Revenue has updated several chapters of the Stamp Duty Tax and Duty Manuals. Further information is available in eBrief no. 016/23.

Revenue has updated the Stamp Duty Tax and Duty Manual to provide information on how section 31D SDCA 1999 (cancellation schemes of arrangement) interacts with section 31E SDCA 1999 (stamp duty on certain acquisitions of residential property).

Revenue will allow the application of the zero rate of VAT to the supply of Covid-19 in-vitro diagnostic medical devices (testing kits) following a request from the Minister for Finance, Michael McGrath. The Covid-19 test kits must conform with the essential requirements of all relevant European Medical Device Directives. For example, a Covid-19 test kit product which has a CE marking is proof that it meets those requirements. This temporary measure applies from 1 January 2023 on an administrative basis pending enactment of the appropriate legislative provisions.

Members are reminded that, effective 1 January 2023, there have been changes to the rules for calculating benefit-in-kind (BIK) on company vehicles under section 121 TCA 1997 & section 121A TCA 1997. From that date: The BIK on all company cars, including electric vehicles, will be calculated with reference to CO2 emissions. The cash equivalent for vans will increase from 5 percent to 8 percent of the original market value (OMV). In addition, for the years 2023 to 2025, the cash equivalent of an electric vehicle made available for an employee’s private use will be calculated based on the actual OMV reduced by: €35,000 for the year 2023, €20,000 for the year 2024, and €10,000 for the year 2025. The changes are largely driven by the government’s Climate Action Plan 2021.

Revenue has updated the guidelines on the Temporary Business Energy Support Scheme (TBESS) with additional information following queries received by businesses wishing to avail of the scheme. A summary of the changes is outlined in the “What’s new” page at the beginning of the guidelines. Preliminary statistics published last week by Revenue show that there are 8,849 businesses currently registered with Revenue for TBESS, with €5.9 million paid in respect of 2,984 approved claims valued €6.64 million. Over one third of the claims for TBESS came from the wholesale and retail sector, with nearly another third of claims from the accommodation and food services sector. Read the complete statistics here.

Revenue has launched the e-tender process to establish the 2022/23 panel of experts who may be called upon to assist review claims for the Research & Development Tax Credit. The link to the 2022/23 e-tender application process is included in the updated Tax and Duty Manual under the footnote on page 2 and can be accessed here.

Revenue has created a Tax and Duty Manual to provide guidance on the operation of the Accelerated Capital Allowances for Farm Safety Equipment scheme available under section 285D TCA 1997. Section 285D TCA 1997 provides for a scheme of accelerated capital allowances for capital expenditure incurred, on certain farm safety equipment, by a person carrying on a trade of farming. The expenditure must be incurred in the period 1 January 2021 to 31 December 2023 and the Minister for Agriculture, Food and the Marine must certify the expenditure. Once certified, the expenditure can be written off at a rate of 50 percent per annum over two years. The scheme is subject to an overall annual budget of €5 million (excluding VAT). Additionally, there is a limit of €500,000 on the total amount of relief that can be granted to any person under this scheme.

Exchequer figures for 2022 show tax revenues increased by 22 percent relative to 2021 with €83.1 billion collected in total – the highest ever tax take. Contributing to this were income tax receipts of €30.7 billion (15 percent higher than 2021, and consistent with the strong post-pandemic recovery in employment), corporation tax receipts of €22.6 billion (a 50 percent increase on 2021), and VAT receipts of €18.6 billion (up 20 percent on last year). An Exchequer surplus of €5 billion was recorded to end-December 2022. This compares with a deficit of €7.4 billion in 2021 and the improvement reflects the significant increases in tax revenue and decline in Covid-related public expenditure. For the first time ever last year, corporation tax receipts were the State’s second-largest income stream. However, a significant part of this income is expected to be once-off in nature. It is also notable that the corporation tax figures for December were below levels expected by the Department of Finance. Commenting on the figures, Minister for Finance, Michael McGrath said: “The end-2022 Exchequer figures show a large headline surplus was recorded last year. This reflects a number of factors, including robust income tax and VAT receipts, both of which reflect the strength of the post-pandemic recovery in demand and employment. The phasing out of Covid-related expenditure is another reason for the surplus last year. By far the most important factor behind the headline surplus is the strength of corporation tax revenue – receipts from this source have doubled since just before the pandemic. My Department estimates that around half of these receipts are potentially at risk – if these receipts were excluded, we would instead be facing a significant deficit. That is why Government has acted to mitigate this vulnerability by transferring part of this windfall to the National Reserve Fund to rebuild our fiscal resources. It is also important to stress that today’s figures are, of course, backward looking. They do not offer a guide as to the challenges that we will have to address going forward. Keeping the public finances on a sustainable trajectory puts us in the best position to meet these future challenges. That is what this Government will continue to do.” Further details are included in the Fiscal Monitor December 2022.

