In September 2023 the UK Financial Conduct Authority (FCA ) announced a review of the treatment of domestic Politically Exposed Persons (PEPs) by financial services firms. The review will look at firms’ arrangements for dealing with PEPs based in the UK and will report by the end of June 2024. In the previous month of August 2023 it invited UK PEPs to share their experiences, including any problems they or their family members have encountered with the PEPs regime. The FCA has previously (in 2017 ) published guidance for how financial services firms should treat customers who are politically exposed persons when meeting their anti-money laundering obligations.

In Irish news, the Institute has informed the Minister for Finance of members’ concerns with the proposed new enhanced reporting requirements and we give you an update from the recent meeting of the Tax Administration Liaison Committee Collections subcommittee. In UK news, the Autumn Statement will take place on Wednesday 22 November, and the Institute is discussing with HMRC the 31 October 2023 deadline for the end of the VAT margin scheme in respect of certain second-hand cars.  In International news, the OECD publishes the 2023 Secretary General tax report.  Ireland The Institute, under the auspices of the CCAB-I, has written to the Minister for Finance, Michael McGrath T.D., to highlight significant concerns our members have about the proposed introduction of Enhanced Reporting Requirements. Read our update from the September 2023 meeting of TALC Collections subcommittee. UK Last week the Chancellor of the Exchequer announced that the Autumn Statement will take place on Wednesday 22 November. The Institute is discussing with HMRC the 31 October 2023 deadline for the end of the VAT margin scheme in respect of certain second-hand cars. International This year’s Secretary General tax report has been published providing an update on the progress on the OECD’s Two-Pillar Solution. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter. Subscribe to the Tax News by updating your preferences in MyAccount. You can also read this week’s EU exit corner here which features updated guidance and publications and the news that the UK has agreed a deal to associate to Horizon Europe.     

On 1 September 2023, the Institute responded to the Financial Reporting Council (FRC) invitation for comments on their proposed changes to the “UK Corporate Governance Code” (‘Code’)*.  The proposed changes arise from a UK government request of the FRC to strengthen the UK Corporate Governance Code in specific areas following the recommendations arising from UK White Paper on “Restoring Trust in Audit and Corporate Governance” (‘White Paper’) published in 2022. Some of the key changes proposed to the Principles and Provisions applying to boards include: Setting out a revised framework of prudent and effective risk management and internal controls to provide a stronger basis for reporting on, and evidencing their effectiveness. Improving the quality of comply-or-explain reporting, taking account of recently published FRC research and reports, e.g. reducing boilerplate wording and requiring reports to demonstrate the outcomes of governance activities. Revising the responsibilities of the board and audit committee for sustainability and ESG reporting, and associated assurance in accordance with a company's audit and assurance policy. Aligning governance and reporting practices with changes to legal and regulatory requirements as set out in the Government's response to the White Paper, including strengthening reporting on malus and clawback arrangements. The Institute response welcomes FRC proposals that: discourage boilerplate reporting and encourage clear and concise disclosure on the reasons for any departure from the Code’s provisions, and how the Board has otherwise adhered to the overall principles of the Code. encourage consideration of and reporting (in accordance with established sustainability reporting standards) all material sustainability and ESG matters, including climate ambitions and transition planning, in defining business purpose, strategy, and values. increase the emphasis on workforce and broader stakeholder engagement, strengthening diversity and inclusion, and improves the effectiveness of remuneration policies and transparency. respond to some of the Chartered Governance Institute recommendations on board performance reviews and emphasis on improving board effectiveness. engage with emerging risks and opportunities such as artificial intelligence, for which the Institute have provided, in our response, some detailed considerations for inclusion in FRC guidance. Some of the key points highlighted in the Institute’s response focused on: The missed opportunity from limiting the update of the Code to reacting to legislative proposals rather than addressing learnings from corporate governance in recent years, including the principles and values (including ethics and healthy culture) that were lacking in respect of high-profile corporate failures. Highlighting the increasing role and responsibilities of Audit Committees, and the risks arising by mandating them as default for additional requirements versus ensuring the ability of the Board, who are ultimately responsible, to delegate roles and responsibilities as it sees fit in accordance with fiduciary duties. The lack of guidance and definitions for key terms used in the principles and provisions which, if provided, would provide for better understanding, and promote greater consistency, in many areas of the Code, including directors declarations on risk management and internal controls, audit and assurance policies, and narrative reporting. The importance of maintaining the principle-based approach to corporate governance that the Code has championed for over thirty years and to avoid deferring to requirements which are prescriptive, a matter of law and are not suited to a comply or explain model. The risk that established and effective practices for stakeholder engagement, reporting on future prospects and delegating oversight of sustainability matters may be lost based on the way some of the proposals are set out. The Chartered Accountants Ireland response to the FRC addressed all 26 questions and is available here. The FRC proposals are available on their website here. Níall Fitzgerald, Head of Ethics and Governance, Chartered Accountants Ireland   * The Code applies to premium listed companies on the London Stock Exchange and companies with a primary listing on the Irish Stock Exchange (and the Irish Corporate Governance Annex). Other organisations can voluntarily adopt the Code, for example, Chartered Accountants Ireland applies principles of the Code where they are relevant and commensurate to the Institute as a membership body.  

