In this week’s miscellaneous updates, HMRC has been writing to approved producers of alcoholic products in the UK to tell them about the new digital service due to be launched in March 2025 and how to get ready. The minutes from the most recent Joint VAT Consultative Committee and Guidance Strategy Forum meetings are available. We update you below on P87 (tax relief for employment expenses) processing and the National Audit Office (NAO) has published a report on tackling tax evasion in high street and online retail.  The fuel advisory rates applicable to company car users from 1 September 2024 have been published and the latest  schedule of HMRC live and recorded webinars for tax agents is also available for booking. Spaces are limited, so take a look now and save your place. And finally, check HMRC’s online services availability page for details of upcoming planned downtime and the online services affected.  P87 processing  HMRC is expected to provide a more detailed update on this issue later in September. However, we have been advised of the following in the meantime:  “HMRC has withheld the processing of some employment expense claims due to concerns about whether the relief claimed is due.   HMRC wants to make sure that customers get the tax repayments they are entitled to in as straightforward manner as possible. However, we also need to make sure that where we identify customers who are making errors, we take action to put things right for the customer and prevent similar mistakes from occurring in the future. This is why we are asking some customers to provide further evidence.  We will provide more information to customers impacted by this in due course.”   NAO report on tax evasion in high street and online retail  The NAO reported recently on tax evasion in high street and online retail in the context of HMRC estimating that tax evasion costs around £5 billion a year in lost revenue and is most prevalent among small businesses. The report examined whether HMRC, with other parts of government, is well-placed to tackle tax evasion in high street and online retail and also examined specific risk areas in more depth.   The report concluded that HMRC has had success in raising more tax from online retail by making online marketplaces liable for the VAT on sales by overseas retailers, which generated more than HMRC expected. However, significant weaknesses remain in government systems which tax evaders can easily exploit, most notably around company registrations and the ability of overseas businesses to falsely represent themselves as UK-established.  Tax evasion has been growing among small businesses, and HMRC has so far lacked an effective strategic response. Although there are good examples of localised campaigns targeting some retailers, HMRC missed earlier opportunities to tackle others, potentially allowing their market share to grow.  HMRC’s assessment of risks has also given too little emphasis to widely used methods of evasion such as sales suppression and “phoenixism”, despite identifying that they were large and potentially growing. This means HMRC may not prioritise the most effective compliance interventions. It has also not used some new powers to tackle tax evasion. While these remain untested, they will offer less deterrence.  Tackling tax evasion is not a straightforward task, and with finite resources HMRC must work with the rest of government and other stakeholders to find the most cost-effective way to reduce evasion.  HMRC’s overarching strategy to tackle non-compliance by preventing it from occurring is sensible, but it has not followed through on this principle sufficiently for tax evasion. Real opportunities exist for HMRC to work more systematically across government to reduce evasion.  The report also concluded that HMRC does not measure its overall performance in responding to tax evasion, although the examples highlighted in the report suggest high returns. The likelihood is that tighter controls and more compliance work could raise significant sums and would be cost-effective and improve value for money.   

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. The most recent Trader Support Service bulletin is also available as is the latest Brexit and Beyond newsletter from the Northern Ireland Assembly EU Affairs Team.  Miscellaneous updates to guidance and publications  Check if a business holds Authorised Economic Operator status,  Data Element 2/3 Documents and Other Reference Codes (National) of the Customs Declaration Service (CDS),  Get an individual guarantee to cover customs debts,  Delivery terms for Data Element 4/1 of the Customs Declaration Service,  Data Element 2/3: Documents and Other Reference Codes (Union) of the Customs Declaration Service,  External temporary storage facilities codes for Data Element 5/23 of the Customs Declaration Service,  Due diligence when making customs declarations. 

