Minister for Finance, Michael McGrath TD, has published a first feedback statement on the development of a participation exemption in Irish corporation tax for foreign dividends. Ireland currently differs from most EU and OECD member states who have already adopted a territorial approach in exempting foreign dividends from domestic tax.  The purpose of this feedback statement is to further progress work on the key building blocks of the participation exemption, which the government has committed to introducing in Finance Bill 2024, to come into effect from 1 January 2025. A public consultation has been launched on the ‘strawman’ proposals which closes on 8 May. Any comments can be emailed to  tax@charteredaccountants.ie.   The feedback statement has been informed by stakeholder responses to the public consultation on the introduction of a participation exemption to Irish corporation tax, including our own under the auspices of the CCAB-I, together with research work undertaken by officials in the Department of Finance and Revenue.  It includes a hypothetical example, a strawman proposal,  for how a participation exemption for foreign dividends might work in Ireland, in order that individual elements can be discussed within the context of the regime as a whole.   On publication of the feedback statement, Minister McGrath stated:  ‘‘The introduction of a participation exemption will be a very important step towards simplification of the Irish corporate tax system and reflects Ireland’s continued efforts to promote a business environment characterised by certainty and clarity. In a time of unprecedented change in international taxation, this move will give confidence and foresight to key stakeholders, maintaining Ireland’s reputation as a business-friendly destination and encouraging companies to establish and expand their operations in Ireland.  We have already introduced significant reforms in the area of Corporate Tax, with Finance (No.2) Act 2023 introducing the new 15% minimum effective corporate tax rate for in-scope companies, giving legislative effect to Pillar Two of the OECD Two-Pillar Agreement.  Against this backdrop, the introduction of a participation exemption for foreign dividends reflects Ireland’s commitment to ensuring that our corporation tax code is competitive and attractive to business investment and aligns with international best practice.  The publication of the feedback statement is a further significant step in the process and I look forward to engaging with stakeholder in relation to the strawman proposal ahead of Finance Bill 2024.”   

Over the course of the last few weeks, we have examined two of the proposals in HMRC’s long planned consultation “Raising standards in the tax advice market” which contains three potential options to regulate the UK tax agent market. This week we are seeking your feedback on option three, regulation by a separate statutory government body, in addition to approaches to strengthen the controls on access to HMRC’s services for tax practitioners. HMRC is also seeking to draft a legislative definition of a tax practitioner to support implementation and sets out the categories of who should be regulated in Chapter 8. Please share your views on this consultation by Tuesday 7 May 2024.   Regulation by a separate statutory government body   More information on this option is set out in Chapter 6. This option would see the introduction of a new independent regulator or expansion of the remit of an existing regulator to regulate tax practitioners. According to the consultation, “a single independent regulator would provide consistency across the market. Having an arm’s length body would avoid potential conflicts of interest arising from HMRC acting as a regulator and avoid a potential race to the bottom.”  The government regulator would set standards, carry out checks on tax practitioners seeking to be regulated, and ensure they meet the required criteria. This could include conducting an annual renewals process to ensure all information is up to date and correct. As is common with professional regulators, this body could have a role in supervising tax practitioners including inspections of tax practitioners on a risk-assessed basis to check they continue to meet expected standards, investigating issues and complaints, and enforcing sanctions.  This regulatory body could introduce “customer support routes” including establishing a complaints process, ensuring transparency, and supporting redress claims. The regulator could be responsible for providing support and guidance to the profession and ensuring tax practitioners receive updates on the latest changes in the tax system.  Within this model there are options about how the regulator could be set up and the role that current professional bodies could play. Current professional body members could be automatically registered with the regulator as they have already undergone a series of checks and professional bodies could retain their role as providers of qualifications and ongoing practice support for their members.  The consultation considers that establishing a new regulator in this way “would provide the opportunity to create a tailored regulatory solution for the market which is adaptable for future needs.”  However, potential problems with this model include that adding a new regulator to an already complicated regulatory landscape for tax and accountancy may cause confusion, and this is likely to be the most expensive of the potential approaches, as it would involve costs for the government and for all tax practitioners. The government sees this approach as a fallback option if the professional body lead approach is not practical or effective. Questions 8-10 specifically seek feedback on this approach.  Access to HMRC’s services for tax practitioners   This aspect of the consultation examines the first step of mandating registration with HMRC for tax practitioners who wish to interact with HMRC on behalf of their clients, and the requirements that HMRC should establish to enable registration.  Alongside the broader proposals on raising standards, the government wants to improve the way that tax practitioners register with HMRC and intends to mandate registration for all tax practitioners who wish to interact with HMRC.   Together with mandated registration, HMRC would automate and streamline the existing registration routes for tax practitioners, with the aim of providing a better service. At the point of registration, HMRC would check that the tax practitioner is compliant with requirements to register for anti-money laundering supervision and is up to date with their tax affairs. HMRC would then periodically reconfirm ongoing compliance with these requirements.   This would aim to provide assurance that registered tax practitioners continue to meet basic standards while interacting with HMRC on behalf of a client.  The government therefore intends to improve registration now, assuring that basic standards are in place for all agent services and is asking for views on the proposal to mandate registration, alongside providing an automated, streamlined way for tax practitioners to register with HMRC.   The consultation recognises that whilst this step by itself is unlikely to fundamentally raise standards in the tax advice market, it would be an essential enabler for a strengthened regulatory framework. It could also be implemented if the broader proposals for a strengthened regulatory framework are not taken forward.  Legislative definition of tax practitioner   As part of this project, the Government also intends to draft a legislative definition of a tax practitioner “as a provider of tax advice and services.” This aspect will be subject to further consultation however the definition will include the following provisions:-  it will cover the full range of business entities operating in the market, that is, individuals, firms, and sole practitioners;  the advice or assistance caught will be  given by way of business, so that friends and family are not inadvertently captured;   provided in relation to UK taxation; and  provided directly, indirectly, or at the request of someone other than the client.  The definition will also set out what is meant by advice or assistance. This will include acting on behalf of a client in their dealings with HMRC or another UK tax authority in relation to tax. Depending on the scope of the regulatory framework, it may also include advising a client in relation to tax. Questions 25 and 26 of the current consultation specifically deal with this aspect.   