Revenue recently published preliminary results for 2022 which provides data on tax and duty collected, compliance rates, the yield from interventions along with details of assistance provided under critical government support schemes.   Revenue collected €62.2 billion in taxes and duties and over €22.3 billion on behalf of other government departments, agencies, and EU Member States.  Timely compliance rates by Irish taxpayers for 2022 remains strong with 98 percent compliance by taxpayers in Revenue’s Large Cases and 96 percent in Medium Cases Divisions and compliance at a rate of 86 percent in other divisions of Revenue.  Revenue conducted risk management interventions generating €813 million. Revenue also secured 9 convictions for serious tax evasion and fraud, published 53 tax settlements in the List of Tax Defaulters and settled 104 tax avoidance cases yielding €16.1 million. Revenue oversaw the payment of €806.6 million under the Employment Wage Subsidy Scheme to 23,330 eligible employers in respect of 327,242 employees. The Temporary Business Energy Support Scheme has paid claims of €5.9 million to 2,984 businesses in its short time of operation. More than 70,000 businesses and individuals are availing of the Debt Warehousing Scheme in respect of just over €2.48 billion of tax debt. For more details on Revenue preliminary results for 2022 see Revenue’s press release.

Revenue has published a Tax and Duty Manual clarifying the tax treatment of payments received under the Basic Income for the Arts (BIA) pilot scheme launched in April 2022. Individuals who qualify for the scheme receive a payment of €325 per week. The scheme is administered by the Department of Tourism, Culture, Arts, Gaeltacht, Sports and Media and is open to eligible artists and creative arts workers.

The Financial Reporting Council (FRC) has reached a significant milestone in the periodic review of its financial reporting standards with the release of FRED 82 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs. This Financial Reporting Exposure Draft (FRED) forms part of the periodic review of the standards which happens approximately every five years. The FRED is now open to consultation and comments are requested by the FRC by 30 April 2023. In March 2021, the FRC commenced the periodic review with a request for views from stakeholders. The Institute's Financial Reporting Technical Committee responded to this request with some recommendations. Some of the key points to note from the FRED are; The draft proposals include significant changes to how leases are accounted for and proposes a model similar to that of IFRS 16 Leases  and will result in many leases which were previously expensed as operating leases now being classified as "right of use assets" within fixed assets. However, given the wide range of users of FRS 102 financial statements, there are simplifications proposed which are aimed at ensuring that these accounting requirements are proportionate and cost effective to apply. There are also some proposed exemptions from the rules for some assets.  The draft proposals include a new model of revenue recognition in FRS 102 and FRS 105. This is based on the principles of IFRS 15 Revenue from Contracts with Customers and the five step model included in this standard. This aims to ensure that there will be more consistency in the reporting of Revenue and that the process for revenue recognition is clearer. The FRC have decided to defer its conclusion as to whether to align FRS 102 with the expected credit loss model of financial asset impairment in IFRS 9 Financial Instruments, but have indicated that they may revisit this when the IASB's IFRS for SMEs Accounting Standard goes through its periodic review process. The proposed effective date for the amendments is accounting periods beginning on or after 1 January 2025, with an option for early adoption. Along with the FRED, the FRC have also released some supporting documents including; FRED 82- at a glance FRED 82- Impact assessment Q&A A podcast providing an overview of the changes

