Revenue has updated the Tax and Duty Manual regarding the payment and receipt of interest and royalties without deduction of tax. The guidance has been updated:  in respect of the application of interest withholding tax to interest paid to Irish partnerships and foreign tax transparent entities (section 5.3), and  refers to the European Stability Mechanism (ESM) and the ESM acting through a subsidiary body or sub-entity (section 8).  In addition, instructions on how to report availing of the practice in section 9 for Form CT1 2021 and Form 11 2021 have been deleted. 

Revenue has updated the Tax and Duty Manual regarding the appointment of experts to assist in the audit of the Research & Development (R&D) Corporation Tax Credit. The manual has been updated:  to reflect the start date of the new independent expert panel on 8 August 2023,  to reflect an increase in the fee to be paid to the independent experts to €1,000,  miscellaneous minor revisions to the text and updates to references.  Each year Revenue establishes a panel of experts who may be called upon to assist with reviews of claims for either the R&D Tax Credit or R&D Corporation Tax Credit.  

The time limit for making a claim under the Temporary Business Energy Support Scheme (TBESS) expired on 30 September 2023. Revenue has published preliminary statistics which provide breakdowns of TBESS approved claims and payments by economic sector, employment size, trade and county. In total, 25,132 businesses made TBESS claims, receiving direct payments and tax liability offsets to the value of €150.5 million. Revenue has also published the list of businesses that received payments under the TBESS. 

Revenue has published a new Tax and Duty Manual to provide guidance on the VAT treatment of certain independent groups of persons commonly referred to as Cost Sharing Groups (CSG). In certain circumstances, an exemption from VAT applies to the supplies by a CSG that would otherwise be taxable.   The exemption applies when two or more persons with exempt and/or non-business activities who operate in the public interest join on a co-operative basis to form a separate, independent group of persons to supply themselves with certain services at cost and exempt from VAT. It is designed to help businesses to collaborate and to share resources without being deterred by the cost of VAT on any recharges. The exemption does not apply to the supply of goods or to the supply of VAT exempt activities not in the public interest, such as insurance or financial services.   The VAT treatment on the Exemption for Certain Activities in the Public Interest TDM has been marked as no longer relevant. 

Last week the Autumn Finance Bill 2023 was published and had its first reading in the House of Commons. The Bill contains many of the measures announced by the Chancellor in the Autumn Statement the previous week. A date for second reading of the Bill has not yet been scheduled.  HMRC also sent the below message about the announcements in the Autumn Statement in relation to the cash basis:-  “As you hopefully will have seen, at Autumn Statement the government announced that it would be proceeding with the proposals set out in the consultation on expanding the income tax cash basis, which was launched earlier in the year. I would recommend reading the Summary of Responses and Tax Information and Impact Note for further details of these changes, but in summary the government will:  remove the turnover thresholds for businesses to use the cash basis  set the cash basis as the default method of calculating taxable profits, with an opt-out for accruals  remove the £500 limit on interest deductions in the cash basis, aligning the rules with accruals  remove the restrictions on using relief for losses made in the cash basis, aligning the rules with accruals.  Thank you for your valuable feedback as part of this consultation, and in particular for your feedback on the interest and loss relief restrictions that the government has decided to remove entirely, rather than slightly relax.  Yesterday the Finance Bill was published, which includes legislation to give effect to the expansion of the cash basis at section 16 and schedule 10. I’d encourage you to look over this legislation and let me know if you have any questions or feedback on how it might operate, or if you can see any significant issues or problems with the legislation which would mean that it wouldn’t work as intended.  You may also notice in the legislation that we have removed the need for a business to show that there is a change in circumstances relating to the trade before withdrawing an election to use GAAP (cash basis in the current legislation, section 31D(3)(a)). The election to use GAAP is also particular to a trade, rather than a person as a whole. This better reflects the reality of tax returns showing a box to use the cash basis (in the future, GAAP) per self-employment and partnership page, and allows for a greater degree of flexibility in an individual being able to use GAAP for some of their trades and cash basis for others.  The government has also published a description of the legislation in the accompanying Explanatory Note to the Bill, which provides some extra background for the legislation.”  If you have any feedback in relation to the changes to the cash basis, please get in touch. 

