This week’s bulletin looks at Ireland's first carbon budgets and the spending allocated to Northern Ireland from the UK’s Autumn Budget which includes funding for levelling up, climate change and a new trade and investment hub in Belfast. We also cover the launch of Ireland’s public conversation on well-being as well as the announcement that renewables have overtaken fossil fuels as the number one power source in the EU. Ireland's Climate Change Advisory Council (CCAC) publishes proposed carbon budgets This week, the CCAC presented proposed carbon budgets to the Irish Government setting out the limits on greenhouse gas emissions for 5-year periods of time. The first carbon budget programme will comprise carbon budgets for the following periods: 2021-2025; 2026-2030 and 2031-2035, with the carbon budget for 2031-2035 being provisional. The average year-on-year reductions in the first budget which runs until the end of 2025 has been set at just under 4.8 per cent, while the average year-on-year reductions in the second budget to 2030 is set at 8.3 per cent. A limit of 295 million tonnes of CO2 equivalent has been set on emissions for 2021-2025 and a 200 million tonnes CO2 limit for 2026-2030 relative to a 2018 baseline. The carbon budget for 2031-2035, which is provisional, is recommended at 151 million tonnes CO2. The budgets are part of a roadmap of actions legislated for under the Climate Action and Low Carbon Development (Amendment) Act 2021. The Act commits Ireland to reach a legally-binding target of net-zero emissions no later than 2050, and a cut of 51 percent by 2030 (compared to 2018 levels). Commenting on the programme, Marie Donnelly, Chair of the CCAC said: “The proposed carbon budgets will have an impact on society and the economy but allow us to act on climate change in a planned and organised way. The budget is based on the best available science and defines an appropriate and necessary path to addressing the climate challenge. Many of the changes required now will only have a real impact on emissions in the second period. Now is the time to put policies and supports in place that will help those people, communities and businesses that will be impacted by the significant changes we need to make to how we live, work and travel.” Noting the requirement for everyone in society to play their part, Ms Donnelly said “the carbon budgets provide a framework, but what is urgently required is transformative change which is led by all of Government on a sustained basis, supported by all sectors of the economy, and all members of society. This will require significant investment across the economy.” The proposed carbon budgets will go to Government and then to the Oireachtas. The Oireachtas will review and approve the budgets within a 4-month period. Once these overall, economy-wide carbon budgets are approved, the Government will have the challenge of dividing the overall carbon budgets into sectoral emissions ceilings. A sectoral emissions ceiling is the maximum amount of greenhouse gas emissions that are permitted in a sector of the economy during each 5-year carbon budget. The Minister for the Environment, Climate and Communications, in consultation with other relevant Ministers, will develop a sectoral emissions ceiling for each relevant sector within each 5-year budget, once the overall carbon budget has been adopted. The Environmental Protection Agency (EPA) and the CCAC will produce annual reports to inform monitoring of compliance with national and sectoral progress towards each carbon budget and sectoral emissions ceiling. More information can be found at this link. UK’s Autumn Budget and Spending Review - “prepares the world for a new economy post-Covid” UK Chancellor, Rishi Sunak announced the UK government’s Autumn Budget and Spending Review 2021 this week, in which he pledged a major increase in public spending of £150 billion by 2024-25 amid higher-than-expected economic growth.  The Spending Review 2021 (SR) sets departmental budgets up to 2024-25. Specifically for Northern Ireland, the Chancellor promised the Northern Ireland Executive an extra £1.6bn per year on average over the next three years, on top of its annual £13.4bn spending settlement (see Box 3.C ). This according to the budgetary documents represents the largest annual funding settlement for the devolved governments since 1998. Spending specific to Northern Ireland includes: £1 billion for farmers and land managers and £9.3 million to support fisheries over the SR An additional £70 million funding for the British Business Bank to build on its existing programmes in Northern Ireland Establishing a new trade and investment hub in Belfast, to enable the benefits of the UK’s global trade policy are channelled to Northern Ireland A separate £150 million Community Ownership Fund, established to protect “treasured assets” will allocate funds to develop a digital hub in Cushendall, Co. Antrim. £14.9 million for the Tackling Paramilitarism Programme over the SR, contributing to a safer Northern Ireland. The drive to net zero Significant spending has been allocated across the UK to boost the drive towards net zero by 2050 including: £3.9 billion to decarbonise buildings, including £1.8 billion to support low-income households to make the transition to net zero while reducing their energy bills. £6.1 billion to boost the number of zero emission vehicles, help to develop greener planes and ships, and encourage more trips by bus, bicycle, and foot. £380 million for the UK’s offshore wind sector including investment in offshore wind ports in Teesside and the Humber Funding for the £1 billion Net Zero Innovation Portfolio which is accelerating near-to-market low-carbon technology innovations £385 million to develop the next generation of small and