In Irish news, the Minister for Finance has published a second feedback statement on developing a participation exemption, and Revenue has published guidance on the new priority email address feature in ROS. In UK news, we outline the key tax elements of the new Chancellor’s summer economic statement and the Exchequer Secretary to the Treasury has written to Chartered Accountants Ireland setting out the Labour Government’s commitment to Making Tax Digital for income tax. In International news this week, the Secretary-General has issued a statement on the Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation.  Ireland Second feedback statement on participation exemption published. Revenue has published new guidance on the priority email address feature in ROS. UK Read our outline of the key tax elements of the new Chancellor’s summer economic statement. The Exchequer Secretary to the Treasury has written to Chartered Accountants Ireland setting out the new Government’s commitment to Making Tax Digital for income tax. International Read the statement by the G20 Secretary-General on International Tax Cooperation. 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.

In the first EU exit corner after the summer break, we bring you the latest guidance updates and publications relevant to EU exit and highlight upcoming milestones under both the Windsor Framework and the UK Government’s Border Target Operating Model. The most recent Trader Support Service bulletin is also available. The Department for the Environment and Rural Affairs has sent an email containing updates for exporters to the EU and HMRC has sent an update on XI EORI numbers which we set out below. Upcoming milestones As we move into September, it is now just a matter of weeks before the next stages in both the Windsor Framework and Border Target Operating Model (BTOM) commence. From 30 September 2024, the Windsor Framework green lane will broaden to all UK Internal Market Scheme authorised traders. Full international customs requirements for traders will be removed and simplified procedures will apply. This will specifically affect parcels moving from GB to NI. From 31 October 2024, phase three of the BTOM commences. From this date, safety and security declarations for EU imports will come into force. Alongside this, the UK will introduce a reduced dataset for imports. The goal is to reduce duplication in customs declarations. More information and guidance from the UK Government is expected ahead of these forthcoming changes and will feature in our EU exit corner. Update on XI EORI numbers HMRC has recently been notifying traders with an XI EORI and EIDR (Entry in Declarants Records) authorisation that the Goods Vehicle Movement System (GVMS) now accepts the use of an XI EORI. Traders should use their XI EORI in GVMS straightaway. The communications were issued to traders via email (if HMRC held a valid email address) or post at the beginning of August 2024. If a trader does not make EIDR movements between Great Britain and Northern Ireland using GVMS, they will not have received any communication, and they don’t need to take any action as these changes do not affect them. More information is available in the section below headed ‘Using GVMS for EIDR movements between GB and Northern Ireland’. The full update from HMRC is as follows: “Goods Vehicle Movement Service: changes to allow the use of an XI EORI in the ‘Entry in Declarant’s Records’ EIDR field We have recently made changes to the Goods Vehicle Movement Service (GVMS). Businesses with an Economic Operator Registration and Identification (EORI) number starting with XI, should now use an XI EORI, if they have one, with a valid EIDR authorisation to generate the Goods Movement Reference (GMR) number in GVMS when moving goods from Great Britain to Northern Ireland. If a trader does not make EIDR movements between Great Britain and Northern Ireland using GVMS, they don’t need to take any action as these changes will not affect them. What is an EIDR movement?  An EIDR movement involves declaring goods by entering them into a trader’s own records and sending other details to customs. They can do this if they are authorised to use the EIDR process. You can find more details at: https://www.gov.uk/guidance/making-an-import-declaration-in-your-records. Using the Trader Support Service If a trader uses the Trader Support Service (TSS), there will be no change to the existing process for them and they don’t need to take any further action. The TSS will continue to confirm the EORI number that the trader should use when they submit their pre-movement information. The trader should put that EORI into GVMS to generate the GMR. Using GVMS for EIDR movements between GB and Northern Ireland If a trader has an XI EORI with an associated EIDR authorisation and they do not use TSS, there are actions they’ll now need to take. If a trader is creating a GMR they should continue to use their GB EORI number to access and log into the GVMS system use the XI EORI linked to a valid EIDR authorisation to generate the GMR number in GVMS for NI EIDR movements If someone creates GMRs on a trader's behalf Please make sure they inform the haulier, or the third party moving the goods for them, of their XI EORI number associated with the EIDR authorisation to use in GVMS. Further help and support For more information on GVMS, go to GOV.UK and search ’Register for Goods Vehicle Movement Service’. If you have any questions, please call our helpline on 0300 322 9434 and refer to this letter. For support or more information on the Trader Support Service, call the TSS Contact Centre on 0800 060 8888 (0800 060 8988 for Welsh speakers) or go to GOV.UK and search ‘Trader Support Service’.” Miscellaneous updated guidance etc. Recently updated guidance, and publications relevant to EU exit are set out below: Check if a business holds Authorised Economic Operator status, Apply for release of a private vessel on payment of Customs Duty and VAT, Transit newsletters — HMRC updates, Data Element 2/3: Document and Other Reference Codes: Licence Types — Imports and Exports of the Customs Declaration Service (CDS), Additional Information (AI) Statement Codes for Data Element 2/2 of the Customs Declaration Service (CDS), Known error workarounds for the Customs Declaration Service (CDS), How to pay duties and VAT on imports from outside of the UK, Notices made under the Customs (Export) (EU Exit) Regulations 2019.

