On 18 May 2023, the Institute responded to the International Ethics Standards Board (IESBA) invitation for comments on their “Proposed Revisions to the Code Addressing Tax Planning and Related Services”. The proposals to amend the Code of Ethics for Professional Accountants are based on recommendations following extensive stakeholder engagement and review by the IESBA since 2019. The review was in response to increased public attention on the topic of tax avoidance, revelations arising from the “Paradise Papers” and the “Pandora Papers”, and global focus on the legality of tax mitigation schemes. The proposals define ‘Tax Planning and Related Activities’ as “a broad range of services designed to assist a client, whether an individual or an entity, in structuring the client’s affairs in a tax-efficient manner”. The IESBA builds upon the principles-based framework of the Code of Ethics and outlines the responsibilities of all professional accountants in respect of these services. Further requirements and guidance are included for Professional Accountants in Public Practice (PAPPs) and Professional Accountants in Business (PAIBs). The key IESBA proposals include: Outlining professional accountants’ public interest role in relation to tax planning services; Requirements in respect of any anti-avoidance legislation court or tax authority rulings, and addressing non-compliance with laws and regulations; Requirements for establishing a credible basis for tax planning advice and carrying out a ‘stand back test’ that considers “the reputational, commercial and wider economic consequences that could arise from the way stakeholders might view” the tax planning arrangement; Examples of ethical threats that can arise from providing tax planning advice, including potential steps professional accountants can take to either eliminate or safeguard against these; Requirements for communicating with clients or employers, including steps to take in the event of disagreement in respect of tax planning; and Requirements in relation to obtaining second opinions, referring or recommending third-party tax planning solutions or advisors. Some of the key points in the Institute’s response to the IESBA proposals focused on: The current size of the Code of Ethics and the opportunity to embed some of the proposals into existing requirements of the Code, including the Conceptual Framework; Concerns regarding the broad definition of ’tax planning’ and the necessity to include ‘related services’, which are typically more closely associated with routine compliance, such as the filing of tax returns and representing clients on compliance issues using tax authorities’ dispute-resolution mechanisms; Requesting further guidance on ‘credible basis’ and ‘stand-back’ tests, and positioning of these as part of the Conceptual Framework alongside other professional judgement requirements. Highlighting the important role of professional accountants in reducing the risk of unexpected tax costs for all taxpayers and ensuring higher compliance rates and collection of tax by assisting clients and employing organisations navigate complex local and global tax requirements; To consider the primacy and responsibility of local tax authorities in the enforcement of tax compliance, the policing of appropriate tax planning and their independent mechanisms to be first arbitrator in making a ruling rather than a court of law or a professional body; Highlighting the issue of competitiveness in the accountancy profession, the capacity of the profession to police and enforce new standards, and the need for a level playing field that ensures tax advisors who are not professional accountants are also accountable to high standards of ethical behaviour; and Providing suggestions in areas such as identifying threats and implementing adequate safeguards, the consideration of multiple uncertainties, and further considerations of the context and role of Professional Accountants in Business in respect of tax planning. The Chartered Accountants Ireland response to the IESBA is available here. The IESBA proposals are available on their website here. Níall Fitzgerald, Head of Ethics and Governance, Chartered Accountants Ireland  

In Irish news, Revenue issues a key clarification on the Code of Practice for Revenue Compliance Interventions and a new TDM has been published on foreign entity classification. In UK news, we want to hear your views on two consultations, and the 2022/23 P60 deadline is approaching. In International news, the European Commission has published its summary report on the recent BEFIT consultation.  Ireland Revenue is updating its policy around the “self-correction without penalty” provision within Chapter 2 of the Code of Practice for Revenue Compliance Interventions with immediate effect. Revenue has published a new Tax and Duty Manual on the classification of foreign entities for Irish tax purposes. UK The Institute is considering making submissions to HMRC on two consultations which are currently open and would welcome your views by 1pm on Monday 29 May 2023. The 2022/23 P60 deadline is approaching. International BEFIT summary report is published by the European Commission.   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.  