advanced modular reactor technologies. A further £625 million for the Nature for Climate Fund, ensuring total spend of more than £750 million by 2024-25 to help meet the commitment to plant at least 7,500 hectares of trees every year in England by 2025 and restore 35,000 hectares of peatland. Levelling up The UK government’s ambition behind the concept of ‘levelling up’ is to reduce inequality between places (‘levelling’) while improving outcomes in all places (‘levelling up’). The levelling up agenda, which involves the creation of a Levelling Up Fund commits to investment in infrastructure that improves everyday life across the UK, including regenerating town centre and high streets, upgrading local transport, and investing in cultural and heritage assets. The Autumn Budget announced some specific measures for Northern Ireland with £49 million allocated from the Levelling Up Fund for 11 projects, including: an Electric Vehicle charging network across Northern Ireland, the redevelopment of a derelict Ministry of Defence site in Derry/Londonderry into an urban community farm, and improved sports facilities in Portrush. Read the Budgetary documents as well as a summary of measures announced. For an overview of the key tax highlights, please read the Institutes newsletter that issued this week. Ireland launches a public conversation on the Well-being Framework This week, the Irish Government launched a public conversation on the Well-being Framework for Ireland. This follows publication of the first report on Ireland’s Well-being Framework in July, which proposed a vision and conceptual framework for Ireland. The overarching vision for the framework, is enabling everyone to live fulfilled lives now and into the future. The Well-being Framework is made up of a Conceptual Framework, with 11 dimensions or elements including, subjective well-being, mental and physical health, housing, environment and climate, knowledge and skills and work and job quality. A Well-being Portal has been published which will allow users to explore the well-being initiative in more depth and to engage with ongoing and future work in the area. The CSO also provide statistics on how Ireland is doing in terms of well-being as well as comparing Ireland internationally. People are encouraged to give their views on the Framework, via a survey. Speaking at the launch this week, Taoiseach Micheál Martin said: “The Well-being Framework represents an important shift towards systematically understanding and measuring progress in the collective areas that provide for a good life in Ireland. I would encourage people to engage with this important cross-Government initiative. It is only through feedback that we can improve the Framework in order to better reflect what is important for the people of Ireland. I also welcome the publication of the CSO’s Wellbeing Information Hub today and thank them for their ongoing work in providing good quality data in the area of well-being and quality of life.” Renewables overtake fossil fuels as the number one power source in the EU The EU’s recently published State of the Energy Union report shows that renewables overtook fossil fuels as the number one power source in the EU for the first time in 2020, generating 38 percent of electricity, compared to 37 percent for fossil fuels. The report analyses how energy and climate policies have been impacted by the COVID-19 pandemic in the past year, and it presents the substantial legislative progress in pursuing the EU's decarbonisation efforts. To date, nine EU Member States have already phased out coal, 13 others have committed to a phase-out date, and four are considering possible timelines. Compared to 2019, EU27 greenhouse gas emissions in 2020 fell by almost 10 percent, mainly due to the COVID-19 pandemic, which brought overall emission reductions to 31 percent, compared to 1990. Read the report.

The following document provides a brief outline of retirement benefit measures contained in the Finance Bill that were not announced as part of Budget 2022.

  There is increasing evidence that strong ESG (environmental, social and governance) credentials can boost a company’s bottom line while also generating access to capital. Investors, clients and employees alike are seeking out companies with credible ESG profiles. There are many reasons why it makes sense for CFOs to take on the task of aligning financial and ESG goals. CFOs work in a variety of organisations. What unites them is that they are all trusted advisors and are core to both daily operations and long-term strategies. They recognise risks and opportunities and act on them. They are involved in critical decision-making and provide reliable information to investors and boards. They advise and influence action in others and are uniquely placed to be a positive force in driving change. What distinguishes CFOs from other financial advisors is their potential to influence and encourage greener choices at an executive level within their organisation. They have the authority to advise on procurement policies and procedures that focus on sustainability as much as cost control. CFOs also have a key role in the preparation of annual reports and in deciding on what they include. Measuring sustainability-related activities and reporting on them is an integral part of becoming a sustainable business. Choosing from among the many frameworks and standards is an example of the leadership a CFO can offer, particularly in the absence of standardised and comparable frameworks. Business models are moving away from placing shareholder value at the centre. Instead, broader sustainable measures are being embraced, and the CFO will play a critical role in this process. Susan Rossney is Public Policy Officer at Chartered Accountants Ireland.