The roadmap for the EU Commission’s milestone Corporate Sustainability Reporting Directive is taking shape and now is the time to start preparing for a brave new era in non-financial reporting, writes Conor Holland With the Corporate Sustainability Reporting Directive (CSRD) now approved by the European Council, entities in the EU must begin to invest significant time and resources in preparing for the advent of a new era in non-financial reporting, which places the public disclosure of environmental, social affairs and governance matters (ESG) matters on a par with financial information. Under the CSRD, entities will have to disclose much more sustainability-related information about their business models, strategy and supply chains than they have to date. They will also need to report ESG information in a standardised format that can be assured by an independent third party. For those charged with governance, the CSRD will bring further augmented requirements. Audit committees will need to oversee new reporting processes and monitor the effectiveness of systems and controls setup. They will also have enhanced responsibilities. Along with monitoring an entity’s ESG reporting process, and evaluating the integrity of the sustainability information reported by that entity, audit committees will need to: Monitor the effectiveness of the entity’s internal quality control and risk management systems and internal audit functions; Monitor the assurance of annual and consolidated sustainability reporting; Inform the entity’s administrative or supervisory body of the outcome of the assurance of sustainability reporting; and Review and monitor the independence of the assurance provider. The CSRD stipulates the requirement for limited assurance over the reported information. However, it also includes the option for assurance requirements to evolve to reasonable assurance at a later stage. The EU estimates that 49,000 companies across the EU will fall under the requirements of the new CSRD Directive, compared to the 11,600 companies that currently have reporting obligations. The EU has confirmed that the implementation of the CSRD will take place in three stages: 1 January 2024 for companies already subject to the non-financial reporting directive (reporting in 2025 for the financial year 2024); 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive (reporting in 2026 for the financial year 2025); 1 January 2026 for listed SMEs, small and non-complex credit institutions, and captive insurance undertakings (reporting in 2027 for the financial year 2026). A large undertaking is defined as an entity that exceeds at least two of the following criteria: A net turnover of €40 million A balance sheet total of €20 million 250 employees on average over the financial year The final text of the CSRD has also set timelines for when the Commission should adopt further delegated acts on reporting standards, with 30 June 2023 set as the date by which the Commission should adopt delegated acts specifying the information that undertakings will be required to report. European Financial Reporting Advisory Group In tandem, the European Financial Reporting Advisory Group (EFRAG) is working on a first set of draft sustainability reporting standards (ESRS). These draft standards will be ready for consideration by the Commission once the Parliament and Council have agreed a legislative text. The current draft standards provide an outline as to the depth and breadth of what entities will be required to report. Significantly, the ESRS should be considered as analogous to accountancy standards—with detailed disclosure requirements (qualitative and quantitative), a conceptual framework and associated application guidance. Readers should take note—the ESRS are much more than a handful of metrics supplementary to the financial statements. They represent a step change in what corporate reporting entails, moving non-financial information toward an equilibrium with financial information. Moreover, the reporting boundaries would be based on financial statements but expanded significantly for the upstream and downstream value chain, meaning an entity would need to capture material sustainability matters that are connected to the entity by its direct or indirect business relationships, regardless of its level of control over them. While the standards and associated requirements are now largely finalised, in early November 2022, EFRAG published a revised iteration to the draft ESRS, introducing certain changes to the original draft standards. While the broad requirements and content remain largely the same, some notable changes include: Structure of the reporting areas has been aligned with TCFD (Task Force on Climate-Related Financial Disclosures) and ISSB (International Sustainability Standards Board) standards – specifically, the ESRS will be tailored around “governance”, “strategy”, “management of impacts, risks and opportunities”, and “metrics and targets”. Definition of financial materiality is now more closely aligned to ISSB standards. Impact materiality is more commensurate with the GRI (Global Reporting Initiative) definition of impact materiality. Time horizons are now just a recommendation; entities may deviate and would disclose their entity-specific time horizons used. Incorporation of one governance standard into the cross-cutting standard requirements on the reporting area of governance. Slight reduction in the number of data points required within the disclosure requirements. ESRS and international standards By adopting double materiality principles, the proposed ESRS consider a wider range of stakeholders than IFRS® Sustainability Disclosure Standards or the US Securities and Exchange Commission (SEC) published proposal. Instead, they aim to meet public policy objectives as well as meeting the needs of capital markets. It is the ISSB’s aim to create a global baseline for sustainability reporting standards that allows local standard setters to add additional requirements (building blocks), rather than face a coexistence of multiple separate frameworks. The CSRD requires EFRAG to take account of global standard-setting initiatives to the greatest extent possible. In this regard, EFRAG has published a comparison with the ISSB’s proposals and committed to joining an ISSB working group to drive global alignment. However, in the short term, entities and investors may potentially have to deal with three sets of sustainability reporting standards in setting up their reporting processes, controls, and governance. Key differences The proposed ESRS list detailed disclosure requirements for all ESG topics. The proposed IFRS Sustainability Disclosure Standards would also require disclosure in relation to all relevant ESG topics, but the ISSB has to date only prepared a detailed exposure draft on climate, asking preparers to consider general requirements and other sources of information to report on other sustainability topics. The SEC focused on climate in its recent proposal. The proposed ESRS are more prescriptive, and the number of disclosure requirements significantly exceeds those in the proposed IFRS Sustainability Disclosure Standards. Whereas the proposed IFRS Sustainability Disclosure Standards are intended to focus on the information needs of capital markets, ESRS also aim to address the policy objectives of the EU by addressing wider stakeholder needs. Given the significance of the directive—and the remaining time to get ready for it—entities should now start preparing for its implementation. It is important that entities develop plans to understand the full extent of the CSRD requirements, and the implications for their reporting infrastructure. As such, they should take some immediate steps to prepare, and consider: Performing a gap analysis—i.e. what the entity reports today, contrasted with what will be required under the CSRD. This is a useful exercise to inform entities on where resources should be directed, including how management identify sustainability-related information, and what KPIs they will be required to report on. Undertaking a ‘double materiality’ analysis to identify what topics would be considered material from an impact and financial perspective—as required under the CSRD. Get ‘assurance ready’—entities will need to be comfortable that processes and controls exist to support ESG information, and that the information can ultimately be assured. The Corporate Sustainability Reporting Directive represents a fundamental change in the nature of corporate reporting—the time to act is now and the first deadline is closing in.