Last week, the TALC BEPS Sub-Committee convened its first meeting of the year. There was a significant and detailed discussion on various matters relating to the EU Minimum Taxation Directive (“Pillar Two”). The various representative bodies had submitted a significant number of queries in advance of the meeting. There was also a discussion on the guidance on the new outbound payments defensive measures.  Outbound Payments Defensive Measures – draft TDM and discussion of submissions  Practitioners noted that they were generally satisfied with the draft TDM. While a number of comments were made at the meeting, the overall guidance should be of great benefit to taxpayers and their agents as they apply the new provisions.  Pillar Two: Update on draft Revenue TDM and discussion of submissions  Practitioners submitted a significant number of queries in advance of the meeting which were discussed fully at the meeting. A number of matters remain for discussion at OECD Working Group level (which Revenue is a party to). The discussion will be laid out fully in the minutes which can be found at the usual place on Revenue’s website in due course. 

Last week, the TALC Indirect Taxes Sub-Committee convened its first meeting of the year. A delegation from Revenue’s Tax Registrations division presented to the group. We will make these slides available in due course. Below we include a summary of the key points for practitioners to consider when making a VAT registration application.  VAT Registration  Revenue advised that when making a VAT registration application, taxpayers and their agents should consider the following (and where possible include with the application):  Demonstrate that the applicant is an Accountable Person within the meaning of sections 5 & 9 VATCA 2010.  Provide a brief description of the business activity.  Provide documentary evidence of the business activity/trade in Ireland.  Provide documentary evidence of the business activity/trade from Ireland to other EU Member States (where applicable).  Clearly outline the place of supply of the relevant goods and/or services.  Provide evidence for the place of supply.  Where possible, provide incoterms of sale, details of duty paid, details of where ownership is exchanged, etc.  Revenue also explained that for ‘Intention to Trade’ applications, European Courts have clearly stated that tax authorities are entitled to “objective evidence of the intention”. Revenue guidance suggests that such evidence may include leases, contracts tools of the trade, etc. In addition business plans and other such supporting documentation would also assist in such applications.  Revenue then explained some of the reasons why applications are disallowed, including:  CRO-registered with mainly non-resident directors or a single Irish -resident director.  No proper place of establishment, e.g. use of an agent’s address, PO Box, or virtual/serviced office as business address.  No evidence of contracts or customers.  Inability to produce a valid invoice.  No employees, or only an agent/director listed as an employee. 

Revenue has updated the Tax and Duty Manual which provides guidance on the enhanced reporting requirements (ERR) for employers. The manual now provides guidance on an optional administrative practice regarding advance payments of travel and subsistence.  An advance payment of travel and subsistence to an employee or director is a perquisite and income tax, USC and PRSI must be deducted. These types of payments would therefore not typically fall within the scope of ERR as the payment does not relate to travel or subsistence incurred by the director or employee. However, when a claim for the related travel and subsistence is made to the employer, and the employer wishes to avail of the Section 114 administrative practice (i.e. not tax the travel and subsistence expense), a payroll adjustment must occur to give the effect of no tax applying to the expense amount incurred and at that point the payment becomes a reportable benefit for ERR. Revenue recognises that this may give rise to certain practical issues for employers in terms of its interaction and obligations with ERR requirements.  Therefore, Revenue will implement an optional administrative practice in respect of advance travel and subsistence payments.   Under this administrative practice, an advance travel and subsistence payment may be treated, in certain circumstances, as not being subject to tax via the payroll when paid, but instead treated as a payment where no tax is deducted in respect of travel and subsistence and therefore subject to ERR reporting at the time of payment. Then, when the expense is incurred and the claim submitted by the employee/director, the employer will be required to update their ERR submission to Revenue to reflect the actual travel and subsistence expense amount in respect of that employee/director. 

