Revenue has updated the Tax and Duty Manuals which provide guidance on the automatic exchange of information for financial account holders, and the implementation of and filing guidelines for the Foreign Account Tax Compliance Act in Ireland. The updates are intended to provide clarity on the reporting of US tax identification numbers for financial institutions and account holders. Further information is available in eBrief No. 267/24.  

Revenue has updated the Tax and Duty Manual which details Revenue Legislative Services’ guide to interpreting legislation to provide further clarity with regard to the decision in Elliss v BP [1987] 59 TC 474, and its effect on how the term "shall" is to be interpreted in legislation (section 7).  

Revenue has reported that some agents have reached out for support and to acknowledge that their Internal Agent IT security has been compromised. Revenue advises practitioners to review their IT security processes/protocols and remote access for potential risks. Revenue has confirmed that the security of ROS has not been compromised. 

Although no changes will be made to a range of key business taxes as confirmed in the Corporate Tax Roadmap 2024, from 6 April 2025 the rate of employer National Insurance Contributions (NICs) will increase for all employers, and its 0 percent threshold will reduce. This is targeted to raise £26 billion, though it remains unclear if this takes into account the related tax effects of increasing employer NICs such as reduced employee NICs, income tax, and corporation tax. Transfer pricing is to be reformed, and the UK’s carbon border adjustment mechanism (CBAM) will be introduced from 1 January 2027 as planned. A range of enhancements were announced to the suite of the UK’s creative sector reliefs and the Pillar Two Undertaxed Profits Rule (UTPR), the final part of the G20-OECD Global Minimum Tax agreed by over 135 countries and jurisdictions, will take effect for accounting periods beginning on or after 31 December 2024. Corporate Tax Roadmap 2024 The promised Corporate Tax Roadmap 2024 has been published. This reinforces the previous commitment to cap the Corporation Tax Rate at 25 percent and maintain the Small Profits Rate at 19 percent. Marginal relief will also be maintained at its current rate and there will be no changes to Corporation Tax thresholds. Other key business taxes which will remain untouched are Full Expensing, the Annual Investment Allowance, the rates of R&D tax relief, and the Patent Box regime. In the Institute’s Pre-Budget Submission, we raised the importance of certainty and stability for the UK’s R&D tax relief regime, given its instability and the myriad of changes in recent years. The commitment to preserving R&D tax relief is therefore welcome. Employer NICs The rate of employer NICs will increase from 13.8 percent to 15 percent from 6 April 2025 and the secondary threshold will reduce to £5,000 (previously £9,100) from the same date. The secondary threshold is the level at which an employer is liable to pay employer NICs on each employee’s salary. This will remain at £5,000 until 6 April 2028 and will increase in line with CPI thereafter. To support small businesses with these changes, from 6 April 2025 the employment allowance will increase from £5,000 to £10,500 and the £100,000 eligibility threshold will be removed thus expanding this to all eligible employers. The current employment allowance gives eligible employers with employer NICs bills of £100,000 or less a discount of £5,000 on their employer NICs bill. Employer NICs relief for veterans The employer NICs relief for employers hiring qualifying veterans will be extended a further year until 5 April 2026. This means that businesses will continue to pay no employer NICs up to the annual earnings of the veteran’s upper secondary threshold of £50,270 for the first year of a veteran’s employment in a civilian role. Carbon border adjustment mechanism (CBAM) The Government has published its response to the March 2024 consultation on the introduction of a UK CBAM which the Institute responded to earlier this year. The response confirms that the UK CBAM will be introduced on 1 January 2027, placing a carbon price on goods that are at risk of carbon leakage imported to the UK from the aluminium, cement, fertiliser, hydrogen and iron and steel sectors. Products from the glass and ceramics sectors will not be in scope of the UK CBAM from 2027 as previously proposed. The registration threshold will be set at £50,000, retaining over 99 percent of imported emissions within the scope of the CBAM, while removing over 80 percent of otherwise registrable businesses. Over 70 percent of those removed from the CBAM altogether by this threshold are micro, small, or medium sized businesses.   