Revenue has update the Tax and Duty Manual which provides guidance on the tax treatment of the reimbursement of expenses of travel and subsistence to office holders and employees, as follows: Guidance regarding the mandatory reporting by employers under Enhanced Reporting Requirements (ERR) as the payment of travel and subsistence expenses free of tax comes within the scope of the ERR (paragraph 1.4) Increased Civil Service subsistence rates applicable from 14 December 2023 (appendix 1).

Revenue has updated the Tax and Duty Manual regarding payments made without deduction of income tax to reflect the change in tax bands introduced by Finance (No. 2) Act 2023, with updated examples where relevant. The updated guidance also clarifies that re-grossing will apply by reference to the applicable income tax rate only, i.e., Universal Social Charge (USC) and PRSI will not be included for the purposes of calculating the re-grossed amount. Where an employer makes payments without the deduction of income tax which fall within the provisions of section 986A TCA 1997, the employer is liable to pay the amount of tax due in respect of the re-grossed amount of the payment.  Re-grossing applies where either there is total non-operation of PAYE in respect of emoluments to an employee or an employer disguises the payment of emoluments.

The Central Statistics Office has published the Quarterly National Accounts for the first quarter of 2024. Modified Domestic Demand (MDD), a broad measure of underlying domestic activity that covers personal, government, and investment spending, went up by 1.4 percent in Q1 2024. The globalised industry (excl. construction) sector contracted by 6.5 percent in Q1 2024 as compared with Q4 2023, reflecting the volatility of production in the multinational sectors. While there was a mixed picture for sectors focused on the domestic market, overall there was growth of 1.7 percent for the sectors combined. Commenting on the figures, Minister for Finance, Michael McGrath T.D., said: “While GDP was up in the first quarter, I recognise that GDP continued to fall on an annual basis at the start of this year. As is widely acknowledged, GDP is not a useful measure in assessing the living standards of domestic residents, given the outsized role the multinational sector plays in our economy. The annual decline reflects the volatile nature of multinational production, which can swing significantly from one quarter to another. In terms of the domestic economy, I am encouraged to see that Modified Domestic Demand – my preferred metric – grew strongly in the first quarter of this year. Importantly, consumer spending meaningfully contributed to this growth, increasing by 0.6 per cent over the quarter. Clearly this a reflection of the continued strength of the labour market, with almost three quarters of the working age population now in work. Additionally, the significant easing in inflation over recent months has come as welcome relief for households and businesses alike. The strength of investment by firms over the quarter has also been a positive development. This investment, primarily by the multinational sector, will boost the productive capacity in our economy and will bring with it increased employment and exports in the years ahead. I also expect housing supply to continue to grow solidly in the year ahead, with over 50,000 new units commenced in the twelve months to April 2024. Looking ahead, inflationary pressures are now returning to more normal levels and this should bring with it a boost to household real disposable incomes. As the year progresses, the increase in real incomes should further support growth in our domestic economy. That said, we are nevertheless living through a time fraught with uncertainty, geopolitical tensions and a changing economic landscape. Against this backdrop, Government remains committed to careful budgetary management. We will continue to strike the right balance, ensuring that spending is both sufficient and sustainable, meeting the needs of today without compromising the future needs of our people in the years to come.”

The Department of Finance and the Department of Public Expenditure, NDP Delivery and Reform have published the Fiscal Monitor for May 2024. This month’s report shows an increase in tax revenue to end-May of €1.2 billion (up 6.2 percent). The increase was driven by strong VAT receipts, up €0.4 billion (12.2 percent) on the same period last year. Income tax receipts increased by €0.9 billion (6.7 percent) when compared with the same period in 2023. Corporation tax receipts showed a recovery from the decline in quarter 1 and are now on a par with the same period last year. Commenting on the figures, the Minister for Finance, Michael McGrath T.D. said: “May is an important month for tax revenues in the exchequer calendar and the positive performance is a welcome indicator of the strength of our economy, most clearly reflected in the healthy growth in income tax and VAT revenues. With a record 2.71 million now at work in Ireland and incomes rising faster than the rate of inflation, living standards are improving again and consumer activity in our economy is being supported. Of course, the most notable feature of the May tax outturn is the spike in corporation tax receipts. As a result, overall corporate tax revenues have recovered after a sharp drop in the first quarter of the year and are now level with the same period last year. I would caution, however, that the significant volatility, in both directions, we have seen from month-to-month in this revenue stream is yet more evidence of the unreliability of these highly concentrated receipts, and the associated risks this brings to our public finances. The fact that we are highly dependent for a large portion of our corporate tax receipts on a very small number of companies requires a decisive policy response to ensure our public finances are sustainable into the future. We cannot necessarily rely on some of these receipts into the future. That is why the setting up of the Future Ireland Fund, and the Infrastructure, Climate and Nature Fund is a landmark and necessary policy development and one I am determined to deliver on. This vulnerability underscores the importance of continuing to pursue a balanced and sustainable budgetary policy. With this in mind, Government will set out the fiscal parameters for Budget 2025 in the Summer Economic Statement in the coming weeks.”