The UK Financial Conduct Authority recently issued a publication on firms’ response to increased sanctions due to Russia’s invasion of Ukraine. In the publication the FCA set out key findings from its assessments of sanctions systems and controls and includes examples of good practice and areas for improvement. While the publication is in respect of financial services firms, the findings in relation to good practices and areas that need improvement may be of interest in any efforts to making improvements to the approach to identifying and assessing the sanctions risks that firms are exposed to.

It is with great sadness that Chartered Accountants Ireland notes the death of Gerry Nicholas. Gerry was admitted to membership in 1979. He served on Council from 2010 until 2017 and was Chair of the London Society from its inception in 1999 until 2019.  During those 20 years, he put in enormous effort into developing the London District Society into the thriving group it is today. He was keenly involved in many of the London-based Irish charities and other Irish professional bodies, forging strong links.  As a result, he was widely known, liked and admired for his clear business mind, enthusiasm and friendship.  Gerry had a strong financial career in the banking industry spending more than 15 years with Bank of Ireland and later through his own companies in asset management, mergers and acquisitions, corporate governance and corporate finance.  Gerry will be remembered as a true collaborator, connector, and communicator, with a huge personality.  He will be sorely missed. We extend our deepest sympathies to Gerry's family and many friends and colleagues throughout London, Ireland and worldwide.

In September 2023 the EU Commission issued a guidance note for EU operators on implementing enhanced due diligence to shield against Russia sanctions circumvention. It is to help European operators to identify, assess, and understand the possible risks of Russian sanctions circumvention. It includes circumvention red flags related to business partners and customers that EU operators should watch for when they enter into a commercial relationship with a new trading partner . The EU Guidance note is in the same vein as the summary AML Alert  Russia sanctions – Trade sanctions circumvention  which was  produced by the Accountancy AML Supervisors’ Group (AASG) from an extract from the UK Department of Business and Trade notice NTE 2023/08: Russia sanctions – Trade sanctions circumvention published 22 May 2023  . Details of this notice were brought to members attention in a news item from Professional Standards Dept. of the Institute of August 23, 2023 where they alluded to awareness of the risk and obligations in relation to sanctioned goods as an important first step for those working in the accountancy profession so that they do not become party to the trade sanctions circumvention.

Sustainability is one of the biggest challenges facing businesses today. In her new book, Doing Good Business: How to Build Sustainable Value, UL Associate Professor Sheila Killian sets out the core pillars of what it means to be a truly sustainable business. She discusses the fast-changing responsibilities of business, the emergence of sustainable and profitable business models, and how climate change and human rights affect all companies, large and small. Doing Good Business provides guidance on the principles of sustainability, related reporting, community engagement, governance, and employee issues as well as environmental initiatives.  Find out more in our bookshop.  

