The OECD, the EU, and members of the OECD Global Forum have engaged with the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (UEMOA) to develop three community legal tax instruments to strengthen the fight against base erosion and profit shifting (BEPS) and improve tax transparency in West Africa. The instruments provide ECOWAS Member States a harmonised tax framework for transfer pricing and exchange of information.

OECD research observes that tax-to-GDP ratios remained below pre-pandemic levels in most Asia-Pacific countries in 2021. The research suggests that regions where the ratio rose saw a corresponding rise in international trade, higher commodity prices and a relaxation in travel restrictions.

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. The latest Trader Support Service bulletin is also available and we issue a final reminder that the deadline for applying for the new UK Internal Market Scheme to ensure applications are processed in time to move goods in the green lane under the Windsor Framework (“WF”) is today, Monday, 31 July. Last week the House of Lords Protocol on Ireland/Northern Ireland Sub-Committee published its report into the WF. The Institute provided evidence to the Committee during the course of its inquiry; our recommendation on the need to conduct an education campaign on the WF, especially for suppliers in Great Britain, is specifically mentioned on page 26 of the report and is one of the Committee’s key recommendations on page 28 of the report in Chapter 3 which deals with the movement of goods. Miscellaneous updated guidance etc. Designated export place (DEP) codes for Data Element 5/23 of the Customs Declaration Service; Transit newsletters — HMRC updates; External temporary storage facilities codes for Data Element 5/23 of the Customs Declaration Service; Check simplified procedure value rates for fresh fruit and vegetables; Border Force customs offices list; Apply for an Advance Origin Ruling; Classifying edible fruit, vegetables and nuts for import and export; Data Element 2/3: Document and Other Reference Codes: Licence Types – Imports and Exports of the Customs Declaration Service (CDS); Claim a waiver for duty on goods that you bring to Northern Ireland from Great Britain or countries outside the UK and EU; Report payments and view your allowance for non-customs state aid and Customs Duty waiver claims; Check if you can claim a waiver for goods brought into Northern Ireland; and Reference Document for The Customs (Northern Ireland) (EU Exit) Regulations 2020

This week we bring you news of a change in the UK’s Country by Country (“CbC”) reporting rules, and HMRC has provided a note on the VAT place of supply rules in the context of education and training. A warning has been issued about a new type of phishing scam, and HMRC has changed its approach to appointing reporting companies under the Corporate Interest Restriction legislation. Agent Update: issue 110 is also available. And finally, the form to acquire overlap relief information from HMRC in the context of basis period reform, which we told you about a few weeks ago, is expected to be launched by HMRC on 29 August. CbC reporting notification requirement removed As a result of The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) (Amendment) Regulations 2023, companies within the UK are no longer required to make an annual CbC reporting notification stating which legal entity within the Multinational Enterprise (“MNE”) is the Ultimate Parent Entity, and will be filing the CbC report. This applies to both UK-headed MNEs with a consolidate group revenue of €750 million or more, and UK resident entities of non-UK MNEs who are required to complete the notification in the UK on behalf of their parent entity. This change in legislation took effect from 26 July 2023. HMRC’s Joint VAT Consultative Committee (“JVCC”) paper on the VAT place of supply rules and education and training HMRC’s JVCC, of which Chartered Accountants Ireland is a member, has responded to a query on the place of supply rules in the context of education and training services. The paper sets out the treatment of the various types of education services and confirms how HMRC sees them being treated for the purposes of the place of supply rules. Read the full email from HMRC. HMRC warning about new phishing scam HMRC has recently detected a new criminal phishing scam offering people tax rebates by email, and have posted a warning on its various digital media channels:- Instagram; X (formerly Twitter); LinkedIn; and Facebook. Corporate interest restriction — HMRC no longer appointing reporting company Companies impacted by the corporate interest restriction (“CIR”) legislation are able to appoint a ‘reporting company’. This company is then required to submit the CIR return which must be submitted within 12 months of the end of the reporting period. In a recent update to the CIR guidance, if a company does not nominate a reporting company by the required deadline (usually 12 months from the end of the accounting period), HMRC is no longer appointing the reporting company. The reporting company must be:- liable to UK Corporation Tax; non-dormant; and authorised by at least 50 percent of the group’s non-dormant companies (which are liable for UK Corporation Tax) to be appointed as the reporting company.