After the closure of the Office of Tax Simplification in 2023, HM Treasury and HMRC were set a mandate to focus “on simplifying the tax code”. In January of this year, the government published an update on progress made towards tax simplification. The Spring Budget 2024 contained further details of this work by setting out specific metrics which will be used to track progress being made, especially for small businesses and individuals.   From HMRC’s annual customer survey, a new survey, the government will track the views of small businesses and individuals on the ease of dealing with tax issues, and the ease of finding information. The government will also measure how easy taxpayers find it to deal with HMRC from a survey offered after using HMRC’s telephony or digital services. Lastly, the government will monitor HMRC’s estimate of the net change in cost to businesses of meeting tax obligations from fiscal event measures. These metrics will be kept under review and enhanced, taking into account feedback from stakeholders.  The Spring Budget 2024’s main red book publication also sets out several measures which deliver “further administrative reforms to make it easier for individuals and sole traders to meet their tax obligations by”. In summary, these are as follows:  Easing the payment of inheritance tax before probate or confirmation - from 1 April 2024, personal representatives of estates will no longer need to have sought commercial loans to pay inheritance tax before applying to obtain a “grant on credit” from HMRC; and   Investment in digital services - simplifying access for those who want to pay in instalments in advance via a Budget Payment Plan, or in arrears via a Time to Pay Arrangement from September 2025.  The government also badged the following Spring Budget 2024 measures as simplifying underlying tax rules:  Abolishing the current tax regime for non-UK domiciled individuals;  Announcing the end of the Alcohol Duty Stamps scheme;   Abolishing the furnished holiday lets tax regime from 6 April 2025; and  The forthcoming consultation on reform of Class 2 NIC. 

Freezes in both fuel and alcohol duty, a new duty on vaping and increased tobacco duty, and the abolition of stamp duty land tax multiple dwellings relief feature in this section together with the news of additional investment in HMRC to tackle collection of tax debt and a range of other measures.   Fuel duty  The current levels of fuel will be maintained for a further 12 months via extending the temporary 5p fuel duty cut and cancelling the planned inflation-linked increase for 2024/25. Following a review, the government will maintain the difference between road fuel gas and diesel duty rates until 2032.  Alcohol duty  Alcohol duty is being frozen from 1 August 2024 until 1 February 2025. This extends the six-month freeze announced at Autumn Statement 2023 and will result in 2p less duty on an average pint of beer, 1p less duty on an average pint of cider, 10p less duty on an average bottle of wine, and 33p less duty on an average bottle of spirits than if the planned duty increases had gone ahead.  Vaping and tobacco duty  The government will introduce a new duty on vaping products from 1 October 2026, with registrations for the duty expected to open from 1 April 2026. The rates will be £1 per 10ml for nicotine free liquids, £2 per 10ml on liquids that contain 0.1-10.9 mg nicotine per ml, and £3 per 10ml on liquids that contain 11mg or more per ml. A 12-week consultation has been launched on the policy design and technical details. The government will also introduce a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.  Stamp duty land tax   From 1 June 2024, the government is abolishing stamp duty land tax (“SDLT”) Multiple Dwellings Relief (“MDR”). MDR is a bulk purchase relief where the rate of SDLT is normally determined by the total consideration given for land and it is currently available to any purchaser buying two or more dwellings in a single transaction, or linked transactions. It allows the purchaser to calculate the SDLT payable based on the average value of the dwellings purchased as opposed to their aggregate value.  Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024. The government will also engage with the agricultural industry to determine if there are any particular impacts that should be considered further.  Legislation will be updated to ensure that from 6 March 2024, registered providers of social housing in England and Northern Ireland are not liable for SDLT when purchasing property with a public subsidy and public bodies will be exempted from the 15 percent anti-avoidance rate of SDLT for high value residential properties.   From 6 March 2024, the rules for claiming SDLT first-time buyers’ relief will be amended so that individuals buying a leasehold residential property through a nominee or bare trustee will be able to claim the relief, including victims of domestic abuse.  Investment in HMRC  The government is investing £140 million “to improve HMRC’s ability to manage tax debts.” The aim is to expand HMRC’s debt management capacity “to support both individual and business taxpayers out of debt faster and collect tax that is due.”   Air Passenger Duty (“APD”)   The 2025/26 APD rates for economy passengers will increase in line with forecast inflation. Rates for those flying premium economy, business and first class and for private jet passengers will also increase by forecast inflation and will be further adjusted for recent high inflation.  Landfill tax rates  Landfill tax rates for the year 2025/26 will be adjusted to better reflect actual inflation and ensure that the tax continues to incentivise investment in more sustainable waste management infrastructure. The standard rate of landfill tax will increase to £126.15 per tonne and the lower rate will increase to £4.05 per tonne.  VAT    The government referenced the Office for Budget Responsibility’s recent review of the VAT Retail Export Scheme and specifically the original costing of the removal of tax-free shopping. The government will consider these findings alongside industry representations and broader data, and welcomes any further submissions in response to these findings.  The government will launch a consultation on the impacts of the July 2023 High Court decision in Uber Britannia Ltd v Sefton MBC next month. A range of viable options will be explored to ensure that this case’s ruling does not have any undue adverse effects on the private hire vehicle sector and its passengers. In this case, The High Court considered the regulation of Uber's business model outside of London, and specifically whether the private hire vehicle operator is acting as a principal when entering into a contractual obligation with the passenger to provide the journey. This in turn has potential VAT consequences in terms of whether the private hire vehicle operator is acting as a principal or an agent, and therefore may impact on the tax base on which VAT should be charged.  Gift Aid legislation  The Digital Markets, Competition, and Consumers Bill is introducing new protections for consumers who take out subscription contracts. The government will amend existing gift aid legislation so that charities can continue to claim gift aid while complying with these new protections. The government’s intention is that these amendments will be in place by the time the relevant provisions of the Bill come into force.  Crypto-Asset Reporting Framework   The government has launched a consultation which seeks views on how best to implement the Crypto-Asset Reporting Framework and amendments to the Common Reporting Standard. As previously announced in November 2023, these changes will be made in time to ensure that information exchanges take place from 2027.  Transfer of Assets Abroad   The government will legislate in the Spring Finance Bill 2024 to ensure individuals cannot use a company to bypass this anti-avoidance legislation, Transfer of Assets Abroad, in order to avoid UK income tax. The changes will take effect for income arising to a person abroad from 6 April 2024.   The Umbrella Company Market    The government will provide an update on the recent consultation on tackling non-compliance in the umbrella company market at Tax Administration and Maintenance Day next month. In summer 2024 the government will also publish new guidance relevant to workers and other businesses who use umbrella companies.  Economic Crime Levy adjustment   From 1 April 2024, the rate at which entities with UK annual revenue greater than £1 billion, and which are regulated for Anti- Money Laundering purposes, will pay the Economic Crime (anti-money laundering) Levy will increase from £250,000 to £500,000 per annum.   Environmental land management and ecosystem service markets   Following consultation, the government will extend the existing scope of agricultural property relief from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies. The government will also establish a joint HM Treasury and HMRC working group with industry representatives to identify solutions that provide clarity on the tax treatment of ecosystem service markets. 

