Revised Public Practice Regulations – effective 1 January 2024 The Institute has issued revised Public Practice Regulations with effect from 1 January 2024.    Institute members engaged in public practice comply with the Public Practice Regulations.  Key revisions are summarised below: Anti-money laundering (AML) supervision: The revised Public Practice Regulations include explicit reference to the Institute’s role as AML supervisor for practising firms.    While firms are familiar with AML supervision and already engage with the Institute in this regard, the revised Public Practice Regulations introduce some new regulatory obligations in this regard.  In particular, the revised Public Practice Regulations: Include a new chapter addressing AML supervision; Define an ‘AML supervised firm’; Require an AML supervised firm to ensure that each of the firm’s principals is either a member of the Institute or has been granted AML affiliate status by 1 January 2025. During 2024 the Institute will engage with the Money Laundering Compliance Principals at AML supervised firms to facilitate compliance with this requirement; Require all AML supervised firms to make a declaration, on behalf of the firm, acknowledging the firm’s obligations under Institute Bye-Laws and Regulations and AML legislation.This declaration will be sought as part of the firm annual return process going forward; Include explicit ongoing fit and proper requirements for beneficial owners, principals and relevant managers at AML supervised firms. Professional indemnity insurance (PII) requirements for authorised investment business firms, Ireland Regulation 7.18A of the Public Practice Regulations reflects a new Central Bank of Ireland requirement for firms authorised by the Institute for investment business (IB) to have specific minimum professional indemnity insurance (PII) which is ringfenced for IB claims.   The Institute has written directly to the IB compliance principals outlining the revised PII requirements.    This topic is covered in more detail in the August edition of the Professional Standards Regulatory Bulletin. Simplified regime for potential ‘dual- PC’ holders Chapter 5 of the revised Public Practice Regulations provides that an Institute member engaged in public practice is exempt from the requirement to hold an Institute practising certificate (PC) where that individual is a member of, and holds a PC from, another specified accountancy body.    While these dual-membership cases are infrequent, the revised approach streamlines regulatory processes between the accountancy bodies, simplifies compliance for individuals and minimises the risk of regulatory gaps or duplication.  Institute PC regime applies only to Ireland and the UK The definition of practising certificate has been revised to state that the Institute’s PC regime applies only to public practice in Ireland and the UK.  This is a clarification and not a change to the Institute’s PC regime.  Where members engage in public practice in jurisdictions other than Ireland or the UK the member complies with any local requirements regarding public practice in that jurisdiction.  Guidance: Revised Public Practice Regulations Guidance is available on the Institute’s website. Previous editions: The revised Public Practice Regulations replace the previous edition of the Public Practice Regulations which remain available to read in the Institute’s online archive of Regulations.  

"Finance is the great enabler of climate action" This was the message of UN Climate Change Executive Secretary Simon Stiell in a speech at a Green Climate Fund event today “Scaling up Access and Impact”.  And it is a key message of this year’s COP, at which a record number of financial executives are attending. Many may be drawn to what Nikita Singhal, co-head of sustainable investment & ESG at Lazard Asset Management, describes as possibly “the greatest alpha-generation or investment-return” in a long time. Singhal  was speaking at the Bloomberg Business Forum at COP28, and was one of several investors who see opportunities for investment returns in action on the twin crises of climate change and biodiversity destruction. “Let's be clear,” said another such investor, Prudential Plc Chair Shriti Vadera, who reminded the Forum “The private sector only does things that are commercial and create a commercial return: they are to preserve the capital of their customers, savers, pensioners and depositors.” Highlights Chair of the IFRS Foundation Trustees, Erkki Liikanen addressed COP28 and reflected on progress since the IFRS Foundation announced the decision to establish the International Sustainability Standards Board at COP26 in 2021.   Export credit agencies, supporting a combined estimated US$120 billion in global trade in 2022, have formed a net-zero alliance. The UN-convened Net-Zero Export Credit Agencies Alliance will be the first net-zero finance alliance comprising public finance institutions. “Public finance has been the missing piece in the net-zero financial landscape,” said Inger Andersen, Executive Director of UNEP. “Export Credit Agencies are in a strong position to deliver more sustainable global trade and to complement the work already being undertaken by the private finance sector”.   Climate Trace the non-profit project has released data “of unprecedented granularity” that shows how countries have been dramatically under-reporting their greenhouse gas emissions;   An 18-month collaboration between leading climate researchers across more than 20 nations has produced a report titled 10 New Insights in Climate Science 2023/2024. The report aims to help inform policy implementation at COP28 and beyond. It warns that humans will increasingly be unable to live in and move from/to places where climate risks continue to rise, and also warns of compound risks which will amplify the climate crisis and increase in uncertainty. Podcast Tripling renewables is one of the goals under discussion at COP28. Find out where more investments are needed and why decarbonizing energy is easier than you think. (Zero)  