Revenue has published a new Tax and Duty Manual which provides guidance on the exemption of certain profits arising from production, maintenance and repair of certain musical instruments.  Section 216F TCA 1997 provides for an exemption of up to €20,000 from income tax for certain profits from the production, maintenance and repair of certain musical instruments. The exemption is available to individuals who are chargeable to income tax in respect of profits arising from the production, maintenance and repair of early Irish harps, Irish lever harps, and uilleann pipes.  This section does not exempt the income from PRSI and USC, which are chargeable in the usual manner. 

In last month’s Autumn Statement, it was announced that the “undertaxed profits rule” (“UPR”) will take effect in the UK for accounting periods beginning on or after 31 December 2024. This is to be legislated for in a future Finance Bill, although draft legislation is available in a policy paper. The UPR aims to ensure that any top-up taxes that are not paid under another jurisdiction’s Pillar Two rules are brought into charge in the UK.  In addition, the Government is legislating for the technical amendments published in draft in July and September in the Autumn Finance Bill 2023.  Pillar Two aims to ensure that Multinational Enterprises (“MNEs”) will be subject to a minimum 15 percent effective tax rate in every jurisdiction in which they operate and will apply to in-scope groups’ accounting periods beginning on or after 31 December 2023.  As it is important that the UK implements Pillar Two to a similar timeline as other countries, the Government will continue to monitor international developments on implementation.  

The Central Statistics Office has published the quarterly National Accounts for the third quarter of 2023. GDP was down 1.9 percent, continuing the trend of recent quarters, while Modified Domestic Demand was unchanged relative to the preceding quarter. Consumer spending increased by 0.7 percent..  Commenting on the figures, Minister for Finance, Michael McGrath T.D., said:  “GDP fell by -1.9 percent in the third quarter compared to the previous 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.  That said, the decline reflects, in no small part, the ongoing fall-off in demand for Covid-related pharmaceutical products. We are also seeing a marked softening in global economic conditions, with the OECD this week projecting weak growth for next year – if realised, this would be the lowest rate of global growth since the Global Financial Crisis with the exception of the first year of the pandemic.  However, it’s not all bad news on the external front, with services exports recording solid growth and reaching a new record level.  In terms of the domestic economy, Modified Domestic Demand – my preferred metric – was unchanged in the third quarter, with growth in consumer spending and a fall in investment spending largely off-setting each other.  Encouragingly, personal consumer spending increased by 0.7 percent in the third quarter, broadly in line with pre-pandemic norms and up 2½ percent on an annual basis. Continued growth in consumer spending is supported by strong employment growth – figures published last week showed that employment increased by 27,000 in the third quarter – and by the easing of inflation, which has slowed to 2.3 percent in November, its slowest rate of increase since July 2021.  I am cognisant that many households continue to be impacted by price pressures and Government continues to play a key role in protecting those most acutely impacted. Measures introduced in Budget 2024 will help to support households that continue to be impacted by cost-of-living pressures, with many of these measures hitting people’s pockets earlier this week.  Importantly, investment in new residential dwellings grew strongly, up 14 per cent in the third quarter year-on-year. I expect continued momentum in housing supply in the months ahead, with just under 31,000 new units commenced in the twelve months to October. We should see these units come on-stream throughout the next year.”   

From investing in HMRC’s ability to manage tax debts, to construction industry scheme reforms, to tougher consequences for promoters of tax avoidance, we outline below the key announcements in this area. Disappointingly, no additional investment was made to tackle HMRC’s ongoing poor service levels. HMRC debt management capability   The Government is investing a further £163 million with the aim of improving HMRC’s ability to manage tax debts. The aim of this is “to allow HMRC to better distinguish between those who can afford to settle their tax debts, but choose not to, from those who are temporarily unable to pay and need support.”   HMRC will also be expanding its debt management capacity to “support both individual and business taxpayers out of debt faster and collect debts that are due”.   Construction Industry Scheme (“CIS”) reform to gross payment status  The Government is introducing reforms in the Autumn Finance Bill 2023 to the CIS which will add VAT to part of the Gross Payment Status (“GPS”) compliance test. The objective is to give HMRC more power to remove GPS immediately in cases of suspected fraud. Alongside this, the Government also announced simplifications to other aspects of the scheme, which will be subject to technical consultation.   Promoters of tax avoidance   Legislation is included in the Autumn Finance Bill 2023 to introduce tougher consequences for promoters of tax avoidance schemes. These include a new criminal offence for those who continue to promote avoidance schemes after receiving a notice requiring them to stop, and a new power enabling HMRC to bring disqualification action against directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. These changes will take effect from the date of Royal Assent of the Autumn Finance Bill 2023.   Improving the data HMRC collects    As previously announced, the Autumn Finance Bill 2023 includes legislation that will require employers, company directors, and the self-employed to provide additional data to HMRC. These changes will take effect from the tax year 2025/26. 