During the summer, HMRC published its 2023/24 Annual Report and Accounts together with performance statistics for 2023/24 and a commentary. The 2023/24 HMRC Annual Charter Report was also published. A recurring theme in all these publications is that HMRC continues to underperform and misses key targets and in particular, call waiting times have increased significantly. So far, the new Labour Government has not provided any information on how it plans to tackle HMRC’s ongoing poor service levels. Chartered Accountants Ireland will continue to express our concerns in respect of these ongoing poor service levels and how this is impacting taxpayers, agents and businesses.   2023/24 Annual Report and Accounts These accounts were once again qualified by the Comptroller and Auditor General due to error and fraud in tax credits in addition to qualifying his opinion on HMRC’s Resource Account for error and fraud in corporation tax research and development tax reliefs. This is the second year that the R&D SME scheme estimate has been prepared using the results of a random enquiry programme. The first modelled estimate for 2021/22 has been revised as results from the random enquiry programme now includes claims received in 2021/22. See page 21 for more detail.   The level of HMRC debt at the end of 2023/24 was £44.6 billion (£45.9 billion 2022/23), with £7.1 billion in time to pay arrangements and £37.5 billion available for collection. Approximately 900,000 taxpayers have time to pay arrangements.   The HMRC app also gets a mention in the report with almost two million new users and 69 percent of interactions with HMRC now take place online.      HMRC’s CEO in his report recognises the difficulties that have been experienced by many individual taxpayers, agents and small businesses when interacting with HMRC – in particular, when accessing helplines and says that HMRC is working hard to address these challenges with a strategy “firmly focused on how we can help more customers get their tax and customs right first time, rather than fixing problems after they happen, and on supporting more customers to self-serve using online services whenever they can.”   However, the impact of the reduction to HMRC’s budgets is clear as is the increased demand due to fiscal drag which has resulted in an additional 2.1 million individuals being brought into income tax (according to the latest figures from the Office for Budget Responsibility).   2023/24 performance statistics These set out details of five specific targets with only one having been met for 2023/24; compliance yield. It should also be noted that the average speed of answering calls, and the waiting time of no more than 10 minutes are both no longer treated as priority metrics by HMRC; likely to be because of its digital strategy. Not surprisingly, both of these measures have deteriorated significantly as follows:   average waiting times have reached 26 minutes, and ·nearly 75 percent of callers wait more than 10 minutes.   2023/24 HMRC Annual Chartered Report Poor service levels were a recurring theme in HMRC’s 2023/24 Annual Charter Report as agents and taxpayers again vented their concerns after a year in which standards continued to fall below expectations. HMRC’s Charter sets out the standards of service that taxpayers and agents should expect from HMRC.   The report includes the results of research commissioned by HMRC and shows a fall in the percentage of agents, individuals and small businesses who positively rated their overall experience of interacting with HMRC. For agents, 37 percent gave a positive rating, down 8 percent from 2022/23.   A survey was also undertaken by the Charter Stakeholder Group which asked respondents to give a score out of 10 for HMRC’s performance against each of the charter standards, with one being the lowest and 10 the highest. 1,647 responses were received, mainly from agents.    The three standards which can arguably be said to represent the health of the tax system scored the lowest average scores as follows:    being responsive - 2.4; making things easy - 2.8; and getting things right - 3.5.    Overall, feedback indicates that, although simple issues can be dealt with well, more complex issues are difficult to resolve. Higher scores were recorded for the remaining five charter standards.

