During the summer, HMRC published its 2023/24 Annual Report and Accounts together with performance statistics for 2023/24 and a commentary. The 2023/24 HMRC Annual Charter Report was also published. A recurring theme in all these publications is that HMRC continues to underperform and misses key targets and in particular, call waiting times have increased significantly. So far, the new Labour Government has not provided any information on how it plans to tackle HMRC’s ongoing poor service levels. Chartered Accountants Ireland will continue to express our concerns in respect of these ongoing poor service levels and how this is impacting taxpayers, agents and businesses.   2023/24 Annual Report and Accounts These accounts were once again qualified by the Comptroller and Auditor General due to error and fraud in tax credits in addition to qualifying his opinion on HMRC’s Resource Account for error and fraud in corporation tax research and development tax reliefs. This is the second year that the R&D SME scheme estimate has been prepared using the results of a random enquiry programme. The first modelled estimate for 2021/22 has been revised as results from the random enquiry programme now includes claims received in 2021/22. See page 21 for more detail.   The level of HMRC debt at the end of 2023/24 was £44.6 billion (£45.9 billion 2022/23), with £7.1 billion in time to pay arrangements and £37.5 billion available for collection. Approximately 900,000 taxpayers have time to pay arrangements.   The HMRC app also gets a mention in the report with almost two million new users and 69 percent of interactions with HMRC now take place online.      HMRC’s CEO in his report recognises the difficulties that have been experienced by many individual taxpayers, agents and small businesses when interacting with HMRC – in particular, when accessing helplines and says that HMRC is working hard to address these challenges with a strategy “firmly focused on how we can help more customers get their tax and customs right first time, rather than fixing problems after they happen, and on supporting more customers to self-serve using online services whenever they can.”   However, the impact of the reduction to HMRC’s budgets is clear as is the increased demand due to fiscal drag which has resulted in an additional 2.1 million individuals being brought into income tax (according to the latest figures from the Office for Budget Responsibility).   2023/24 performance statistics These set out details of five specific targets with only one having been met for 2023/24; compliance yield. It should also be noted that the average speed of answering calls, and the waiting time of no more than 10 minutes are both no longer treated as priority metrics by HMRC; likely to be because of its digital strategy. Not surprisingly, both of these measures have deteriorated significantly as follows:   average waiting times have reached 26 minutes, and ·nearly 75 percent of callers wait more than 10 minutes.   2023/24 HMRC Annual Chartered Report Poor service levels were a recurring theme in HMRC’s 2023/24 Annual Charter Report as agents and taxpayers again vented their concerns after a year in which standards continued to fall below expectations. HMRC’s Charter sets out the standards of service that taxpayers and agents should expect from HMRC.   The report includes the results of research commissioned by HMRC and shows a fall in the percentage of agents, individuals and small businesses who positively rated their overall experience of interacting with HMRC. For agents, 37 percent gave a positive rating, down 8 percent from 2022/23.   A survey was also undertaken by the Charter Stakeholder Group which asked respondents to give a score out of 10 for HMRC’s performance against each of the charter standards, with one being the lowest and 10 the highest. 1,647 responses were received, mainly from agents.    The three standards which can arguably be said to represent the health of the tax system scored the lowest average scores as follows:    being responsive - 2.4; making things easy - 2.8; and getting things right - 3.5.    Overall, feedback indicates that, although simple issues can be dealt with well, more complex issues are difficult to resolve. Higher scores were recorded for the remaining five charter standards.

In a recent letter to Chartered Accountants Ireland, the new Exchequer Secretary to the Treasury clearly sets out the Labour Government’s ongoing commitment to Making Tax Digital (MTD) for income tax. Effectively, although the letter does not explicitly say so, the timetable for commencement remains unchanged and will commence for unincorporated businesses and landlords as originally planned from April 2026 for those with turnover exceeding £50,000 with the turnover over £30,000 population mandated from April 2027. The letter highlights that 2024/25 is a critical stage in the delivery of MTD for income tax as HMRC’s focus is on developing a successful testing phase. It also clearly reiterates that this will not be achieved without continued strong collaboration between HMRC and external partners, such as Chartered Accountants Ireland. One of the key requirements of the testing is to ensure that the right quantity and types of businesses can participate. This is one area where the government sees an important role for representative bodies like Chartered Accountants Ireland. The Institute will be providing a full update on recent developments in MTD for income tax in a later edition of Chartered Accountants Tax News in September. We will also continue to attend HMRC MTD forum meetings and collaborate with HMRC on MTD for income tax to assist members and businesses in their preparation for this change.