Creative sector reliefs  As previously announced, from 1 April 2025 film and high-end TV productions will be able to claim an enhanced 39 percent rate of Audio-Visual Expenditure Credit on their UK visual effects costs. UK visual effects costs will be exempt from the Audio-Visual Expenditure Credit’s 80 percent cap on qualifying expenditure. Costs incurred from 1 January 2025 will be eligible. This measure will be legislated in Finance Bill 2024/25.   From 1 April 2025, UK films with budgets under £15 million and a UK lead writer or director will be able to claim an enhanced 53 percent rate of Audio-Visual Expenditure Credit, known as the Independent Film Tax Credit. Expenditure incurred from 1 April 2024 on films that began principal photography on or after 1 April 2024 is eligible. Also from 1 April 2025, the rates of Theatre Tax Relief, Orchestra Tax Relief and Museums and Galleries Exhibitions Tax Relief will be set at 40 percent for non-touring productions and 45 percent for touring productions and all orchestra productions. These rates apply UK-wide. Both these measures have already been legislated for.  R&D tax relief  In addition to a detailed email from HMRC’s R&D Communications Forum, the Government will discuss widening the use of advance clearances in R&D reliefs with stakeholders, with the intention to consult on lead options in Spring 2025. A document has also been published setting out further information on the scale and characteristics of error and fraud up to 2023/24, the policy and operational changes that have been made to address this, and further data on taxpayer experience.   Reform of transfer pricing  A further consultation on reforms to the UK’s rules on transfer pricing, permanent establishments, and the Diverted Profits Tax will launch in Spring 2025. This will include the potential removal of UK-to-UK transfer pricing. A consultation will also be published in Spring 2025 on further changes to the transfer pricing rules which will examine proposals such as:   lowering the thresholds for exemption from transfer pricing for medium-sized businesses whilst retaining an exemption for small businesses, and  introducing a requirement for multinationals in the scope of transfer pricing to report information to HMRC on certain cross-border related party transactions.  Alongside this, a review will be conducted on the transfer pricing treatment of cost contribution arrangements, to ensure that the rules are certain and do not act as a deterrent to investment that brings economic benefits to the UK.   Technical amendments will also feature in Finance Bill 2024/25 to provide certainty that Advance Pricing Agreements are available for financing arrangements covered by the Transfer Pricing rules in line with HMRC’s existing Statement of Practice 1 (2012).   Pillar Two UTPR   The UTPR will be included in Finance Bill 2024/25 and will take effect for accounting periods beginning on or after 31 December 2024. Technical amendments to the Multinational and Domestic Top-up Tax legislation will also be included in the Finance Bill to incorporate the latest international updates and stakeholder feedback.   Repeal of offshore receipts for intangible property   The offshore receipts for intangible property rules will be abolished for income arising on or after 31 December 2024, based on the Government’s view that the Pillar Two UTPR will more comprehensively discourage the multinational tax-planning arrangements that these rules sought to counter. Repeal will be legislated for in 2024/25.   Apprenticeship levy  As previously announced, the government will take steps to transform the Apprenticeship Levy (AL) into a more flexible Growth and Skills Levy by investing £40 million, with the aim of delivering new foundation and shorter apprenticeships in key sectors. The reformed levy will be developed in partnership with employers, providers, and learners.   Skills England will take the time to consult with a wide range of partners to ensure that levyfunded training meets the needs of employers, providers, and learners, and secures good value for money. Disappointingly, no mention was made of how this will be taken forward in Northern Ireland where the AL is a devolved function. 

The Parliamentary Budget Office (PBO) has published a briefing paper on budgetary issues in Finance Bill 2024. The paper provides an analysis of measures contained in the Finance Bill 2024 that the PBO believes could have a budgetary impact, and it includes an overview of these measures, including information on possible costs, policy background and policy impact.  Where possible, the PBO has endeavoured to provide information on the cost or yield of a measure, or a policy change as estimated by the Department of Finance.  Amendments to the Finance Bill arising out of this week’s Committee Stage are due for consideration at Report Stage week commencing Monday 18 November. The briefing paper is based on the Bill as published and does not take account of any future amendments. 