Revenue has informed us that it is updating its policy around the “self-correction without penalty” provision within Chapter 2 of the Code of Practice for Revenue Compliance Interventions. This change is effective immediately. The code currently states that: “In line with Revenue’s role in supporting voluntary compliance, taxpayers may avail of self-correction without penalty provided that the following conditions are met: The taxpayer notifies Revenue, within the applicable time limit, (either in writing or in ROS) of the adjustments being made (Note: submitting an amended return on ROS does not constitute notification to Revenue – written notification is required), The taxpayer provides a computation of the correct tax and statutory interest payable, and Payment, in full, accompanies the submission.” The code contained a specific provision whereby bi-monthly, quarterly or half-yearly remitters of VAT, who are self-correcting a net underpayment of less than €6,000, may include the amount of tax as an adjustment on the next corresponding VAT return following the one in which the error was made. In such cases, there is no requirement to notify Revenue and interest is not charged. In September 2022, Revenue issued the Tax and Duty Manual (TDM) for Revenue Compliance Interventions - Operation of Payroll Taxes (Income Tax, PRSI, USC) by Employers. This guidance deals with cases where it is determined that the updating of an employee’s payroll record is required due to the incorrect operation of the Pay As You Earn (PAYE) system by an employer as a result of error or carelessness. This TDM applies to any self-correction or qualifying disclosure received and/or Revenue compliance intervention initiated following the publication of the TDM. This TDM states that for current year cases, employers are permitted to treat untaxed emoluments (arising from incorrect operation) as being paid at the time they are identified, using the latest Revenue Payroll Notification available to calculate the correct liability in accordance with Regulation 11. In such cases, the liability due will be corrected through the next payroll submission (within the current tax year) rather than over multiple submissions. In these type of cases, where any additional emoluments are treated as paid at the next pay date, no interest arises. In such cases, there is no longer a requirement to also notify Revenue in writing of the correction being made. For all other tax heads (other than those outlined above), taxpayers must continue to notify Revenue in writing or through ROS to avail of “self-correction” without penalty. This is necessary to ensure such amounts including statutory interest are brought to account correctly. Revenue are working to remove the notification requirement for all tax heads and will update TALC Audit Sub-Committee as the matter progresses. The Code of Practice for Revenue Compliance Interventions will be updated shortly.

The Minister for Finance Michael McGrath TD welcomed S&P’s upgrade of Ireland’s long-term sovereign credit rating from AA- to AA with a stable outlook. The last time Ireland was rated as highlight was in August 2010 and is the third highest ranking the S&P can give. Ireland’s credit rating is now aligned with core Eurozone countries France and Belgium. In addition, there are only five EU Member States with a higher rating - Germany, Luxembourg, Netherlands, Austria and Finland. Commenting on the recent ranking, Minister McGrath noted: “The announcement by S&P of an upgrade to Ireland’s sovereign credit rating, coming just 4 weeks after an upgrade by Moody’s, is a further vote of confidence in the Irish economy and the management of the public finances. I am determined that the progress we are making in putting the public finances on a sound long term footing will be further advanced in the period ahead. A total of €6 billion has now been transferred to the National Reserve Fund to strengthen our fiscal buffers and I recently published a departmental paper setting out high level principles regarding a more long-term focused savings fund. While I am confident we will have resources from recurring tax revenues to reduce the burden of income tax, increase core welfare payments, invest in public services and our infrastructure, in Budget 2024 and beyond, we have a once in a generation opportunity to use some of the windfall receipts to put the nation’s finances on a more sustainable, long-term footing. This will be an important initiative to secure the future wellbeing of our economy and society and will require bringing legislation to the Oireachtas setting out how such a fund will be built up and the circumstances in which we will draw on it. Work on this by my officials is continuing and I intend to bring a more detailed proposal to Government for consideration in the coming weeks. The publication of the Summer Economic Statement will provide detail on the government’s approach to managing the forecast budget surplus and how we can maximise the long-term benefit for society.”