Just before the summer parliamentary recess commenced at the end of July, new Chancellor of the Exchequer Rachel Reeves announced that the Labour Government’s first Budget will take place on Wednesday 30 October. The Chancellor also announced next steps and published draft legislation on some “priority tax commitments” ahead of the full announcements which will take place on Budget Day. The Finance Bill 2024-25 draft legislation and technical tax documents were also published and several new tax policy announcements were made, including the expected removal of the VAT exemption for private school fees. A full Ministerial Written Statement is also available and it is confirmed that there will be no increases to income tax, employee national insurance contributions, or VAT.    The measures announced in July included the following:   2024: Non-UK domiciled individuals - policy summary - this confirms that the four-year foreign income and gains regime announced by the previous government at the Spring Budget will take effect for all foreign income and gains arising from 6 April 2025. However, the proposal to provide a 50 percent reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime will not be introduced. A temporary repatriation facility will be available for individuals who have been taxed on the remittance basis, and a form of overseas workday relief will be retained. Further details will be provided at the Budget. The current domicile-based inheritance tax (IHT) system will proceed, again as announced by the previous government, to be replaced with a new residence-based system from 6 April 2025. This will be based on whether or not a person has been resident in the UK for 10 years prior to the tax year in which the chargeable event (including death) arises, with a 10 year “tail provision” to be introduced after leaving the UK. The new government intends to end the use of excluded property trusts to keep assets out of the scope of UK IHT. Confirmation of these new rules, including transitional arrangements, will be published at the Autumn Budget, after external engagement. A formal consultation will not be taking place. The furnished holiday lettings tax regime is being abolished as planned from April 2025 with an anti-forestalling rule in place from 6 March 2024 to prevent the use of unconditional contracts to obtain capital gains tax relief under the current rules. Details of a number of transitional rules necessary as a result of this change have also been published.   Announcements were also made in the following niche areas:   Pillar 2: transitional country-by-country reporting safe harbour anti-arbitrage rule, Tax treatment of carried interest - Call for Evidence, and Changes to the Energy (Oil and Gas) Profits Levy.   Tax non-compliance The government also set out its commitment to tackling tax non-compliance in the publication “Fixing the foundations: public spending audit 2024-25” with the new Exchequer Secretary to the Treasury stating that work has begun on recruiting 5,000 more HMRC staff specifically for this purpose. The government also stated its commitment to investing in HMRC’s technology infrastructure. Further updates will be provided on this at the Budget.   End of private school fees VAT exemption The ending of the VAT exemption and the introduction of 20 percent VAT on education and boarding services provided for a charge by private schools across the UK will commence from 1 January 2025. This will also apply to pre-payments of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024. However, this change will not apply where pupils with the most acute special educational needs can only have those needs met in private schools.    Schools cannot register yet for this charge on education and boarding. In due course, HMRC will provide schools with details on how and where to register.   More information on this is available in the publication “Revenue and Customs Brief - removal of the VAT exemption for private school fees and boarding services.” You can also read the draft legislation, accompanying explanatory note, and technical note which are being consulted on until 15 September.

The Secretary-General has issued a statement on the Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation. G20 Members have agreed a comprehensive stand-alone Tax Declaration, reflecting the transformational achievements of international tax cooperation to date, the importance of that cooperation and its commitment to continue to carry it forward. 