The Minister for Finance, Michael McGrath TD has announced his intention to introduce a legislative amendment in Finance Bill (No. 2) 2023 to deal with how the Defective Concrete Products Levy (DCPL) impacts on the sale of certain precast products. Current legislation, contained in Part 18E TCA 1997, provides that while such products are not within scope of the DCPL, the pouring concrete element which forms a constituent part of precast concrete products is within scope. The amendments are to be introduced following the identification of a potentially negative impact on the export of these products.  Minister McGrath commented:  “The Defective Concrete Products Levy (DCPL) is intended to ensure a contribution by the construction sector towards the cost of the Mica Redress Scheme.  A limited number of precast products had originally been listed as being within scope of the levy when it was announced in October 2022.  Following further consideration, these were removed prior to the publication of what became Finance Act 2022. The legislation provided that while such products would not be within scope of the DCPL, the pouring concrete element which forms a constituent part of precast concrete products is within scope. This is reflected in Section 99 of the Act as passed by the Oireachtas.  My officials have held a series of meetings with industry bodies where they outlined their concerns about this aspect of the application of the levy. It has become clear that the manner in which the levy impacts on the sale of certain precast products has a potentially negative impact on the export of these products and competition from suppliers into the jurisdiction.  It is my intention to bring forward an amendment in the forthcoming Finance Bill to exclude the value of pouring concrete used in precast products from the scope of the levy. This will come in to effect on 1 January 2024 and a refund scheme will apply for the interim period to the end of 2023. Concrete blocks and pouring concrete for use other than in precast products will remain within scope of the DCPL.  It is my belief that, taking account of the proposed amendment, the overall design of the levy balances the need to ensure some of the costs of the redress scheme are met from a source other than the Exchequer, while limiting the impact on inflation in the construction sector.  The Department of Finance will, with Revenue’s assistance, closely monitor the introduction and operation of the DCPL and will continue to engage with industry to identify ways to address any issues that arise.” 

The Minister for Finance, Michael McGrath TD has signed the Commencement Order to implement Finance Act 2022 amendments, providing for an increase of the effective tax rate for the Knowledge Development Box (KDB), with effect from 1 October 2023.  The KDB provides relief from corporation tax on income arising from qualifying assets such as computer programs, inventions protected by a qualifying patent, or certified inventions for SMEs. The amendments are in line with the implementation of Pillar Two Solution of the OECD agreement and demonstrate Ireland’s continued commitment to agreed international tax reforms.  Commenting, Minister McGrath said:  “This is an important step in the implementation of the OECD Two Pillar agreement. Ireland is fully committed to agreed international reforms. Work is continuing to transpose the EU Minimum Tax Directive in Ireland in the Finance Bill this autumn, to provide for the 15 percent minimum effective corporation tax rate element of Pillar Two.”   

The Department of Finance has published the Fiscal Monitor incorporating the Exchequer Statement for August 2023. Tax receipts to end-August were €53.1 billion, up €3.3 billion, or 6.6 percent on an annual basis.   Income tax receipts remained robust at €20.7 billion to end-August, up 8.2 percent on the same period last year and reflecting the strength in the labour market. VAT remains ahead of the same period last year, up by €1.4 billion, or 11.2 percent. While cumulative corporation tax receipts to end-August were €12.7 billion, up by €0.9 billion on an annual basis; August receipts were €1.8 billion which is €1 billion less than collected in August 2022. Although a decline was expected, and there may be timing issues at play, the magnitude of the decrease is larger than had been anticipated, highlighting the inherent volatility in corporation tax receipts.  Commenting on the figures, the Minister for Finance, Michael McGrath TD said:  “The tax data to end-August return remain broadly positive, with tax revenues €3.3 billion ahead of the same period last year. However, the €1 billion drop in corporation tax this month, compared with the August 2022 figures, serves as a timely reminder of the underlying vulnerabilities that still remain in our public finances.  This is a risk that I have highlighted many times, and Government has taken a number of steps to mitigate our exposure to this volatile revenue stream. €6 billion in windfall corporation tax receipts has been transferred to the National Reserve Fund, and work is ongoing in relation to establishing a longer-term investment fund. Government has also committed €2¼ billion in windfall receipts to fund increased capital investment over the period 2024-2026, enabling us to use some of these temporary revenues to fund permanent improvements to our economy and society.  As we approach Budget 2024, the fall in corporation tax reinforces the importance of striking the correct balance between continuing to invest in our public services and maintaining the long-term sustainability of our public finances.” 

