITSA clients to the ASA which will therefore remain in place.  Agents are therefore advised to ensure that existing VAT clients are copied across to their ASA before October. Once this functionality is removed, VAT clients must be authorised using the digital handshake authorisation route available in the ASA.  

Last week, the Institute, under the auspices of the CCAB-I, wrote to the Minister for Finance, Michael McGrath T.D., to highlight significant concerns our members have about the proposed introduction of Enhanced Reporting Requirements (ERR) which will require all employers to report to Revenue details of certain non-taxable benefits and payments to employees from 1 January 2024.   While it is accepted that employers already maintain records of the reportable benefits, integrating these records with a real-time filing requirement is a complex task and, in our view, unnecessary.   We have suggested that an annual return should be sufficient to provide Revenue with the necessary information while also taking into account the burden the reporting requirement will place on employers. Over the past number of months, we have been informing Tax News readers that employers will be required to report details of small benefits, travel and subsistence and remote working allowances paid to employees and directors from 1 January 2024. This new requirement was introduced in Finance Act 2022 and is set out in Section 897C TCA 1997.    As previously reported, in Tax News, representatives from the Institute, under the auspices of the CCAB-I, attend meetings of the Tax Administration Liaison Committee (TALC) Enhanced Reporting Requirements Subgroup and Main TALC to discuss the implementation of enhanced reporting requirements. At each meeting our representatives have raised their concerns around the practicality of real-time reporting as well as concerns with the additional costs for businesses associated with the new measures.  Revenue intends to hold information webinars on the new enhanced reporting requirements for employers commencing 14 September 2023. Invitations to attend the webinars will be delivered to the employer’s ROS inbox and an email notification is also to be provided.  CCAB-I will continue to liaise with Revenue and will inform members via Tax News. 

On 31 August 2023, Papua New Guinea deposited its instrument of ratification for the MLI (The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting). Then on 5 September 2023, Romania confirmed the completion of its internal procedures in preparation for ratification of the MLI. 

We’d like to hear your views on HMRC’s consultation on the taxation of employee ownership trusts and employee benefit trusts. The consultation closes on 25 September 2023 and examines potential proposals to reform the tax treatment of each of these types of trust. Let us know your views before Monday 18 September 2023.  The aim of the consultation is to ensure that the tax regimes for these trusts remain focused on the targeted objectives of rewarding employees and encouraging employee ownership, whilst preventing tax advantages being obtained through use of these trusts outside of these intended purposes.   There’s also still time to let us know your views on the on the consultation examining potential new tax incentives for occupational health. We’d like to hear from you on this consultation by Friday 29 September 2023. 

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. Further guidance was published last week in relation to the Windsor Framework and the latest Trader Support Service bulletin is also available. And finally, we bring you more on the announcement last week that the UK has agreed a deal to associate to Horizon Europe.  Windsor Framework updated guidance  Last week HMRC published the following updated guidance documents (which includes guidance on moving parcels to and from Northern Ireland):-  The Windsor Framework - further detail and publications; Sending parcels to and from Northern Ireland;  Moving parcels from Great Britain to Northern Ireland under the Windsor Framework from 30 September 2024; and  The Customs (Northern Ireland) (EU Exit) (Amendment) Regulations 2023.  Horizon Europe  Last week the UK agreed a deal to associate to Horizon Europe, the EU's key funding programme for research and innovation. From 7 September 2023, UK researchers can bid into Horizon, certain that all successful UK applicants will be covered through the UK’s association (or through the guarantee) for the remainder of the programme. All calls in Work Programme 2024 will be covered by association and the UK guarantee scheme will be extended to cover all calls under Work Programme 2023.  For more information, see:- UK joins Horizon Europe under a new bespoke deal; and  Joint Statement by the European Commission and the UK Government on the UK’s association to Horizon Europe and Copernicus.  Miscellaneous updated guidance and publications   The following guidance, and publications relevant to EU exit are available:-  Customs declaration completion requirements for Great Britain;  Customs, VAT and excise UK transition legislation from 1 January 2021;  Reference Documents for The Customs Tariff (Preferential Trade Arrangements) (EU Exit) Regulations 2020;  Reference documents for The Customs (Reliefs from a Liability to Import Duty and Miscellaneous Amendments) (EU Exit) Regulations 2020;  Reference Documents for The Customs (Tariff Quotas) (EU Exit) Regulations 2020;  Reference document for authorised use: eligible goods and authorised uses;  Check simplified procedure value rates for fresh fruit and vegetables;  Apply for an Advance Origin Ruling;   Classifying edible fruit, vegetables and nuts for import and export;  Valuing imported fruit and vegetables using simplified procedure values with Method 4;  Check if a business holds Authorised Economic Operator status;  Notices made under the Customs (Import Duty) (EU Exit) Regulations 2018; and  Maritime ports and wharves location codes for Data Element 5/23 of the Customs Declaration Service. 

In Irish news this week, the Minister for Finance has welcomed growth in the domestic economy and Revenue has updated VAT guidance to reflect the application of the 13.5 percent rate of VAT from 1 September 2023. In UK news, HMRC interest rates increased again last month, and, in our lobbying update, read our letter to the Financial Secretary to the Treasury on changes to the geographical scope of agricultural property relief. In International news, the OECD has published a paper on the taxation of labour and capital.  Ireland While welcoming growth in Modified Domestic Demand in the second quarter of the year, the Minister for Finance noted that there were ‘several headwinds’ including constraints in infrastructure and slower growth among trading partners, and that it would be against this backdrop that Budget 2024 would be framed. Following the cessation of the temporary 9 percent VAT rate applying the goods and services in the tourism and hospitality sector on 31 August 2023, Revenue has updated several VAT Tax and Duty Manuals to reflect the application of the 13.5 percent rate of VAT from 1 September 2023. UK HMRC interest rates have increased again. In our lobbying update, read the Northern Ireland Tax Committee’s letter to the Financial Secretary to the Treasury on changes to the geographical scope of agricultural property relief. International The OECD has published a paper comparing the tax treatment of labour and capital income. 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 which features news of the phasing in of exports moving from CHIEF to the Customs Declarations Service and a delay to the implementation of the new UK Border Target Operating Model for imports into the UK, including Ireland.