There were a number of minor updates to several other manuals since we last issued Tax News. Please follow the link below for a short summary of these changes. Guidelines on PAYE Assessments to reflect the statutory time limit on the making or amending of PAYE assessments on employers. Additional guidance on how to appeal a PAYE assessment is included. Guidance on health and well-being related benefits confirms that no benefit in kind charge arises where an in-house medical plan includes a GP service, which is available to all employees and directors (paragraph 7); clarifies that relief in respect of speech and language therapy, or for educational psychological assessments, will only apply in certain circumstances. Donations to approved sports bodies to include a link to the "List of Sports Bodies with Tax Exemption", as published on the Revenue website. Guidance on the tax treatment of Members of the European Parliament (MEPs) regarding allowances paid to MEPs and transitional allowances and pensions paid to former MEPs. Income tax credits and reliefs for certain older persons and individuals caring for certain older persons reflects changes to the upper age limit for a PRSI exemption introduced by the Department of Social Protection, effective since 1 January 2024. Guidance on certain payments to Local Authority Chairpersons and Members regarding the exemption from tax that is available for maternity-related administrative support allowance payments to Local Authority members, and the tax treatment of security allowance payments. Guide to Exchange of Information under Council Directive 2011/16/EU, Ireland’s Double Taxation Agreements and Tax Information Exchange Agreements and the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters. Guidance regarding the levy on authorised insurers. to correct an error in the rates of levy which were previously published relating to insurance contracts which are renewed or entered into on or after 1 April 2024. Stay and Spend Tax Credit to remove references to the service provider registration process as the period for such registration has now ceased and the information pertaining to same is no longer relevant. Exemption from income tax in respect of certain payments made under Employment Law to confirm that the Industrial Relations Acts 1969 is a “relevant Act” for the purposes of section 192A TCA 1997.  

Revenue has published  new Stamp Duty Manual to provide guidance on Miscellaneous Acts which contain Stamp Duty Exemptions. The manual provides a list of the current stamp duty exemptions contained in legislation, which includes the  Stamp Duty Consolidation Act 1999 together with a number of Statutes enacted before 1922 and Acts of the Oireachtas which were enacted from 1922 onwards.

Revenue has published a new Tax and Duty Manual which contains an overview of the administration of Pillar Two rules. In addition, the recently published Tax and Duty Manual regarding the global minimum effective tax rate for large groups and companies has been updated. The updated manual now includes guidance on the operation of the Pillar Two rules along with the detailed correlation table which cross references the legislation contained within Part 4A of the TCA 1997 with: the relevant article of the EU Minimum Tax Directive, the relevant article of the OECD Model Rules, OECD Commentary, where relevant, and OECD Administrative Guidance, where relevant.

Revenue has informed us that it will cease the Relevant Contract Tax (RCT) registration of circa 47,000 predominantly Business Division cases who are now inactive for RCT. This will not impact other tax registrations. Taxpayers with no RCT payments made/received/contracts entered into in 2021, 2022 or 2023 will be considered inactive and will have their RCT registration ceased. Revenue has also advised that, if a taxpayer is linked to a new RCT contract notification in the future, their RCT registration will be auto reactivated without requiring intervention by the taxpayer or their agent.

Revenue has updated the Capital Acquisitions Tax Manual which provides an overview of the valuation date for Capital Acquisitions Tax purposes. The updated guidance reflects amendments made by Finance (No 2) Act 2023 whereby the clawback periods for agricultural relief and business relief now commence on the valuation date. In addition, the phrase "In the context of real property" has been removed in paragraph 8.2.2 to clarify that section 13 CATCA 2003 applies to any property that is held under a joint tenancy. 

Revenue has amended the Tax and Duty Manual which outlines information and services for customers with disabilities. The manual provides details of Revenue public office locations where the Loop Counter system is available for hearing-aid users.

Revenue has released a teaching module on its website to provide an opportunity to introduce tax to Transition Year students. Revenue has provided the resources teachers need to support delivery of this module in the classroom and for students’ exploration of tax. The module consists of eight units encompassing income tax, VAT, USC, PRSI, customs and the shadow economy.

Revenue has updated the Tax and Duty Manual which provides guidance on employer provided vehicles. The updated manual: outlines the current cash equivalent calculation (paragraph 4.1), reflects the extension of the temporary reduction to OMV under Finance Act (No. 2) 2023 (paragraph 4.1.3), reflects the extension of relief available in respect of battery electric vehicles to 2027 (paragraph 6.3), illustrates the combined effect of the temporary reduction to OMV and relief available in respect of battery electric vehicles (paragraph 6.3.1), includes a table showing the business mileage applicable from 1 January 2023 (Appendix A).