In Irish news, Revenue commences local property tax and vacant home tax compliance projects and we bring you an update from the recent meeting of the Tax Administration Liaison Committee (TALC) Direct & Capital Taxes Sub-Committee. In UK news, read about the key issues and themes discussed at last week’s HMRC Stakeholder Conference and the latest Finance Bill has received Royal Assent.  In International news, the latest OECD Secretary-General Tax Report is published ahead of the first meeting of the G20 under the Brazilian Presidency.  Ireland  1.   Revenue outlined local property tax and vacant home tax compliance projects it has commenced at the recent meeting of the TALC Collections Sub-Committee.  2.   Read our update from the recent meeting of the TALC Direct & Capital Taxes Sub-Committee.  UK  3.   Read about the key issues and themes discussed at last week’s HMRC Stakeholder Conference. 4.   The Autumn Finance Bill has received Royal Assent.  International 5.   OECD publishes tax report ahead of first meeting of Brazilian G20 presidency.  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. 

Balancing the recent news that the UK tipped into recession at the end of 2023 with calls from politicians in his own party to reduce the tax burden in what is most likely an election year, Jeremy Hunt delivered the UK’s Spring Budget 2024 today. According to the Chancellor, the main announcements centred around “more investment, more jobs, and lower taxes”.   The VAT registration threshold will increase to £90,000 from April 2024, the first increase since 2017.  Full expensing which provides 100 percent tax relief for investments in new plant and machinery by companies will be extended to leased assets, when affordable. And the higher 28 percent rate of Capital Gains Tax on residential property disposals will be reduced to 24 percent from 6 April 2024. According to the Chancellor’s speech, the Northern Ireland Executive will receive an additional £100 million under the Barnett Consequential (which compensates devolved administrations with funding where Budget measures do not apply UK-wide) and from April 2025 both the regime for non-UK domiciled individuals and furnished holiday lets will be abolished with a new residence-based regime to be introduced for non-UK domiciles. However, the big ticket announcement was the 2 percent reductions in the rates of National Insurance Contributions for employees and the self-employed, both of which will take effect from 6 April 2024. Members will also be interested to hear that HMRC’s long planned consultation on “Raising standards in the tax advice market” has been launched and essentially examines options to strengthen the tax agent regulatory framework in the tax advice market, and on requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client’s behalf. The Institute will be responding to this consultation and engaging with members on this important issue. The analysis in this and subsequent stories is based on the Spring Budget 2024 publications of HMRC and HM Treasury and specifically the main red book publication. Monday’s edition of Chartered Accountants Tax News will feature the tax announcements in more detail. The Spring Finance Bill 2024 is expected to be published next week, in the meantime supporting documents are available, as is the Spring Budget 2024 overview of the tax legislation and rates. You can also read the Institute’s reaction to today’s Budget.