In a recent letter to Chartered Accountants Ireland, the new Exchequer Secretary to the Treasury clearly sets out the Labour Government’s ongoing commitment to Making Tax Digital (MTD) for income tax. Effectively, although the letter does not explicitly say so, the timetable for commencement remains unchanged and will commence for unincorporated businesses and landlords as originally planned from April 2026 for those with turnover exceeding £50,000 with the turnover over £30,000 population mandated from April 2027. The letter highlights that 2024/25 is a critical stage in the delivery of MTD for income tax as HMRC’s focus is on developing a successful testing phase. It also clearly reiterates that this will not be achieved without continued strong collaboration between HMRC and external partners, such as Chartered Accountants Ireland. One of the key requirements of the testing is to ensure that the right quantity and types of businesses can participate. This is one area where the government sees an important role for representative bodies like Chartered Accountants Ireland. The Institute will be providing a full update on recent developments in MTD for income tax in a later edition of Chartered Accountants Tax News in September. We will also continue to attend HMRC MTD forum meetings and collaborate with HMRC on MTD for income tax to assist members and businesses in their preparation for this change.

Just before the summer parliamentary recess commenced at the end of July, new Chancellor of the Exchequer Rachel Reeves announced that the Labour Government’s first Budget will take place on Wednesday 30 October. The Chancellor also announced next steps and published draft legislation on some “priority tax commitments” ahead of the full announcements which will take place on Budget Day. The Finance Bill 2024-25 draft legislation and technical tax documents were also published and several new tax policy announcements were made, including the expected removal of the VAT exemption for private school fees. A full Ministerial Written Statement is also available and it is confirmed that there will be no increases to income tax, employee national insurance contributions, or VAT.    The measures announced in July included the following:   2024: Non-UK domiciled individuals - policy summary - this confirms that the four-year foreign income and gains regime announced by the previous government at the Spring Budget will take effect for all foreign income and gains arising from 6 April 2025. However, the proposal to provide a 50 percent reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime will not be introduced. A temporary repatriation facility will be available for individuals who have been taxed on the remittance basis, and a form of overseas workday relief will be retained. Further details will be provided at the Budget. The current domicile-based inheritance tax (IHT) system will proceed, again as announced by the previous government, to be replaced with a new residence-based system from 6 April 2025. This will be based on whether or not a person has been resident in the UK for 10 years prior to the tax year in which the chargeable event (including death) arises, with a 10 year “tail provision” to be introduced after leaving the UK. The new government intends to end the use of excluded property trusts to keep assets out of the scope of UK IHT. Confirmation of these new rules, including transitional arrangements, will be published at the Autumn Budget, after external engagement. A formal consultation will not be taking place. The furnished holiday lettings tax regime is being abolished as planned from April 2025 with an anti-forestalling rule in place from 6 March 2024 to prevent the use of unconditional contracts to obtain capital gains tax relief under the current rules. Details of a number of transitional rules necessary as a result of this change have also been published.   Announcements were also made in the following niche areas:   Pillar 2: transitional country-by-country reporting safe harbour anti-arbitrage rule, Tax treatment of carried interest - Call for Evidence, and Changes to the Energy (Oil and Gas) Profits Levy.   Tax non-compliance The government also set out its commitment to tackling tax non-compliance in the publication “Fixing the foundations: public spending audit 2024-25” with the new Exchequer Secretary to the Treasury stating that work has begun on recruiting 5,000 more HMRC staff specifically for this purpose. The government also stated its commitment to investing in HMRC’s technology infrastructure. Further updates will be provided on this at the Budget.   End of private school fees VAT exemption The ending of the VAT exemption and the introduction of 20 percent VAT on education and boarding services provided for a charge by private schools across the UK will commence from 1 January 2025. This will also apply to pre-payments of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024. However, this change will not apply where pupils with the most acute special educational needs can only have those needs met in private schools.    Schools cannot register yet for this charge on education and boarding. In due course, HMRC will provide schools with details on how and where to register.   More information on this is available in the publication “Revenue and Customs Brief - removal of the VAT exemption for private school fees and boarding services.” You can also read the draft legislation, accompanying explanatory note, and technical note which are being consulted on until 15 September.