Last week Revenue published a detailed statistical report on the Debt Warehouse Scheme. Over 93 percent of the €3.2 billion debt warehoused at its peak in January 2022 has been either paid in full, secured under a phased payment arrangement (PPA) (or in the process of being secured), or is awaiting approval to offset the debt. In May, €100 million of warehoused debt was collected. At the time of writing, 12,747 businesses have agreed PPAs totalling almost €1.2 billion. Revenue will continue to monitor compliance with the terms of PPAs. All current returns and liabilities should be submitted and paid on time for businesses availing of PPAs to continue availing of the 0 percent interest rate. Where businesses encounter difficulties paying current taxes, they should engage with Revenue so that a mutually acceptable solution can be found. Demands were issued to 11,724 businesses with warehoused debt that had not engaged with Revenue by the 1 May 2024 deadline. Forty percent of those businesses have since engaged. With a total debt of €100 million, the remaining 7,024 businesses have been removed from the warehouse. This debt is now subject to normal collection and enforcement proceedings and is subject to interest at the standard rate of 8 – 10 percent as appropriate. Further information is available in Revenue’s press release. Commenting on the scheme, Minister McGrath stated: “I wish to acknowledge the work of the Collector General’s Division in Revenue and the success of the Tax Debt Warehousing scheme in supporting viable businesses and employments during an unprecedented and exceptionally difficult trading environment. Thanks to their efforts, the scheme successfully offered valuable and practical liquidity support to businesses by assisting with their cash-flow, thereby preventing business failure. I also wish to acknowledge the significant levels of engagement to date by taxpayers and their agents in agreeing realistic payment plans tailored to their particular circumstances. As a result of their engagement, the amount of warehoused tax debt has reduced by a substantial €284 million since January of this year. For those customers who have agreed PPAs, it is important to note that in order to retain the 0 per cent interest rate, it remains a key condition that current taxes are filed and paid as they fall due, and that all monthly payments are honoured as agreed. It is important to highlight that any taxpayer experiencing temporary cashflow difficulties which impact on their ability to meet their tax obligations on a timely basis should engage with Revenue at the earliest opportunity. Revenue will work with viable businesses in a fair and pragmatic way to agree mutually acceptable payment solutions. On a case-by-case basis this may include options such as a payment deferral or a payment break, rather than deploying debt collection and enforcement options.”

In Irish news, we bring you an update from last week’s National Economic Dialogue and share an update from Revenue on the ongoing work to update the guidance on relief for investment in corporate trades. In UK news, the Institute tells HMRC that mandatory membership of a recognised Professional Body is its preferred approach to regulation of the UK tax agent market, but without additional regulation of our members, and the Spring Finance Bill has received Royal Assent. In International news, the OECD welcomes the commitment from the members of the Inclusive Framework to resolve the remaining issues under Pillar One.   Ireland   1.  Institute representations at National Economic Dialogue focus on support for SME sector. 2.  Update from Revenue on the ongoing work to update the guidance on relief for investment in corporate trades.  UK  3.  Read the Institute’s response to the tax agent regulation consultation which tells HMRC that mandatory membership of a recognised Professional Body is its preferred approach, but without additional regulation of our members.  4.  The Spring Finance Bill has received Royal Assent.  International 5.  OECD welcomes commitment to resolve remaining Pillar One issues  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. 