The Institute, under the auspices of the CCAB-I, made representations on behalf of members at last week’s meeting of the TALC Collections subcommittee. Among the issues discussed, Revenue provided updates on the implementation of the Enhanced Reporting Requirements for employers, the Debt Warehousing Scheme and the non-resident landlord withholding tax. Revenue also informed the group that interest charges on the late payment of tax, suspended since March 2020, is to recommence this month.  Enhanced Reporting Requirements for Employers  Revenue intends to hold information webinars commencing 14 September 2023 on the new enhanced reporting requirements for employers for agents and employers. Invitations to attend the webinars will be delivered to the employer’s ROS inbox and an email notification is also to be provided.  We will continue to keep members updated via Chartered Accountants Tax News.  Debt Warehousing Scheme  At the end of July 2023, the total debt warehoused was €1.9 billion consisting of over 60,000 businesses, 42 percent of which owe less than €500 each, with 66 percent owing less than €5,000 each. Just under 6,000 businesses owe a combined €1.6 billion, each owing in excess of €50,000. Revenue initiated a telephone outreach campaign in July, commencing with 600 businesses that each owe in excess of €500,000.   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 date there have been 2,200 agreed PPAs from the Debt Warehouse Scheme valued €100 million.   Revenue is encouraging taxpayers to engage now in the PPA process as there is much 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.   Arrangements will be subject to review of supporting documentation contained in the Form ePPA1. For amounts exceeding €50,000 supporting bank statements are required to be uploaded, other documents such as cashflow statements and management accounts will also be required where the debt exceeds €100,000.   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). The topics covered include:  PPA Application  Defer your Next Payment  Apply for a Payment Break  Consolidation  Change Bank Details  Change Payment Date  Pay in Full  Revenue would encourage taxpayers to view these videos in advance of applying for a PPA to assist taxpayers to become familiar with the PPA online facility and understand the range of flexible payment options that are available to suit their individual circumstances.   Non-Resident Landlords   Following the introduction of the new non-resident landlord withholding tax (NLWT) system from 1 July 2023 over 4,300 rental notifications have been made in respect of 2,300 properties by over 1,000 filers in respect of €10 million rental receipts with €2 million withholding tax paid. These figures exclude HAP (circa 1,800 properties).   There will be a further Tax and Duty Manual update in the coming weeks with improved functionality to allow amendments to rental notifications (RNs). Revenue confirmed that there has been an issue with setting up repeat RNs and this is the be fixed in the coming weeks.  Section 216D TCA 1997 micro-generation of electricity Section 216 D TCA 1997 provides for an exemption of up to €200 from income tax, USC and PRSI for certain profits arising to a qualifying individual who generates energy from renewable, sustainable or alternative energy sources for their own consumption and applies from 1 January 2022.   Revenue advise that such income is assessable under Schedule D Case IV net of the exemption of €200. It should be included in Panel G Other Irish Income on the ROS Form 11 or included as non PAYE income ‘fees and commissions’ if filing a Form 12 where relevant.  Interest on late payment  Interest on late payment is a charge provided for in tax legislation, the purpose of which is to encourage timely payments, compensate the exchequer for late payment and to ensure equity for those taxpayers who do make their payments on time.  From mid-September, Revenue intends resuming the collection of interest on late payment, with automated interest warning notices for VAT and PREM late payment issuing for July 2023 periods onwards. Interest charges on late payment were suspended in March 2020 in conjunction with the introduction of certain public health measures. Where subsequent late payments occur following the warning notice, interest will be charged on any future occurrences of late payment, and a standard notice will issue to taxpayers outlining the Interest on late payment charge.   Change to acceptance of certain card types for tax payments   From 1 October 2023, Revenue will no longer accept commercial credit cards for payment of tax. A warning message will display to the taxpayer on the online payment screens to advise that this card type is not accepted. Revenue continues to accept personal debit and credit cards in addition to commercial debit cards. Revenue advises that where a taxpayer is unsure of their card type, they should contact their card provider to confirm their card type.  

The Chancellor of the Exchequer announced last week that this year’s Autumn Statement will take place on Wednesday 22 November 2023. As usual, the Institute will be analysing the tax announcements for members, and any subsequent developments, in Chartered Accountants Tax News.  The Office for Budget Responsibility has also been commissioned to prepare an economic and fiscal forecast to be presented to Parliament alongside the Chancellor’s Autumn Statement.