The Secretary-General has issued a statement on the Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation. G20 Members have agreed a comprehensive stand-alone Tax Declaration, reflecting the transformational achievements of international tax cooperation to date, the importance of that cooperation and its commitment to continue to carry it forward. 

There were a number of minor updates to several other manuals since we last issued Tax News. Please follow the link below for a short summary of these changes. Guidelines on PAYE Assessments to reflect the statutory time limit on the making or amending of PAYE assessments on employers. Additional guidance on how to appeal a PAYE assessment is included. Guidance on health and well-being related benefits confirms that no benefit in kind charge arises where an in-house medical plan includes a GP service, which is available to all employees and directors (paragraph 7); clarifies that relief in respect of speech and language therapy, or for educational psychological assessments, will only apply in certain circumstances. Donations to approved sports bodies to include a link to the "List of Sports Bodies with Tax Exemption", as published on the Revenue website. Guidance on the tax treatment of Members of the European Parliament (MEPs) regarding allowances paid to MEPs and transitional allowances and pensions paid to former MEPs. Income tax credits and reliefs for certain older persons and individuals caring for certain older persons reflects changes to the upper age limit for a PRSI exemption introduced by the Department of Social Protection, effective since 1 January 2024. Guidance on certain payments to Local Authority Chairpersons and Members regarding the exemption from tax that is available for maternity-related administrative support allowance payments to Local Authority members, and the tax treatment of security allowance payments. Guide to Exchange of Information under Council Directive 2011/16/EU, Ireland’s Double Taxation Agreements and Tax Information Exchange Agreements and the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters. Guidance regarding the levy on authorised insurers. to correct an error in the rates of levy which were previously published relating to insurance contracts which are renewed or entered into on or after 1 April 2024. Stay and Spend Tax Credit to remove references to the service provider registration process as the period for such registration has now ceased and the information pertaining to same is no longer relevant. Exemption from income tax in respect of certain payments made under Employment Law to confirm that the Industrial Relations Acts 1969 is a “relevant Act” for the purposes of section 192A TCA 1997.  

Revenue has published  new Stamp Duty Manual to provide guidance on Miscellaneous Acts which contain Stamp Duty Exemptions. The manual provides a list of the current stamp duty exemptions contained in legislation, which includes the  Stamp Duty Consolidation Act 1999 together with a number of Statutes enacted before 1922 and Acts of the Oireachtas which were enacted from 1922 onwards.

Revenue has published a new Tax and Duty Manual which contains an overview of the administration of Pillar Two rules. In addition, the recently published Tax and Duty Manual regarding the global minimum effective tax rate for large groups and companies has been updated. The updated manual now includes guidance on the operation of the Pillar Two rules along with the detailed correlation table which cross references the legislation contained within Part 4A of the TCA 1997 with: the relevant article of the EU Minimum Tax Directive, the relevant article of the OECD Model Rules, OECD Commentary, where relevant, and OECD Administrative Guidance, where relevant.

Revenue has informed us that it will cease the Relevant Contract Tax (RCT) registration of circa 47,000 predominantly Business Division cases who are now inactive for RCT. This will not impact other tax registrations. Taxpayers with no RCT payments made/received/contracts entered into in 2021, 2022 or 2023 will be considered inactive and will have their RCT registration ceased. Revenue has also advised that, if a taxpayer is linked to a new RCT contract notification in the future, their RCT registration will be auto reactivated without requiring intervention by the taxpayer or their agent.