Legislation day earlier this month featured changes to the UK’s Pillar Two draft legislation and specifically how the Under Taxed Profits Rule (“UTPR”) will be implemented in the UK. At Autumn Statement 2022, the Government announced that it intended to introduce the multinational top-up tax and the domestic top-up tax for accounting periods beginning on or after 31 December 2023, and that it would also implement the UTPR with effect no earlier than accounting periods beginning on or after 31 December 2024. Draft UTPR legislative provisions have now been published to reflect this and these will not take effect until they have been included in the next Finance Bill and Regulations have been laid by HM Treasury to set a commencement date, which will not be before accounting periods beginning on or after 31 December 2024.  As part of the draft legislation published earlier this month, the Government has also set out amendments to the multinational and domestic top up taxes, which implement the Income Inclusion Rule (“IIR”) and Qualified Domestic Minimum Top-up Tax (“QDMTT”) in the OECD’s Pillar 2 rules. These amendments aim to respond to stakeholder observations and ensure consistency with the OECD model rules and administrative guidance. This draft legislation is available here. HMRC is seeking representations on all the draft legislation by 12 September 2023.  Earlier this month, the OECD published new administrative guidance on the Pillar 2 IIR and QDMTT and an update to the Globe Information Return. The administrative guidance includes:   A safe harbour for domestic minimum taxes which aims to protect the UK tax base and reduce administrative burdens for business by removing the need to make multiple calculations;   Agreement on the information to be reported to tax authorities, including provisions to protect taxpayer confidentiality and options for reducing burdens;   Further provisions for the treatment of tax credits, which include technical amendments to ensure UK businesses can better access the rules, and clarification of the treatment for marketable tax credits; A time limited safe harbour from the UTPR (the backstop rule), where a country’s nominal tax rate is above 20 percent; and  Detailed guidance on currency conversion rules and substance-based income exclusion (“SBIE”).  The Government is committed to ensuring the UK rules are consistent with the globally agreed approach hence future amendments to the legislation are likely to reflect this new guidance.    

As part of the recent publication of HMRC’s Annual Report and Accounts for 2022-23 (see earlier feature on this), HMRC also published new estimates for the level of non-compliance in research and development (“R&D”) tax reliefs. The Government also published HMRC’s Approach to R&D Tax Reliefs which sets out HMRC’s compliance approach in this area in more detail. The next R&D workshop with HMRC is at the beginning of September and will include a prolonged session on this. Hence HMRC is  keen to have your questions and thoughts as soon as possible in advance of that workshop so that some more detailed, thematic answers can be provided at the session. Chartered Accountants Ireland is represented on HMRC’s R&D forum and would welcome your feedback on this new publication as we are concerned that this is deterring genuine R&D tax relief claimants. Read the full email from HMRC below. “We have recently completed new analysis to better understand the size and scope of non-compliance in the R&D reliefs, based on the most detailed work that has ever been carried out on them (a post-payment, random sampling exercise conducted by our R&D specialists). The updated estimate of the overall level of error and fraud for both reliefs for 2020-21 is 16.7% (£1.13bn), which is significantly higher than the previously published estimate of 3.6% for 2020-21. The majority of this non-compliance is in the SME scheme, where error and fraud for 2020-21 is estimated as 24.4%. This methodology for estimating the level of non-compliance in these reliefs represents international best practice, but introduces a two-year time lag on the estimates due to relying on post-payment enquiries. As a consequence, many of the changes that the government has introduced in the last three years to reform the schemes are not reflected in the latest estimate.  Over the last three years, HMRC has more than doubled the number of people working on R&D compliance. This includes an extra 300 people tackling non-compliance. In addition to this increased resource, the government has announced new policy measures to counter non-compliance. Some are already in place with others coming into effect from August.  The Government is absolutely clear that this level of non-compliance within the R&D tax reliefs is unacceptable, and today HMRC has published HMRC’s Approach to R&D Tax Reliefs. This document sets out what the latest HMRC analysis tells us about the scale and shape of non-compliance in R&D tax relief schemes, details the action taken by the government to date, and sets out the department’s compliance approach to R&D.  As a key stakeholder in R&D tax reliefs, we want to work with you to deliver the significant improvements in the regime that are needed. We know this will take a collective effort.”