The European Commission has published its spring forecasts for the European Union, euro area and selected European economies for 2023 and 2024. Modified Domestic Demand is projected to grow by 2 percent and 2.3 percent in 2023 and 2024 respectively. This is broadly in line with forecasts published by the Department of Finance in April. The euro area is projected to grow by 1.1 percent this year and by 1.6 percent in 2024. The Minister for Finance Michael McGrath TD commented: “The Commission is anticipating a more positive economic outlook than in its winter forecast, with lower energy prices, improved business confidence and a strong labour market helping to boost economic activity across the continent. Euro area GDP is projected to increase by 1.1 per cent this year, an upward revision of 0.2 percentage points from the Commission’s winter forecasts. I also note the Commission’s projections for the Irish economy. The Commission forecasts GDP growth of 5½ per cent for this year, an upward revision of 0.6 percentage points since the winter forecasts. Modified Domestic Demand (MDD) – which better reflects domestic economic activity – is projected to grow by 2 per cent this year and 2.3 per cent next year, broadly in line with my Department’s spring forecasts published in the Stability Programme Update (SPU) last month. The Commission projects an easing in headline inflation to 4.6 per cent this year and 2.6 per cent next year, though with core inflation remaining elevated, in line with my Department’s expectations. According to the Commission, the comparatively strong rate of growth in the Irish economy reflects the continued dynamism, a labour market at full employment and related strength in private consumption. The Commission forecasts another large budget surplus for this year and next, while noting the potential volatility of future corporation tax receipts. Indeed, that is why I am developing proposals for a long-term savings fund that will be capitalised with some portion of windfall receipts and future budgetary surpluses. The options for such a fund are explored in a paper released by my Department last week. Looking ahead, I continue to be optimistic about the Irish economy, which has shown remarkable resilience in the face of a weak global economy. Ireland is now at close to full employment with an unemployment rate of 3.9 per cent recorded in April, the lowest rate in over two decades. As inflationary pressures continue to ease, real household disposable income is set to recover and will support consumer spending growth, while the fading of the energy price shock should also support higher levels of investment by firms."

Revenue has published a new Tax and Duty Manual on the classification of foreign entities for Irish tax purposes. Practitioners should be aware that Revenue intends to withdraw a similar, but different, list contained in the Dividend Withholding Tax manuals.

The President, Michael D. Higgins, has signed Finance Act 2023 into law.

The Institute is considering making submissions to HMRC on two consultations which are currently open and would welcome your views by 1pm on Monday 29 May 2023. More detail on each consultation is available at the consultation link. Expanding the cash basis – closes 7 June 2023 This consultation is seeking views on options for extending the income tax cash basis for self-employed businesses which would allow more businesses to use the simpler regime. Simplifying and modernising HMRC's Income Tax services through the tax administration framework – closes 7 June 2023 This discussion document explores how HMRC can simplify and modernise HMRC’s income tax services as part of its Tax Administration Framework Review. It sets out HMRC’s intention to move to a digital by default approach for some of its outputs, seeks views on improving Pay As You Earn processes, and launches a review of the Income Tax Self-Assessment criteria.

The deadline for employers to provide employees with their P60 for 2022/23, either on paper or electronically, is Wednesday 31 May 2023. The P60 summarises the employee’s total pay and deductions for the year. By that date, employers must give a P60 to all employees on payroll who were working for them on the last day of the tax year (5 April 2023). If an employer is exempt from filing payroll online, copies of P60s can be ordered from HMRC.

The Spring Finance Bill 2023 (official title: Finance (No 2) Bill (Session 2022-23)) continues its passage through the parliamentary process and is now at committee stage. A Committee of the Whole House sitting took place on 18 and 19 April 2023 when MPs scrutinised and voted on proposed amendments made to selected clauses of the Bill. The topics debated included the UK’s Pillar 2 rules, pensions savings tax changes, capital allowances and R&D tax reliefs. Minor amendments tabled by the Government were accepted which centred around Pillar 2 and R&D tax relief. The first of three Public Bill Committee stages took place on 16 and 18 May. The third and final part of this stage is due to take place tomorrow, Tuesday 23 May 2023, when the Public Bill Committee is expected to complete its deliberations. The Bill will then move on to Report Stage. No firm dates have been published as yet for this stage. Supporting documents for the Bill 2023 were updated recently. HMRC has published a newsletter on the changes to the lifetime allowance (“LTA”) rules announced in the Spring Budget and contained in the Spring Finance Bill. The newsletter sets out additional information about the interaction between the pensions changes and LTA protections that were applied for before 15 March 2023. Reforms to the UK’s R&D tax relief regime were also confirmed in the Spring Budget. HMRC has now published the final guidance on these changes 

Revenue has published amendments to its Capital Acquisitions Tax Manual which provides guidance on the charges that apply to discretionary trusts. The amendments to the manual are as follows: Clarification that the definition of a discretionary trust for CAT purposes differs from and is wider than the definition for general law. Confirmation of the relevant return filing dates. Clarification of the payment date in relation to the annual charge. Incorporation of various legislative references.

HMRC has recently updated its plastic packaging tax guidance as the tax is now more than 12 months old. HMRC has also published a consultation seeking views on draft legislation amending the Plastic Packaging Tax regulations. When determining if registration is required using the look back test, it is now necessary to look back 12 months from the last day of the relevant month to check how much finished plastic packaging components were manufactured and imported. Look back to 1 April 2022 is no longer relevant.