In recent weeks we have issued several reminders that 30 April 2024 is the deadline for the end of the VAT margin scheme for second hand vehicles moved to Northern Ireland from Great Britain prior to 1 May 2023. If these vehicles are sold after 30 April 2024, VAT will therefore be chargeable on the full selling price and not on the margin made. At the request of HMRC, Chartered Accountants Ireland gathered evidence recently from local car dealers which demonstrates that many dealers are still experiencing delays in selling these vehicles for a range of reasons, including the economic environment and delays in MOT testing. Click read more for an update on our recent meeting with HMRC on this issue. The Institute met at the end of last month at the request of HMRC with their VAT policy team to discuss and present the evidence gathered from local dealers. The Institute also explored the potential for either removal of the deadline, a type of amnesty, or another extension.  Readers are advised that HMRC is insistent that the deadline remains 30 April 2024 and that there will not be a further extension. According to HMRC, a deadline is required for “legal certainty”. Despite presenting evidence of the ongoing difficulties being experienced in selling these vehicles, it is disappointing that the cliff edge deadline of 30 April 2024 remains in place.    

The Department of Finance and the Department of Public Expenditure, NDP Delivery and Reform have published the Fiscal Monitor for March 2024. Tax revenues to the end of March were €20.1 billion, €0.3 billion ahead of last year but behind target due to decreased corporation tax receipts. The Exchequer surplus for the first quarter of 2024 of €0.3 billion compares to a deficit of €2.1 billion in the same period last year, with a surplus of €3.5 billion recorded on a 12-month rolling basis.  Notably, corporation tax receipts decreased by €0.7 billion to €1.9 billion, with indications suggesting this reflects timing issues. At €7.9 billion, income tax receipts remained solid, up 7.6 percent and reflecting continued resilience in the labour market. VAT receipts increased by 5.4 percent to €7.1 billion but were slightly behind target.  Commenting on the figures, Minister McGrath noted:  “The first quarter figures are, in many respects, a continuation of the pattern evident in the second half of last year, with steady growth in income tax and VAT receipts but with significant volatility in corporation tax revenues.  The performance of the income tax and VAT tax heads provide evidence of a domestic economy that is performing well, notwithstanding continuing international headwinds. With record employment levels, the labour market remains in robust shape. As inflation continues to fall, the vast majority of households will experience a gain in income in real terms across this year, resulting in improved living standards overall.  While it is expected that the fall in corporation tax this month relates to timing issues and is likely to be made up later in the year, it serves to remind us of the inherent unpredictability in what is a highly concentrated revenue stream.  This volatility, and the concentration of these receipts, underpin the Government’s policy of establishing longer-term savings vehicles – the Future Ireland Fund and the Infrastructure, Climate and Nature Fund – that will help future-proof our public finances.” 