The second 2022/23 self-assessment payment on account for income tax and Class 4 National Insurance Contributions is due for payment on or before midnight today Monday 31 July 2023. Each payment on account is half of the previous year’s liability. Information on time to pay arrangements and how to apply is available on GOV.UK. Anyone who is self-employed is required to make two payments on account every tax year unless:- their last Self-Assessment tax bill was less than £1,000; or they’ve already paid more than 80 percent of all the tax owed, for example through their tax code. If a taxpayer knows their tax bill is going to be lower than last year, a request can be made to HMRC to reduce payments on account.

Earlier this month HMRC's annual report and accounts for the year ended 31 March 2023 were published together with the HMRC Charter annual report 2022/23. The National Audit Office also published its report on HMRC’s accounts. The Comptroller and Auditor General qualified his opinion of HMRC annual report and accounts for 2022/23 on the basis of error and fraud in both research and development tax reliefs and tax credits. In 2022/23 HMRC collected £814 billion in tax revenues, £82.9 billion more than 2021/22 and an increase of 11.3 percent. More information on the highlights from 2022/23 is available in the publication HMRC's annual report and accounts 2022 to 2023: performance overview. Information in the 2022/23 annual report and accounts, the Charter 2022/23 annual report, and performance update publications continues to reflect HMRC ongoing poor service levels but also sets out, in the Chief Executive’s Review of 2022/23, HMRC’s ambition to “reduce the volume of contact through phone and post by 30% by 2025”. Chartered Accountants Ireland continues to discuss HMRC’s poor performance at various forum meetings and remains concerned that HMRC is seeking to introduce new online services to reduce the need for traditional contact channels too quickly. We are also concerned that insufficient agent services are being prioritised for development. These concerns are reflected in the Institute’s annual position paper, the Next Financial Year 2023, which is due to be published in September. The HMRC Charter annual report 2022/23 also reviewed HMRC’s performance against the principles set out in the HMRC Charter. The report clearly acknowledges that 2022/23 was a challenging year for HMRC across many traditional phone and post services. Although there were some specific factors contributing to this, overall HMRC’s “customer” base is growing, with many taxpayers having more complex needs. This will continue in 2023/24 hence HMRC aims to shift demand from the traditional phone and post channels to online services in order to meet the demands on their services in the context of their reduced budget and resources. Last week HMRC also published Individuals, Small Businesses and Agents, Mid-sized Business and Large Business survey results.  

Revenue has published a new Tax and Duty Manual that provides guidance on the new farming accelerated allowances for capital expenditure on slurry storage introduced in Section 658A TCA 1997. Section 658A TCA 1997 provides for a scheme of accelerated capital allowances for capital expenditure incurred, on slurry storage facilities, by a person carrying on a trade of farming. The expenditure must be incurred in the period 1 January 2023 to 31 December 2025. The qualifying expenditure can be written off at a rate of 50 percent per annum over a period of 2 years. There is a limit of €500,000 on the total amount of relief that can be granted to any person under the scheme.

Revenue has updated the Tax and Duty Manual regarding Revenue officers entering construction sites. The manual has been updated to more closely reflect wording of Section 1078(2)(j) TCA 1997.  which relates to possible fines and/or imprisonment for anyone convicted under this section, is also included.

Revenue has updated Chapter 10 of the Pensions Manual regarding benefits on death-in-service. An approved scheme may, in addition to providing a lump sum, provide a pension or transfer of benefits into an Approved Retirement Fund (ARF) for a spouse, or civil partner, or dependant where a pension scheme member dies in service. The updated manual clarifies that while a deceased member's benefits, after taking a tax-free lump sum, can be paid as an annuity or transferred into an ARF, the balance of the benefits cannot be paid as a taxable lump sum to the surviving spouse, civil partner or dependent.

Revenue has published a new Tax and Duty Manual which provides guidance on the operation of the new Defective Concrete Products Levy (DCPL) as set out in Part 18E and Schedule 36 TCA 1997. The DCPL will apply to the ‘first supply’ of certain concrete products, at a rate of 5percent of the market value of concrete products, on or after 1 September 2023.