Further reductions in National Insurance Contributions (“NICs”) for employees and the self-employed and a reduction in the higher rate of Capital Gains Tax (“CGT”) for residential properties disposals featured under the personal taxes banner. Amendments will also be made to the high income child benefit charge thresholds ahead of more sweeping changes in 2026. The remittance basis regime for non-UK domiciled individuals is to be abolished and replaced with a new residence based regime from 6 April 2025 and a new residence based regime will also be introduced for Inheritance Tax. And finally, the furnished holiday letting regime is to be completely abolished from 6 April 2025. NICs reductions From 6 April 2024, the main rate of employee NICs is being reduced from 10 percent to 8 percent from 6 April 2024. Combined with the 2 percent reduction from 12 percent to 10 percent which was announced at Autumn Statement 2023 and took effect from 6 January 2024, according to the Budget publication this will save the average worker on £35,400 over £900 a year. From the same date, a 2 percent reduction is also being made in the main rate of Class 4 self-employed NICs which will now reduce from 9 percent to 6 percent from 6 April 2024 (a 1 percent reduction from 9 percent to 8 percent from 6 April 2024 had previously been announced at Autumn Statement 2023). When taken together with the abolition of the requirement to pay Class 2 NICs from 6 April 2024, this should save the average self-employed individual on £28,000 around £650 a year. CGT on residential property disposals From 6 April 2024, the higher rate of CGT for residential property gains will be reduced from 28 percent to 24 percent. Resident property gains in the basic rate band will continue to be taxed at 18 percent. High income child benefit charge (“HICBC”) In order to end the unfairness for single earner families in the Child Benefit system, the Chancellor announced that from April 2026 the HICBC will move to be assessed on the overall household, rather than on an individual basis. The Government will consult on this in due course. In the meantime, from April 2024 the HICBC income threshold where the tax commences will be increased to adjusted net income of £60,000, and the rate at which the HICBC is charged will be halved so that Child Benefit is not withdrawn in full until individuals earn £80,000. This essentially means that from 6 April 2024, every £100 of income over £60,000 will result in a 0.5 percent tax charge on the child benefit received. Abolition of remittance basis for non-UK domiciled individuals The remittance basis for non-UK domiciled individuals is to be abolished from 6 April 2025 and replaced with a UK wide residence-based regime. Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-UK tax resident for the last 10 years. Transitional arrangements will be introduced for existing non-UK domiciled individuals claiming the remittance basis as follows:- There will be an option to rebase the value of CGT assets to 5 April 2019; A temporary 50 percent exemption for the taxation of foreign income will be available in 2025/26 only; and A two-year temporary repatriation facility will be available to bring previously accrued foreign income and gains into the UK at a 12 percent tax rate of tax. Inheritance tax (“IHT”) The Government also announced its intention to move to a residence-based regime for IHT and will consult in due course on the best way to achieve this, including consulting on a 10-year exemption period for new arrivals and a 10-year ‘tail-provision’ for those who leave the UK and become non-resident. However, no changes to IHT will take effect before 6 April 2025.  