Do you use HMRC online services? Don’t be caught out by the planned downtime to some services. HMRC are warning about the non-availability of specific services on the HMRC website, a range of services are impacted. Check the relevant page for information on planned downtime.  

At the most recent meeting of the Inclusive Framework on Base Erosion and Profit-Shifting, the OECD Secretary-General Mathias Cormann welcomed the commitment of the group to resolve the outstanding issues with Amount A of Pillar One which should enable the signing of the Multilateral Convention implementing the rule by the end of June 2024. The key concern is reaching agreement on a fair allocation of taxing rights across the 147 countries who make up the Inclusive Framework.

Revenue has published a new manual on the Flat-rate Farmers Refund Order. The new guidance outlines how VAT can be reclaimed, with commentary on the necessary conditions, the types of expenditure and information required to make a claim.

Readers may be aware of a minor update to the guidance on relief for investment in corporate trades (including the Employment Investment Incentive Scheme (EIIS)), whereby the date on the face of the Tax and Duty Manual (TDM) was changed from April 2023 to May 2024. This has caused some confusion as there had been no updates to the contents of the manual since the April 2023 release. Revenue has provided an update to the Institute through the TALC Direct & Capital Taxes Sub-committee confirming that the TDM is presently being updated to reflect the changes implemented by Finance (No. 2) Act 2023. Revenue’s update is as follows: “In the course of the last meeting of the TALC Direct and Capital Taxes Sub-Committee and subsequently, queries were raised regarding the updating of TDM Part 16-00-02 “Relief for Investment in Corporate Trades” and initial risk finance investment.    We wish to advise that the matter which delayed publication of the update of TDM Part 16-00-02 “Relief for in investment in corporate trades” is still under consideration and it remains the intention to circulate a draft of the updated TDM prior to publication as soon as we are in a position to do so.  We note that a version of the TDM was recently published on www.revenue.ie stating that it was last reviewed in May 2024.  This was an error that arose whereby the retention of the TDM last reviewed in April 2023 was extended which resulted in an incorrect date on the first page.  This has been rectified and we confirm that no changes have been made to the TDM.  We regret any confusion caused.   In relation to the queries raised on initial risk finance, and in light of the delay in publication of the TDM, please note the following clarification.   We wish to confirm that it remains possible to raise initial risk finance investment in tranches as has always been the case.  The position is unchanged from that as set out in the TDM which states “Many companies who seek to raise EII, SCI or SURE supported funding, do so in tranches. That is, they embark on a fundraising round over a number of months. Shares are usually issued at the end of the fundraising round, but there may be occasions where the shares are issued as the amounts are invested. The initial risk finance investment will be the initial round of fund raising, whether the shares are issued at the end, or throughout that fundraising round. It should be noted that the shares should be fully paid up at all times throughout the relevant period.”  The initial risk finance investment requirements must be set out in the business plan in line with the legislative requirements in that regard and as specified in the TDM.  Where a business plan identifies a need for State aid in the form of initial risk finance and those funds are subsequently raised in tranches, each tranche will form part of the initial risk finance investment and will not constitute follow-on investment until the initial risk finance investment as provided for in the business plan has been raised.    Where an investment is raised in tranches, it should be noted that the rate of relief that may be availed of on investment could differ over the course of an extended period i.e. a company may be part of a RICT group that is not operating in any market at the time of one tranche of investment and it may be a company that is part of a RICT group operating in a market at the date of a later investment tranche. The rate of relief to apply to the investment will depend on whether the company is part of a RICT group that is not operating in any market or part of a RICT group that is operating for less than 10 years post incorporation or less than 7 years following its first commercial sale at the time the eligible shares are issued in line with section 496(5) TCA.  For shares issued on or after 1 January 2024, the amount of a qualifying investment that may qualify for relief is as follows: In the case of initial risk finance investment in a RICT group which has not been operating in any market, pursuant to section 496(5), 125% of the investment may qualify for relief giving rise to a rate of relief of up to 50%. In the case of initial risk finance investment in a RICT group which has been operating in any market for less than 10 years post incorporation or less than 7 years following its first commercial sale, pursuant to section 496(5), 87.5% of the investment may qualify for relief giving rise to a rate of relief of up to 35%. In the case of expansion risk finance investment pursuant to section 496(6), 50% of the investment may qualify for relief giving rise to a rate of relief of up to 20%. In the case of follow-on risk finance investment pursuant to section 496(7), 50% of the investment may qualify for relief giving rise to a rate of relief of up to 20%. In the case of investments made indirectly via a qualifying investment fund, 75% of the investment may qualify for relief giving rise to a rate of relief of up to 30%. Accordingly, in the case of a company that is raising its initial risk finance investment in tranches throughout 2024 where it is part of a RICT group that makes its first commercial sale on 1 June 2024 for example, the rate of relief will be up to 50% where the eligible shares are issued prior to 1 June 2024 and it will be up to 35% where the eligible shares are issued on or after 1 June 2024.”