The Institute, under the auspices of the CCAB-I, made representations on behalf of members at last week’s meeting of the TALC Collection subcommittee. Among the issues discussed, Revenue provided updates on the implementation of the Enhanced Reporting Requirements for employers, the Debt Warehousing Scheme and the vacant homes tax. Revenue also reminded the group of the costs to which the VAT flat rate farmer scheme applies. Revenue is aware of an issue in the Statement of Net Liabilities process and will be contacting the affected taxpayers.  Enhanced Reporting Requirements for Employers (EER)   Despite the CCAB-I's concerns over the introduction of ERR, Revenue has advised us that the requirements will enter force from 1 January 2024. In the meantime, Revenue intends to go live with the reporting portal in the second week in December. In the meantime, Revenue will continue to hold information webinars up to 14 December 2023 on the new  requirements for employers for agents and employers.   Revenue issued e-Brief 254/23 this morning referencing an update to Revenue’s guidance on the small gift exemption, which include examples of how ERR will apply.   A recent snap poll of our members last week has indicated that 60 percent of organisations are not ready for the Enhanced Reporting Requirements. As the 1 January 2024 deadline approaches, we continue to meet with Revenue to discuss implementation and guidance. We will continue to keep members updated via Chartered Accountants Tax News.   Debt Warehousing Scheme   Revenue reported that the total debt warehoused in the scheme was €1.8 billion consisting of over 57,000 businesses, 67 percent of which owe less than €5,000 each. Over 5,500 businesses owe a combined €1.5 billion, each owing in excess of €50,000. Revenue is continuing its telephone outreach campaign contacting businesses owing in excess of €50,000.   The Debt Warehousing Scheme is currently in Period 3, running from 1 January 2023 to 1 May 2024, with interest accruing at 3 percent per annum on the unpaid debt. The 3 percent interest charge will be incorporated into the phased payment arrangement (PPA) for its duration. Where there is no PPA, the interest will be charged retrospectively.   Taxpayers have until 1 May 2024 to agree a PPA with Revenue and are reminded that they can make interim payments during this period, and also request for the offset of any refunds owing against the balance of tax warehoused.   To assist taxpayers and their agents in quantifying the PPA instalments and interest payments, Revenue is providing a PPA calculator on its website. Revenue is encouraging taxpayers to engage now in the PPA process as there is flexibility in terms of payment terms, amounts and downpayments. In addition, payment breaks can be arranged once the PPA has been commenced. A nominal downpayment amount of 0.1 percent of tax and interest can be input using the online application system to commence the process of engagement and negotiation with the caseworker.   Revenue has prepared a number of ‘How to” videos in relation to the PPA process which are now available on the Revenue website (link to videos).   Vacant Homes Tax  Revenue provided current statistics on the Vacant Homes Tax (VHT) that was due to be reported on by 7 November 2023. Of the 50,000 properties reported to Revenue, only 5,000 properties were declared vacant. Revenue wishes to remind property owners that there is only an obligation to file a VHT return where the property is vacant.  Of the 5,000 declared to be vacant, 2,000 properties have been claimed to be exempt VHT. The VHT liability on the remaining 3,000 properties is due for payment by 1 January 2024.  Earlier in the year, Revenue wrote to owners of some 25,000 properties to advise them of the actions they needed to take, where the data available to Revenue indicated that the recipient may have a liability to Vacant Homes Tax (VHT). Revenue received responses from 45 percent of this cohort. Revenue intends to review the non-responders after the due date for payment of VHT, 1 January 2024.  Statement of Net Liabilities  Revenue is aware of some 1,000 instances in the Statement of Net Liabilities process where an offset of 2022 Income Tax refund against 2023 Preliminary Tax was selected but the refund issued, resulting in an underpayment of 2023 preliminary tax. Revenue will be contacting the affected taxpayers.  VAT Flat Rate Farmers Scheme  Farmers who are not registered for VAT are not, in the normal course, entitled to credit for, or repayment of, VAT incurred by them on their business inputs. However, a flat-rate farmer, who would not otherwise be entitled to reclaim VAT on costs incurred for the purpose of their farming business, can reclaim VAT on certain costs in accordance with Value-Added Tax (Refund of Tax) (Flat-rate farmers) Order 2012. Revenue wishes to remind farmers, and their agents, that VAT reclaimable is that VAT paid in relation to costs incurred only on:  (a) the construction, extension, alteration or reconstruction of that part of the building or structure which was designed solely for the purposes of a farming business and has actually been put to use in such a business carried on by him or her,  (b) the fencing, drainage or reclamation of any land which has actually been put to use in such a business carried on by him or her, or  (c) the construction, erection or installation of qualifying equipment for the purpose of micro-generation of electricity for use solely or mainly in his or her farming business.  It is to be noted that outlay for other purposes, such as on the acquisition of milk bulk tanks, feed bins, milking parlour equipment, automatic scrappers and automatic calf feeders do not come within the scope of this refund order. 

Revenue has updated the VAT Tax and Duty Manual on the VAT treatment of portfolio management services has been updated to provide further guidance s in line with the judgement in the Court of Justice of the European Union (CJEU) Deutsche Bank case (C-44/11).  

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.”