Following recent amendments to the Debt Warehouse Scheme, Revenue has updated the guidelines for Phased Payment Arrangements (PPA). The updated guidance highlights the necessity for Debt Warehouse customers to either pay their liability in full or enter into a PPA prior to 1 May 2024 in order to avail of the reduced interest rate of 0 percent (sections 1 and 5).  The 'Key features of a PPA' are detailed in Section 6 for ease of reference, with all sections updated to reflect Revenue flexibility in terms of a PPA, including reduced down payments, longer repayment periods, and the option to take a payment break. 

The Defective Concrete Products Levy (DCPL) applies to the ‘first supply’ of certain concrete products on or after 1 September 2023. The levy is chargeable on the open market value of the concrete products that are within the scope of the levy, on the date of their first supply. The person who makes a first supply of a concrete product which is within scope of the DCPL is the chargeable person in respect of the levy. Revenue has updated the Tax and Duty Manual regarding the DCPL to provide for a simplification measure in certain circumstances.   For the purposes of determining the levy due in respect of a supply of ready to pour concrete where the price includes related delivery and haulage costs, the chargeable person may apply a fixed average percentage rate to calculate the portion of the cost which relates to delivery and haulage which is not subject to the levy. The percentage applied to the haulage and delivery costs may not, in general, exceed 25 percent of the overall cost.  The chargeable person must maintain evidence for the basis of the cost apportionment between the ready to pour concrete product and the related haulage and delivery costs.  

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. The most recent Trader Support Service and Cabinet Officer Borders bulletins are also available. Readers are advised that this bulletin contains important information on the next phase in the implementation of the UK’s new import controls, known as the Border Target Operating Model, which commences from 30 April 2024 when  documentary and risk-based identity and physical checks on medium-risk animal products, plants, plant products and high-risk food (and feed) of non-animal origin imported from the from the EU will begin.   Miscellaneous updated guidance etc.   Recently updated guidance, and publications relevant to EU exit are set out below:-  Customs Declaration Service: service availability and issues;  Reference Document for The Customs (Northern Ireland) (EU Exit) Regulations 2020;  Appendix 1: DE 1/10: Requested and Previous Procedure Codes;  Appendix 1: DE 1/10: Requested and Previous Procedure Codes of the Customs Declaration Service (CDS);  CDS Declaration Completion Instructions for Imports;  Customs declaration completion requirements for Great Britain;  Data Element 2/3: Documents and Other Reference Codes (Union) of the Customs Declaration Service;  Appendix 2: DE 1/11: Additional Procedure Codes of the Customs Declaration Service (CDS);  Authorisation type codes for Data Element 3/39 of the Customs Declaration Service;  Data Element 2/3 Documents and Other Reference Codes (National) of the CustomsDeclaration Service (CDS);  Additional Information (AI) Statement Codes for Data Element 2/2 of the Customs Declaration Service (CDS);  Reference Documents for The Customs Tariff (Suspension of Import Duty Rates) (EU Exit) Regulations 2020; and  Customs, VAT and excise UK transition legislation from 1 January 2021. 

Revenue has updated the Tax and Duty Manual regarding the Single Person Child Carer Tax Credit. The updated guidance reflects the increase in the tax credit from €1,650 to €1,750 for the 2024 year of assessment as amended by Finance (No.2) Act 2023. The manual contains a new table which provides an overview of the tax credit amount for 2023 and prior years and examples have been refreshed.  

HMRC’s latest schedule of live and recorded webinars for tax agents is available for booking. Spaces are limited, so take a look now and save your place. 

Earlier in the year we informed you that Revenue was aware of issues with the pre-population of Department of Social Protection information in the 2023 ROS Form 11. Revenue has released a fix effective 2 April 2024 to resolve the matter.  

Revenue has updated the Capital Acquisitions Tax (CAT) Manual following amendments introduced in Finance (No.2) Act 2023.   The updated guidance reflects:  The extension of the Group B tax-free threshold to apply to benefits received by a person from certain relatives of their foster parent or from other individuals fostered by the same foster parent. (section 1.2.3);  an individual’s obligation to file a CAT return when they are in receipt of certain interest-free loans (section 1.2.7).  The updated manual also includes an example of the CAT aggregation rules. 

Check out the latest items on the Agent Forum. Remember, in order to view each item, you must be signed up and logged in.   All agents, who are a member of a professional body, are invited to join HMRC’s Agent Forum. This dedicated Agent Forum is hosted in a private area within the HMRC’s Online Taxpayer Forum. You can interact with other agents and HMRC experts to discuss topical issues and processes.