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. 

Revenue has updated the Pensions Manual which deals with the discontinuance of schemes. Chapter 14 has been revised to add a new paragraph which contains contact details for Pensions Branch in Large Cases - High Wealth Individuals' Division. 

Revenue has updated the Tax and Duty Manual which provides guidance regarding the interpretation of the Corporation Tax Acts. The updated manual confirms Finance (No.2) Act 2023 amendments that:  extended the tax exemption under section 208 TCA 1997 to include professional services income of a charity;  inserted a definition of sport which includes both competitive and recreational sport into section 235 TCA 1997, which provides for a tax exemption for certain income of a relevant body established for the promotion of athletic or amateur games or sports. 

Revenue has updated the Tax and Duty Manual titled Securitisation Regulation: Notification of Investment (NOI) following the revision of the EU list of non-cooperative jurisdictions for tax purposes on 26 February 2024. The updated guidance reflects the change from the October 2023 list, and the current listing of relevant Annex II jurisdictions.  Recital 7 of Regulation (EU) 2021/557 explains that an investor in a Securitisation Special Purpose Entity (“SSPE”)1, established after 9 April 2021, in a jurisdiction listed in Annex II of the Council of the European Union’s list of non-cooperative jurisdictions, for the reason of operating a harmful tax regime, should notify the tax authority of the Member State in which it is resident for tax purposes. This information may be used to assess whether the investor derives a tax benefit from such an investment. 

At the most recent meeting of the TALC Direct and Capital Taxes Sub-Committee which took place last week, Revenue provided an update on various matters. The full minutes of this meeting will be available in due course on Revenue’s website, where minutes of all previous meetings are also available. Below we include a brief summary of some of the key issues discussed.  Guidelines to assist businesses to determine correct employment status classification  The group was informed that a significant update to the Tax and Duty manual on the employment status of workers will be published in the coming weeks. The guidance is being drafted following the recent Supreme Court decision in Karshan.   Requirement to file a stamp duty return under section 31C SDCA 1999 Section 31C is an anti-avoidance measure introduced in Finance Act 2017 on foot of the increase in the stamp duty rate from 2 percent to 6 percent (now 7.5 percent) applying to sales and transfers of non-residential property. Where section 31C SDCA 1999 applies, a rate of 7.5 percent of stamp duty arises on the transfer of shares. The general de minimis provision exempts shares of less than €1,000 from stamp duty. Revenue noted the relief in Schedule 1 is not an administrative relief. However where there is a sale of shares under section 31C, a return is required even where there is no tax to pay, even if the stamp duty arising is below €1,000.  Guidance for social media influencers and content creators  Revenue advised that it is in the process of preparing guidance addressing the taxation of social media influencers and content creators. At the meeting, Revenue advised that the taxation of people in these industries follows fundamental principles of taxation. Therefore, the extent to which an influencer is carrying on a trade and how that trade is taxed will always depend on the particular facts and circumstances of each case. Nevertheless, guidance will be welcome given this is a new area of industry.  Updated guidance on section 80 SDCA 1999  There was a detailed discussion on Revenue’s latest guidance on section 80 SDCA 1999 on reconstructions or amalgamations of companies. Section 1.1 in the TDM defines the meaning of “undertaking”. The prior version of the guidance suggested that the transfer of a 100 percent shareholding met the definition of “undertaking”. However, the latest amendment introduces an ‘active ownership’ test. Revenue noted the updated TDM was designed to be more detailed and useful. The ‘active ownership’ element was included to clarify Revenue’s position. Practitioners noted that a 100 percent shareholding is more likely to be managed at subsidiary level rather than at purchaser level. There was uncertainty as to what ‘active ownership’ means and so practitioners are to revert with examples for consideration.   Leasing guidance  Revenue confirmed that further guidance on the following sections is planned for release in the coming weeks:  Guidance on section 299 will be sent to TALC for review by the end of March Guidance on section 403 & 404 TCA 1997 will be sent to TALC for review by the end of April Guidance on section 76E TCA 1997 will be published sometime in April