The Institute is represented on two HMRC VAT forums; the Joint Vat Consultative Committee (“JVCC”) and the VAT Registration Sub-Group forum. Recent updates from each are set out below. JVCC update   The JVCC is an HMRC forum to exchange views between HMRC and representative bodies and other organisations relating to the procedures and operations of VAT, and to consider and discuss VAT issues arising from member organisations with the aim of strengthening HMRC’s understanding of the needs of the business/taxpayer. The minutes from the 125th JVCC meeting have been published and are available on GOV.UK.   The JVCC has also been advised that the new VAT Tertiary Legislation manual is now available. Except for margin scheme content, nothing in the manual new as it has all been published previously on GOV.UK. The revised margin scheme tertiary legislation is available in the manual for the first time following the withdrawal of VAT Notice 718.  To date, HMRC has not removed any force of law content from VAT Notices and so, much of it is duplicated in both this manual and its original home on GOV.UK. In due course, HMRC aims to remove legal content from its VAT Notices and replace it with plain English, where appropriate.  In the new manual, HMRC has aimed to maintain a logical structure and has included heading numbers for ease of reference. As the manual is new, HMRC is seeking feedback using the buttons in the manual.   VAT registration Sub-Group forum  Details of action points and HMRC responses from the January 2024 meeting of this forum are set out below.  A member asked whether the guidance made it clear that customers might need multiple authorisations for VAT.   This has been investigated and a change to the wording of the guidance was required and has been instigated. The guidance will be updated.  Can the VAT50 and VAT51 forms be uploaded and added to the application at the end of the online VAT registration process?  The VAT 50/51 can be either attached at the point of submission of the VAT registration within the digital journey, or taxpayers can choose to send this to HMRC via post. HMRC’s preference is that these forms are uploaded via the Vat Registration Service (“VRS”) if the taxpayer or their agent is able to do so.  Can a review be carried out regarding virtual offices and the principal place of business?  A review has been instigated and is currently ongoing. Details will be shared when an update is available.  Were specified supplies included when the previous review was carried out on compulsory registration?  HMRC has updated the rules behind the VRS to take account of these. When a person applying under these circumstances enters the words ‘SPECIFIED SUPPLIES’ in the ‘Business Descriptions’ free text box, the application will not be rejected.  HMRC has updated section 2.7 of VAT Notice 700/1 to this effect and is considering the most appropriate place to include an update in the VRS itself to best support applications.   Does the registration team no longer send out confirmation of registration changes?  VAT registration and variation outputs are generated automatically and issued to the taxpayer when the application or variation has been processed; there is no manual process to issue an output to provide the same confirmation.  Other updates  HMRC provided an update regarding queries that have been made in relation to Parish Councils and Public Bodies as follows:-  “Applications for VAT registration from public bodies should be made on a paper VAT1 as per current guidance. When we can introduce a bespoke journey into the online VAT Registration Service, we will communicate this via the appropriate channels, but there are currently no plans for this.” 

Better long-term support for the SME sector was advocated for by Director of Advocacy and Voice, Cróna Clohisey, and Institute President Barry Doyle who both represented Chartered Accountants Ireland at the National Economic Dialogue (NED) last week. The NED provides a forum for public consultation and debate ahead of Budget 2025 and this year’s theme was challenges and opportunities in a more shock-prone world. The Institute representatives also emphasised to Ministers the importance of careful consideration around the timing of new regulations and their impact on businesses, the need to simplify the tax system, in addition to enhancing the supply of childcare places. Documents and speeches from the NED can be found on gov.ie.