The first increase in seven years to the VAT registration threshold, further enhancements to the various creative sector reliefs and the inclusion of leased assets in the full expensing regime (when fiscal conditions allow) were the key business taxes announcements. As previously announced, HMRC has also published updated guidance around the tax deductibility of training costs for sole traders and the self-employed. This guidance aims to ensure that updating existing skills, maintaining pace with technological advancements, or changes in industry practices, are allowable costs when calculating taxable profits. HMRC are also to establish an expert panel to assist in the administration of R&D tax reliefs. VAT thresholds From 1 April 2024, the current £85,000 VAT registration threshold will increase to £90,000, the first increase since April 2017. The Chancellor’s aim here is to ensure that the UK continues to have one of the highest thresholds in the OECD. According to the main budget publication, over 28,000 businesses will benefit in 2024/25 from no longer being VAT registered. The de-registration threshold will also increase from £83,000 to £88,000 from 1 April 2024. Full expensing to be extended to leased assets Full expensing for companies was made permanent in the Autumn Statement 2023. These capital allowances are currently only available to companies incurring expenditure on new plant and machinery (with some exclusions). The Chancellor announced today that full expensing will be extended to leasing when fiscal conditions allow. Draft legislation on this extension will be published shortly. Creative sector tax reliefs A UK independent film tax credit will be introduced at a rate of 53 percent on qualifying film production expenditure. This enhanced audio-visual expenditure credit will be available for films with budgets under £15 million that meet the requirements of a new British Film Institute test. Productions will be able to make claims from 1 April 2025, in respect of expenditure incurred from 1 April 2024 onwards provided that films started principal photography from 1 April 2024. Following a call for evidence at Autumn Statement 2023, the credit rate for visual effects costs in film and high-end TV will be increased to 39 percent from April 2025, and the 80 percent cap will be removed for qualifying expenditure for visual effects costs. The government will also consult on the types of expenditure that will be in scope for the additional tax relief which will be implemented via a future Finance Bill. And finally, from 1 April 2025, the rates of theatre tax relief, orchestra tax relief, and museums and galleries exhibitions tax relief (“MGETR) will be permanently set at 40 percent (for non-touring productions) and 45 percent for touring productions and all orchestra productions. The sunset clause for MGETR is also being removed meaning relief will not end on 31 March 2026 as announced at Spring Budget 2023.    

The OECD Secretary-General Tax Report sets out the latest developments in international tax reform since October 2023. This latest report includes updates on the Two-Pillar International Tax Package, implementation of BEPS Actions (including actions on harmful tax practices and tax treaty abuse), and an update on the inequality and progressivity of tax systems.

The Central Statistics Office has published the Quarterly National Accounts for Quarter 4 2023 and an updated estimate for 2023 as a whole. The rate of inflation in February was 2.2 per cent, down 6 percentage points since the same month last year.  Modified domestic demand (MDD), a proxy for the domestic economy, is the sum of personal and government consumption and investment, excluding investment in imported intellectual property and aircraft for leasing. It also excludes changes in the value of stocks. MDD grew by 0.5 percent in 2023 and was down 0.4 percent in the fourth quarter relative to the previous quarter.  Consumer spending grew by 3.1 percent last year but was unchanged in the fourth quarter. GDP was down 3.2 percent last year and fell 3.4 per cent in the fourth quarter.  Commenting on the figures, Minister for Finance, Michael McGrath T.D., said:  “Modified Domestic Demand – my preferred metric of Ireland’s economic performance – grew by a modest 0.5 per cent last year, and contracted by 0.4 per cent in the final quarter of last year, with the contraction driven entirely by a fall in private sector investment spending.  Importantly, investment in housing remained robust, up at an annual rate of 12 per cent in the fourth quarter. I expect housing supply to continue expanding in the year ahead, with over 34,000 new units commenced in the twelve months to January 2024. We should see these units coming on-stream as the year progresses.  Consumer spending grew at a solid pace of 3.1 per cent last year. This was underpinned by strong employment growth – figures published last week show a record 2.71 million people in employment in the fourth quarter of last year. The strength of the labour market – with 90,000 jobs added in the last twelve months – is a good measure of the underlying health of the domestic economy.  That said, today’s data show that consumer spending was flat at tail-end of last year – with the tightening of monetary policy weighing on spending. In this context, I would highlight the easing of inflation – to 2.2 per cent in February, its lowest rate since July 2021 – which will help support the purchasing power of households and underpin spending over this year. Ireland’s estimated inflation rate is now 0.4% the euro area rate.  Income tax reductions introduced in Budget 2024 will also underpin real income growth. I expect that the vast majority of people will experience an improvement in living standards this year, as income growth combined with personal tax reductions and other social supports, will comfortably exceed the rate of inflation. I also anticipate that we will see further reductions in energy prices for households and businesses, driven by improvements in the wholesale energy markets.  Today’s figures also show that GDP fell by 3.4 per cent in the fourth quarter, continuing a trend we have seen in recent quarters. 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 decline reflects a re-normalisation of activity in some sectors – mainly pharmaceutical – following a Covid-related boost in demand in 2021 and 2022. Indeed the trend in GDP contrasts sharply with employment which was up by 3.5 per cent in 2023.  As is the norm, my Department is now in the process of updating its economic and fiscal forecasts, and these will be published in the Stability Programme Update early next month.” 

Revenue has published an updated Tax and Duty Manual regarding the Sea Going Naval Personnel Tax Credit. The updated manual reflects the extension of the tax credit to 2024 and contains updated examples.