A range of VAT measures featured from VAT relief to energy saving materials, to the treatment of private hire vehicles.  Reforms to Energy-Saving Materials   Following a call for evidence, the Government intends to expand the VAT relief available on the installation of energy-saving materials by extending the relief to additional technologies, such as water-source heat pumps, and bringing buildings used solely for a relevant charitable purpose within scope.   As a result of the Windsor Framework, these reforms will be implemented UK-wide in February 2024. Full details on these reforms will be published shortly.  Private hire vehicles   The Government will consult in early 2024 on the impacts of the July 2023 High Court ruling in Uber Britannia Ltd v Sefton MBC.   This case 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 potentially has VAT consequences in terms of whether the private hire vehicle operator is acting as a principal or an agent for the purposes of charging VAT.  VAT retail export scheme   The Government continues to review the rules of this scheme and thanks industry for submissions on the scheme and the associated airside scheme (tax-free shopping). The Government will continue to accept representations and will consider any new information carefully alongside broader data.   Sanitary products   The scope of the current VAT zero rate relief on women’s sanitary products is being extended to include reusable sanitary underwear from 1 January 2024. 

The main Autumn Statement 2023 publication contained details throughout of a range of measures and changes which did not specifically feature in the Chancellor’s main speech. We summarise these below. The Government will tackle the long-standing problem of “small pot” pensions and intends to launch a call for evidence on a lifetime provider model which would allow individuals to have contributions paid into their existing pension scheme when they change employer, providing greater agency and control over their pension. This call for evidence will also examine a potential expanded role for collective defined contribution schemes in future. The Government will also introduce the multiple default consolidator model to enable a small number of authorised schemes to act as a consolidator for eligible pension pots under £1,000;  As confirmed by HM Treasury in October, the Government will legislate to extend the Enterprise Investment Scheme and Venture Capital Trusts to 2035 hence they will not end as originally intended on 5 April 2025;  The Government is currently reviewing responses to the consultation on taxation of environmental land management and ecosystem service markets and will respond in due course;  The Growth Market Exemption, which provides relief from Stamp Duty and Stamp Duty Reserve Tax, is being extended to include smaller, innovative growth markets. This extension will also increase the threshold for the market capitalisation condition that is used within the exemption from £170 million to £450 million. These changes are included in the Autumn Finance Bill 2023 for implementation from 1 January 2024;   The offshore receipts in respect of intangible property (“ORIP”) rules are being abolished in respect of income arising from 31 December 2024. This repeal will be legislated for in a future Finance Bill, and will take place alongside the introduction of the Pillar Two Undertaxed Profits Rule, which aims to more comprehensively discourage the multinational tax-planning arrangements that ORIP sought to counter;   Exempting legislation is included in the Autumn Finance Bill 2023 to exempt from corporation tax compensation payments made under the Historical Shortfall Scheme, Group Litigation Order schemes, Suspension Remuneration Review or Post Office Process Review Scheme. This draft legislation aligns the taxation of onward payments of compensation to that of individual recipients;  Further to the publication of draft legislation on 18 July 2023, the Government is making amendments to the rules for Real Estate Investment Trusts which aim to enhance the competitiveness of the regime. The changes will take effect from the date of Royal Assent of the Autumn Finance Bill 2023, and will apply to accounting periods ending on or after 1 April 2023, or, where relevant, will be deemed to have always had effect;  The annual chargeable amounts under the Annual Tax on Enveloped Dwellings regime will be increased in 2024/25 in accordance with September 2023’s CPI figure of 6.7 percent. The Government will implement this change in the usual way through a Treasury Order;  There will be no changes to the van benefit charge and the car and van fuel benefit charges in 2024/25 hence these will remain at their 2023/24 levels;   Vehicle excise duty (“VED”) rates for cars, vans and motorcycles will increase from 1 April 2024 in line with inflation. To support the haulage sector, the VED rates for HGVs and the HGV levy will both remain unchanged from their 2023/24 rates in 2024/25;  Alcohol duties were frozen until 1 August 2024 with the annual increase decision also delayed to the Spring Budget 2024 in order to give businesses time to adapt to the new duty system introduced on 1 August 2023;  Duty rates on all tobacco products increased by RPI plus 2 percent from 6pm on 22 November 2023 and are included in the Autumn Finance Bill 2023. To reduce the gap with cigarette duty, the rate on hand-rolling tobacco increased by RPI plus 12 percent;   The Gross Gaming Yield bandings for gaming duty are frozen from 1 April 2024 until 31 March 2025;   The Government will consult shortly on proposals to bring remote gambling (meaning gambling offered over the internet, telephone, TV, and radio) into a single tax, rather than taxing it through a three-tax structure;   The Government will legislate so that, where the substantive decision to proceed with a project to create a new electricity generation station or expand an existing generating station is made on or after 22 November 2023, receipts from that new generating station or additional capacity will not be subject to the Electricity Generator Levy;  The Government is legislating in the Autumn Finance Bill 2023 to increase the Plastic Packaging Tax rate in line with CPI, from 1 April 2024, to £217.85 per tonne. To ensure the Plastic Packaging Tax continues to incentivise the use of recycled plastic in packaging, an evaluation plan will also be published by the end of the year in order to gather further evidence to inform the future trajectory of the rate and recycled plastic content threshold;   The Government will increase the Aggregates Levy rate in line with RPI, from 1 April 2025 to £2.08 per tonne; and  A technical change is being made to section 660 of the Income Tax (Earnings and Pensions) Act 2003 in the Autumn Finance Bill 2023, to ensure that the legislative reference to the Scottish Government’s Carer Allowance Supplement is correct. 