  In this week’s bulletin, read about how Budget 2022 aims to support the transition to a climate-neutral and circular economy and society with an allocation of €858 million to the Department of the Environment, Climate and Communications. Also covered are the measures announced in Budget 2022 to ‘green the tax system’. €858 million allocated to the Department of the Environment, Climate and Communications This year’s Budget 2022 allocated €858 million – an increase of 19% over 2021 – to the Department of the Environment, Climate and Communications. This allocation is broken down as follows: €368 million for Energy Transformation: €202 million from carbon tax revenue for residential and community retrofit schemes (over 22,000 home energy upgrades in total), with more than half for free upgrades for low-income households at risk of energy poverty €10m for the Solar PV scheme €31 million for energy efficiency and renewable energy schemes in businesses and the public sector. A new low-cost loan scheme for residential retrofitting will also be introduced. This part-Exchequer and part-EU funded scheme will enable credit institutions to offer loans at reduced interest rates – making energy upgrades more affordable increased resources in the department and its agencies will support the delivery of a second Renewable Electricity Support Scheme (RESS 2) auction, the first Offshore Renewable Electricity Scheme (ORESS), and to ensure continued security of electricity supply.   €251 million to support connectivity and communications, including: €225 million to further progress the roll-out of the National Broadband Plan (NBP). An estimated 60,000 premises will be passed by the end of 2021, which is less than targeted. The government hopes that investment in 2022 will allow the number to grow to at least 130,000 by the end of 2022. €2.5 million for the National Cyber Security Centre.   €152 million to support Just Transition, fund vital research and build capacity across the department and its agencies to lead and support Ireland’s response to the climate crisis: €34 million of funding will be available in 2022 for projects that are approved for EU and national Just Transition funds, in areas and sectors of the economy most impacted by the transition to net zero emissions €22 million will go towards the Bord na Móna Peatlands Rehabilitation Scheme in 2022 €11 million will fund climate research to enable Ireland to meet its renewable energy targets and climate commitments, with funding ring-fenced to strengthen and enforce air quality regulations. In tandem with this, the department will develop Ireland’s first ever Clean Air Strategy.   €98 million to support the transition to a Circular Economy and will protect natural resources, including waste management and geoscience research initiatives, supporting the implementation of the government’s Waste Action Plan for a Circular Economy, and conservation and protection of our inland fisheries (€3 million). Commenting, Minister for the Environment, Climate and Communications, Eamon Ryan TD, said: “Budget 2022 is about supporting our citizens as we begin the transition to a climate neutral, circular and connected economy and society…Cutting our emissions in half by 2030 is both a challenge and an opportunity. Today we are strengthening our capacity to do that in very practical ways." More information about the allocation can be found on the Department’s website here. ‘Greening the Tax System’ In a drive to further decarbonise the economy and meet Ireland’s commitment to reduce carbon emissions by 7 percent next year, the rate of carbon tax on auto fuels will increase again this year by €7.50 from €33.50 to €41 per tonne of CO2 from 13 October 2021.  Budget 2022 also amends both Vehicle Registration Tax rates and the accelerated capital allowance schemes to further encourage the transition to lower-emission fuels. The BIK exemption on electric vehicles is extended to 2025. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels. A 60-litre tank of diesel will increase by an estimated €1.48 from 13 October and a similar tank of petrol will cost an estimated extra €1.28. Home heating The price of home heating oil, coal and peat will all increase from 1 May 2022. A 900-litre tank of home heating oil will cost €19.40 more a 40kg bag of coal will cost 89 cents extra and a 12.5kg bale of peat briquettes will go up by 20 cents. The cost of annual natural gas usage will increase by an average of €16.95. Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes. Electrical vehicles – BIK exemption extended The BIK exemption where an employer makes a battery electric car (both new and used) available to employees has been extended until 2025. This exemption was due to end on 31 December 2022. There will however be a tapering effect on the vehicle value. For BIK purposes, the original market value of an electric vehicle will be reduced as follows: by €35,000 for 2023 €20,000 for 2024 and €10,000 for 2025. Accelerated capital allowances scheme Amendment for energy efficient equipment The accelerated capital allowance scheme for energy efficient equipment, which allows the full cost of expenditure on qualifying energy efficient equipment to be deducted for tax purposes in the year of purchase, has been amended to disallow equipment that is directly operated by fossil fuels from qualifying. Gas vehicles and refuelling equipment Introduced in the Finance Act 2018, this scheme allows the full cost of expenditure on qualifying gas vehicles and refuelling equipment used for business purposes to be deducted from taxable profits in the year of purchase. The scheme, which is particularly focused on the heavy-duty land transport sector, was due to end on 31 December 2021 but has been extended until 31 December 2024. Furthermore, in an effort to encourage the transition to lower-emission fuels, the scheme will be extended to include hydrogen powered vehicles and refuelling equipment. Income from micro-generation of electricity A tax disregard of €200 is being introduced for personal income received by households who sell residual electricity generated by them back to the grid. Vehicle Registration Tax (“VRT”) In order to reinforce the environmental rationale behind the VRT system, a revised vehicle registration tax table is being introduced from 1 January 2022.  This will result in increases in the rates of VRT. The 20-band table will remain; however, there will be: a 1 percent increase for vehicles that fall between bands 9-12 a 2 percent increase for bands 13-15, and then a 4 percent increase for bands 16-20. The €5,000 relief from VRT for battery electric vehicles is being extended to 31 December 2023. You can find all of Chartered Accountants Ireland’s Budget 2022 coverage here. You can find information, guidance and supports to help members understand sustainability and meet the challenges it presents in our Sustainability Centre. Read all our updates on ourPublic Policy web centre  

In a drive to further decarbonise the economy and meet Ireland’s commitment to reduce carbon emissions by 7 percent next year, the rate of carbon tax on auto fuels will increase again this year by €7.50 from €33.50 to €41 per tonne of CO2 from midnight.  Budget 2022 also amends both Vehicle Registration Tax rates and the accelerated capital allowance schemes to further encourage the transition to lower-emission fuels. The BIK exemption on electric vehicles is extended to 2025. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels. A 60-litre tank of diesel will increase by an estimated €1.48 from 13 October and a similar tank of petrol will cost an estimated extra €1.28. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels. Home heating The price of home heating oil, coal and peat will all increase from 1 May 2022. A 900-litre tank of home heating oil will cost €19.40 more while a 40kg bag of coal will cost 89 cents extra and a 12.5kg bale of peat briquettes will go up by 20 cents. The cost of annual natural gas usage will increase by an average of €16.95.   Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes. Electrical vehicles – BIK exemption extended The BIK exemption where an employer makes a battery electric car (both new and used) available to employees has been extended until 2025. This exemption was due to end on 31 December 2022. There will however be a tapering effect on the vehicle value. For BIK purposes, the original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025. Accelerated capital allowances scheme Amendment for energy efficient equipment The accelerated capital allowance scheme for energy efficient equipment, which allows the full cost of expenditure on qualifying energy efficient equipment to be deducted for tax purposes in the year of purchase, has been amended to disallow equipment that is directly operated by fossil fuels from qualifying. Gas vehicles and refuelling equipment Introduced in the Finance Act 2018, this scheme allows the full cost of expenditure on qualifying gas vehicles and refuelling equipment used for business purposes to be deducted from taxable profits in the year of purchase. The scheme, which is particularly focused on the heavy-duty land transport sector, was due to end on 31 December 2021 but has been extended until 31 December 2024. Furthermore, in an effort to encourage the transition to lower-emission fuels, the scheme will be extended to include hydrogen powered vehicles and refuelling equipment. Income from micro-generation of electricity   A tax disregard of €200 is being introduced for personal income received by households who sell residual electricity generated by them back to the grid. Vehicle Registration Tax (“VRT”) In order to reinforce the environmental rationale behind the VRT system, a revised vehicle registration tax table is being introduced from 1 January 2022.  This will result in increases in the rates of VRT. The 20-band table will remain; however, there will be a 1 percent increase for vehicles that fall between bands 9-12; a 2 percent increase for bands 13-15; and then a 4 percent increase for bands 16-20. The €5,000 relief from VRT for battery electric vehicles is being extended to 31 December 2023.