On Wednesday, the Chancellor of the Exchequer, Rachel Reeves announced the Labour government’s first Autumn Statement. The government has set out to restore balance in the public finances, however businesses are concerned that they will bear the burden of this rebalancing act. While the need to balance public spending is key to the government’s decisions, the innovative tax policies needed to drive long-term growth and sustainability are not evident in the package announced this week. Chartered Accountants Ireland is particularly concerned that the increase in employers’ National Insurance will not be sustainable for many businesses. While the allowances may provide some protection for the most affected businesses, it is adding to businesses’ already bulging employment costs. You can read our coverage of this week’s Autumn Statement in our Special Tax Newsletter which issued on Wednesday evening. You can also read our press release which issued following the Budget announcement.

In Irish news, Minister Chambers publishes the report on the Funds Sector 2030 review, Revenue publishes the updated RICT Form and readers are reminded that next Thursday 7 November is the deadline for filing Vacant Homes Tax returns. In UK news, read this week's miscellaneous updates, including updates on the plastic packaging tax and the independent film tax credit.  In International news, the European Commission adopts a new proposal to help companies with their filing obligations under the EU Minimum Taxation Directive (Pillar Two).  Ireland 1. The Minister for Finance, Jack Chambers TD has published the report of the Funds Sector 2030 review. 2. Revenue has updated forms for Employment Investment Incentive Scheme. 3. Thursday 7 November 2024 is the return filing deadline for Vacant Homes Tax for the year ended 31 October 2024. UK 4. Read this week's miscellaneous updates, including updates on the plastic packaging tax and the independent film tax credit. International 5. The European Commission adopts a new proposal to help companies with their filing obligations under the EU Minimum Taxation Directive (Pillar Two). 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.        

The government has identified a significant ‘tax gap’ across the UK economy. The tax gap is the difference between what should be collected (based on taxpayer data) and what is actually collected. Over the next five years, the government is expanding HMRC’s resources in an aim to bring in an additional £6.5 billion per year in tax revenue. The plan to bridge the tax gap includes a commitment to overhauling HMRC’s IT system. It is proposed that this will improve HMRC’s debt management system by ensuring tax debt is settled faster, making the overall organisation more productive. The government announced that an additional 5,000 compliance staff will be recruited, while 1,800 debt management staff will be maintained and recruited. Taxpayers can also expect digitalisation to simplify interaction with HMRC allowing taxpayers to self-serve and manage their own tax affairs.

The government announced that it is capping the headline rate of corporation tax at 25 percent, the lowest across the G7. It has committed to maintaining the capital allowances system, preserving the R&D tax relief, and developing a new process for increasing tax certainty in advance of major investments. In our letter to the Exchequer Secretary to the Treasury ahead of today’s Budget, we raised the importance of certainty and stability for the R&D tax relief, given the myriad changes in recent years. As such, it is welcome to see a commitment to preserving the R&D tax relief. Offshore trusts The government announced that transitional arrangements will be introduced to tackle offshore trusts which are used to shelter assets from inheritance tax (IHT). The details of how these measures will operate will be discussed in due course once those details become available. Carried interest The tax treatment of carried interest will be reformed by increasing the capital gains tax (CGT) rate on such interest to 32 percent. From April 2026, a revised regime will apply which will have bespoke rules reflecting the characteristics of the relevant reward. VAT on private schools The government has maintained its commitment to introduce VAT on education and boarding services provided by private schools. From 1 January 2025, VAT of 20 percent will apply to charges for services provided by private schools in this regard.

The government has taken the decision to increase employers National Insurance contributions by 1.2 percent to 15 percent from 6 April 2025. The secondary threshold will reduce to £5,000 (previously £9,100). The secondary threshold is the level at which an employer is liable to pay National Insurance on each employee’s salary. The government has increased the Employment Allowance to £10,500 (previously £5,000). The allowance will also be extended to all eligible employers by removing the £100,000 cap. This means that businesses will be able to employ up to four workers on the National Living Wage on a full-time basis without a liability to employers’ National Insurance arising. The government has not raised employee National Insurance at this time. This will ensure that the tax burden on individual workers is not increased further (we note that the tax burden has increased due to lack of indexation of the tax bands relative to inflation). The income tax and National Insurance contributions thresholds will be unfrozen from 2028-29 onwards.