This week we bring you news about the need to include an agent reference number on P87 forms (employment expenses claims) and marriage allowance claim forms from 26 February 2024 and the VAT DIY housebuilder’s scheme is going digital from tomorrow, Tuesday 5 December. The UK and other jurisdictions recently announced their intention to implement the OECD’s Crypto-Asset Reporting Framework. HMRC is seeking feedback on its Annual Report publication and the latest advisory fuel rates which apply from 1 December are also available. And finally, the latest news and information bulletin from HMRC is available.  Change to P87 and marriage allowance forms from February 2024   Agent Update 114 recently confirmed that from 26‌‌‌ ‌‌February 2024, paid tax agents submitting form P87 (claims for relief from employment expenses) and marriage allowance claims on behalf of clients will be required to provide the agent reference number when submitting the forms if the agent wishes to receive the related repayment.   If the agent reference number is not provided, the related repayment will be paid to the taxpayer and not the agent, even if the repayment has previously been nominated to be paid to them. This change is part of HMRC’s continuing drive to protect taxpayers from the behaviours of certain repayment agents.  VAT DIY housebuilder’s scheme to go digital  As announced in the 2023 Spring Budget, the Government is legislating to digitise the VAT DIY housebuilders’ scheme from tomorrow, Tuesday 5 December. However, we understand that paper based claims will also remain possible if the digital process cannot be used. The time limit for making claims is also to be extended from three to six months after completion of the build.   By way of reminder, this scheme allows DIY housebuilders to reclaim VAT incurred and paid by them on building materials for any part of a house build which they undertake themselves and is also available to individuals converting a non-residential building into their own home.   The legislation to make these changes was laid recently. The associated Statutory Instrument  and tax information and impact note are as follows:-   The Value Added Tax (Refunds to “Do-It-Yourself” Builders) (Amendment of Method and Time for Making Claims) Regulations 2023; and  VAT: Digitisation of claims and extending time limit for DIY Housebuilders Scheme.   HMRC will be publishing new guidance when the changes go live tomorrow.  HMRC Annual Report  HMRC publishes its Annual Report and Accounts each year in July and want to make sure it's as helpful as possible to those who read it.  They would like feedback on how you use the Annual Report. Does it contain the information you need? Is it well presented and easy to read and find what you're looking for? How could it be improved? By taking a few minutes to complete this short form and give HMRC some feedback on their Annual Report and Accounts, you can help HMRC to make its performance reporting more accessible and effective.