Confirmation that the Employment Wage Subsidy Scheme (EWSS) will remain in place in a graduated form until 30 April 2022 will give vital certainty to over 39,000 employers who are still registered for the support, Chartered Accountants Ireland said today. Reacting to Budget 2022, the largest professional accountancy body on the island of Ireland said this support is key to helping the SME sector to return to pre-pandemic trading levels.  Business supports Norah Collender, Professional Tax Leader, Chartered Accountants Ireland said “Today’s decision to extend the EWSS until 30 April 2022, avoiding any cliff edge, will come as a major relief for many small businesses that are still not operating at full capacity, for example in the tourism, hospitality, and entertainment sectors. These supports cannot last forever, but their presence over the last 18 months has been an example of a targeted, partnership-based approach by the state which has kept many businesses afloat.”   In contrast, the Institute referenced the decision to not reduce Ireland’s rate of Capital Gains Tax, among the highest in the EU, from 33 per cent as a missed opportunity, noting the role that a reduced CGT rate could have played in supporting entrepreneurship and encouraging investment in SMEs that need capital. The Institute also noted the announcement by Government that new companies can continue to benefit from a reduction in corporation tax, with companies now able to avail of this for the first five years of trade, an increase on the previous limit of three years. Collender said “The struggle for survival is a reality for start-up companies, and that struggle is even more acute for businesses starting out just as the country recovers from a pandemic and ongoing Brexit disruption. A reduced corporation tax liability for such business will help cash flow and is a worthwhile endorsement of the Irish entrepreneurial spirit.” Carbon reduction measures Ireland’s enterprise sector accounts for just over 13% of the economy’s total emissions. According to the Institute, there was very little in today’s Budget to incentivise those businesses to help achieve the 7 per cent annual emissions reduction that the Government has committed to over the next decade. Commenting, Cróna Clohisey, Public Policy Lead, Chartered Accountants Ireland said “Businesses, particularly SMEs, will play a crucial rule in meeting the Government’s net-zero carbon emissions targets by 2050. However, businesses can only deliver if they are supported by the right policy frameworks and incentivised by Government to commit to carbon-reduction targets.  “The absence in this Budget for example of an enhanced R&D Tax Credit to fast track the development of green technologies making renewable energy cheaper and more readily available, is a real missed opportunity.” This lack of incentive and alternatives for businesses to make a different choice, also applies to consumers, with the Institute noting that the biggest challenge of tackling climate change continues to be changing human behaviour. Clohisey continued “Any positive environmental impact of carbon taxes is limited by the lack of alternatives for consumers. Higher diesel and petrol prices will not have any real impact on car usage or carbon emissions until affordable alternatives are provided to consumers. Electric cars remain expensive and while the extension of the BIK exemption on electric cars out to 2025 is broadly welcome, the grants available to purchase new electrical cars should be extended to second hand electric vehicles.  “Similarly, today’s carbon tax rise is effectively cancelled out by the resulting need to increase the weekly fuel allowance payment. Continuing to increase the fuel allowance without accelerating the retrofitting of homes for those in fuel poverty risks leaving the State in a holding pattern, without forward momentum towards net-zero.”  Supporting home working The pandemic has shone a harsh spotlight on how the taxation system reflects the costs for employees working from home. To date, tax relief can only be claimed on expenses incurred for equipment used “wholly, exclusively and necessarily” in the performance of the duties of employment, with a strict interpretation of this resulting in complex rules and slim odds of making a successful claim. Restrictive tax rules for making claims for costs of utility bills have resulted in a low uptake to date by remote workers. Norah Collender, Professional Tax Leader, Chartered Accountants Ireland said “Fairer and more accessible tax rules must be developed as part of an effective strategy for remote working. The Institute has previously called for a similar measure to the UK’s ’express claim’ tax relief to be considered by the Irish Government; while more modest, it is easier to claim. Today’s increased relief for 30 per cent of electricity, heating and broadband costs will only facilitate the hybrid working model if the tax relief is straightforward for claimants.” ENDS For more information:  Jill Farrelly  PR & Communications Manager   Chartered Accountants Ireland  087 738 6608