As expected, the government has increased the capital gains tax (CGT) rates and maintained the freeze on personal tax thresholds (although it has not been extended). There have been significant changes announced in inheritance tax (IHT) which will see IHT extended to death benefits payable from a pension into a deceased’s estate, as well as changes to both business property relief and agricultural relief. The government also announced the abolition of the non-domicile regime with effect from April 2025. The remittance basis of taxation for non-domiciled persons will be replaced with a residence-based regime. Personal tax thresholds The freeze on personal tax thresholds on income tax and national insurance will not be extended, meaning that from 2028/29 taxpayers can expect the thresholds to again increase in line with inflation. As the thresholds remain frozen, it means that the actual tax burden on workers is increasing because of the effect of inflation. Capital gains tax rate increases The lower rate of CGT is set to increase from 10 percent to 18 percent, with the higher rate increasing from 20 percent to 24 percent. These new rates will align with the residential property rates which remain unchanged. CGT Business Asset Disposal Relief In support of entrepreneurship, the government has announced an increase in Business Asset Disposal Relief (BADR) to 14 percent from 6 April 2025 and 18 percent from 6 April 2026. The lifetime limit for Business Asset Disposal Relief (BADR) will remain at £1 million. Inheritance tax changes The freeze on the IHT thresholds will be extended for a further two years until April 2030. According to the government this means that 90 percent of estates each year will not pay inheritance tax. In a significant move, the government will introduce legislation charging IHT on unused pension funds and death benefits payable from a pension into a person’s estate. This change will apply from April 2027. Agricultural property relief and business property relief The government has announced significant reforms of both agricultural property relief and business property relief. From April 2026, the first £1 million of combined agricultural and business assets will be entitled to 100 percent relief from IHT. The change will see the rate of relief reduced to 50 percent for amounts in excess of £1 million. Non-domicile residents The concept of non-domicile residents will be abolished from April 2025. The remittance basis of taxation for non-domiciled individuals is to be replaced with a residence-based regime.

Reacting to today’s Budget, Chartered Accountants Ireland says that small businesses have borne the heaviest burden in the attempt to repair the UK’s finances and the innovative tax policies needed to drive long-term growth and sustainability are not in evidence today. Commenting, Janette Burns, Chair of the Institute’s Northern Ireland Tax Committee noted: “In a rush to repair the funding gap in public finances and keep pre-election promises not to raise tax on working people, the hike in employers’ national insurance contributions (NIC) as well as a rise in the minimum wage means small businesses, many of whom are already struggling, will face increased labour costs. Although some businesses will be partially protected by increased allowances, the 1.2% rise in employer NIC is unlikely to be sustainable for many. “Increasing the rates of CGT was anticipated but the concern remains; a higher rate brings with it the risk of deterring investment and is likely to lead to reduced economic activity across many sectors which could ultimately slow the tax take. “On the business tax side, maintaining the corporation tax rate of 25 percent gives much needed certainty to business leaders. Chartered Accountants Ireland continues to support a reduced rate of corporation tax for businesses operating in and from Northern Ireland and believe that this would raise productivity, increase incomes, and unlock the economic potential in the region.” Gillian Sadlier, Chair of Chartered Accountants Ireland Ulster Society, said: “The extent to which the various measures announced in today’s Budget will lead to real growth across the UK economy remains to be seen. Ultimately, businesses are the drivers of growth and what this Budget has done is increase their overheads. “There were some smaller innovative measures that the government could have announced which would have cost relatively little. For example, we would have liked to have seen an increase in the £90,000 VAT registration threshold to reduce the administrative burden on small businesses and to enable growth. In terms of innovation, a commitment to review the rules around the research and development credit to make it best in class internationally would also have been welcomed.    “The commitment to significantly increase HMRC’s headcount is positive but there must be a definitive drive to improve customer service levels, which have deteriorated in recent years.” ENDS