The Institute, under the auspices of the CCAB-I, made representations on behalf of members at last week’s meeting of the TALC Collections Sub-Committee. Among the issues discussed, Revenue provided an update on the Debt Warehousing Scheme and outlined local property tax and vacant home tax compliance projects it has commenced. Revenue also reminded the group that the 2023 Form 11 has been updated for taxpayers wishing to claim the Mortgage Interest Tax Credit and/or the Rent Tax Credit. Minutes will be available in due course.  Debt Warehousing Scheme – 1 May 2024 deadline  Readers are reminded that taxpayers that have neither paid warehoused debt in full nor commenced the application process for a phased payment arrangement (PPA) by 1 May 2024 will be required to repay the debt is full and will be subject to interest at 10 percent, backdated to when the debt arose.  Revenue is urging taxpayers seeking a PPA to submit their payment proposal (via ROS) by 1 May 2024. Revenue will then work with the taxpayer to formulate a repayment plan. Once a PPA is approved, Revenue has stated that there is flexibility within the system to allow for the first payment to start after 1 May 2024.  Revenue noted that letters will issue to taxpayers in the DWS in March. Due to GDPR issues, these letters will not be copied to agents.   At end of January 2024 there was €1.7 billion debt warehoused by 57,000 taxpayers of which 30,000 owed less than €1,000 (most of whom owed less than €500). €1.4 billion is owed by 5,200 taxpayers, each owing in excess of €50,000. These taxpayers operate in the wholesale/retail, accommodation and food, construction and professional scientific sectors.  Refunds interest totalling €500,000 are due to be made to 475 taxpayers that paid interest of 3 percent.  Taxpayers with PPAs in progress that include the 3 percent interest rate will receive a priority ROS Inbox Notification. They will be required follow certain steps in ROS to trigger the 0 percent interest rate and must ensure they complete the ‘sign and submit’ section to accept the updated payment schedule.  Local Property Tax   Taxpayers were required to have their 2024 local property tax (LPT) liability payment arrangement in place by 10 January 2024. Single annual direct debits will be collected on 21 March 2024. Properties that became suitable for use as a dwelling after 1 November 2022 and on or before 1 November 2023 become liable to LPT for the first time in 2024, based on the market value of the property at 1 November 2021.  Revenue noted that some taxpayers who pay their LPT by deduction at source from pay or pension have failed to file an LPT return. Revenue advises that they file an LPT return as soon as possible in order to avoid issues at a later date.  Revenue informed the group that compliance work is underway in 2024, focusing on property valuations project where there has been a decrease in valuation band in period 2 (2022-2025) from the original valuation band in period 1 (2013-2021).   In addition, Revenue also intends to review properties where taxpayers have claimed uninhabitable status, which may also have a vacant homes tax (VHT) impact if subsequently deemed habitable.  Vacant Homes Tax   Revenue intends writing to persons that own 20 or more properties this week, asking them to declare whether the property is occupied or is vacant. Where vacant, and not already returned, a return and payment will be required to regularise their affairs. Revenue intends to undertake a similar communications campaign when it moves on to contact the middle cohort of property owners with 2 to 19 properties at a later date.  Letters of No Objection for voluntary strike-off  Revenue is aware of delays experienced by taxpayers in obtaining a Letter of No Objection for a voluntary strike-off. While 82 percent of cases were responded to within 30 days in quarter 4 2023, Revenue is endeavouring to reduce the timeframe for issuing such letters. Revenue advises practitioners to use the Exceptional Contact channel in urgent cases where delays arise. Revenue recommends that applicants engage with Revenue as soon as possible and supply all the mandatory information at the beginning of the process. More details are available on revenue.ie  Form IT38  The capital acquisitions tax (CAT) return Form IT38 for the period 1 September 2023 to 31 August 2024 was made available in Revenue’s Return Preparation Facility (RPF) on 26 February 2024. Form IT38 for earlier periods will become available from 26 March 2024 but, in the meantime, they can be prepared using the ROS Offline application.  Employee Share Options  As readers will be aware, from 1 January 2024 the taxation of a gain realised on the exercise, assignment or release of share options no longer falls under individual self-assessment. Instead, employers are responsible for collecting income tax, USC and PRSI from employees on share option gains and remitting those taxes to Revenue as part of the payroll process. Revenue has updated its website for these changes and additional text has been added to screens to alert anyone trying to submit relevant tax on share options (RTSO) for 2024.   The self-assessment regime continues to apply to gains arising on or before 31 December 2023, as does the obligation to register for Relevant Tax on Share Options (RTSO). The 2023 Form 11 is available to any taxpayer wishing to submit their 2023 income tax return. Revenue’s advice to taxpayers that will no longer be chargeable persons for income tax purposes for 2024, is to de-register for income tax via ROS once their 2023 income tax return has been submitted.  2023 Form 11 matters  Revenue has been informed of issues with the pre-population of Department of Social Protection information in the 2023 Form 11 and is continuing to investigate the matter. We will keep readers informed via Tax News.  The 2023 Form 11 has been updated for taxpayers wishing to claim the Mortgage Interest Tax Credit and/or the Rent Tax Credit.