With the news that HMRC is aiming to expand the trial for Making Tax Digital for income tax Self-Assessment (“MTD for income”) from next Monday 22 April, we take a look at recent developments in this area. The Institute still has many reservations about this project and will continue to represent members views on MTD for income tax when in attendance at HMRC forum meetings in this space. Feedback can be sent at any time to tax@charteredaccountants.ie.  Amended MTD regulations  As previously announced, MTD for income tax will commence for unincorporated businesses and landlords with business and/or property income over £50,000 from April 2026. Those with income over £30,000 are mandated from April 2027. In December 2023, HMRC consulted on the amended draft MTD for income tax regulations which Chartered Accountants Ireland responded to.  Following this consultation, The Income Tax (Digital Requirements) (Amendment) Regulations 2024 have now been laid. These, alongside the earlier regulations which they amended, set out the requirements which must be complied with, including the use of MTD-compatible software to keep and preserve business records digitally and the sending of quarterly updates of these records to HMRC. Note that the deadline for submitting quarterly MTD for income tax returns will now be the 7th day of the month after the relevant tax year quarter end, amended as recommended in the Institute’s consultation response in order to align with the VAT return filing deadline for those within VAT Stagger 1.   An Update Notice has also been published which sets out the information which will need to be sent to HMRC quarterly using MTD-compatible software. The update information that must be provided in a quarterly update period is dependent on the relevant person’s business or businesses. HMRC will also publish the Software Notice and Notice for joint property owners in the Spring, alongside detailed guidance for each. More information is also still to be published on the digital record keeping and digital links requirements.   MTD trial  HMRC’s aim in 2024/25 is to expand the current MTD for income tax trial by encouraging agents to consider which clients can sign up and then to sign them up to participate in the expanded private beta testing trial in 2024/25. This month, HMRC will be sending further communications regarding the MTD for income tax trial to its entire agent mailing list. Overall, this involves a three-armed email campaign which will provide several opportunities for agents to learn more about the testing and how to sign up.   HMRC began sending these comms last month. The next email will then be sent at launch, which will signpost agents towards the updated GOV.UK pages on compatible software, eligibility criteria, and sign-up pages.   However, as of 10 April 2024, there still remains a very limited number of software packages that are available to participate in the trial with just five vendors confirmed, although many are in development, some of which may become available during 2024/25 or later. The Institute recommends that agents carefully consider the advantages and disadvantages of signing up clients to participate in the trial.  HMRC has also now published detailed guidance in respect of the penalty regime which will apply when trial participants testing MTD for income tax make late submissions. These changes to penalties only apply during the testing phase and must be agreed to before a taxpayer can be signed up to participate in the trial.  Broadly, agents who wish to develop a list of clients that are eligible to join the expanded trial in 2024/25 should follow the below steps when considering their options:  Step 1 - assess client suitability – this can be done by using an eligibility checker to triage/filter which clients are eligible to participate.  Step 2 - discuss this with the client and get their agreement before going back into the service to actually sign them up.  Note that full client approval is needed to then progress onwards and sign the client up to participate.  The cost of MTD  HMRC has also sent the following message about the cost of MTD:  “We have also published an updated Tax Information and Impact Note (TIIN), to accompany the Regulations. Among other impacts, this sets out the latest projected exchequer benefits, operational costs, and customer cost impacts of MTD ITSA. Since we published the last TIIN in September 2021, we have updated the assumptions within the customer costs model. We have also reviewed the methodology and cost assumptions with tax professional bodies and the Administrative Burdens Advisory Board (ABAB).   We recognise that there are transitional costs for business in moving to MTD. Both these, and the continuing costs will vary depending on factors such as size, complexity, and digital capability of the business.   Continuing costs     Once implemented, MTD expansion is estimated to increase the total net continuing costs of complying with the tax system for all mandated businesses by £196m per year - about £110 per year, per business. This compares to a previous net cost estimate in 2021 of £152m per year, or about £35 per year, per business. A range of assumptions have been updated since the last estimates, including uplifting costs and wage rates in line with inflation, re-examining time spent undertaking tasks, reviewing the price of software products, and using the latest evidence on record keeping practices.   Transitional costs     The decision to increase the previous £10,000 income threshold to £30,000 means there is a smaller, more digitally able population within scope. We have therefore reduced our per-business estimate for the transitional costs, in comparison to the estimates published in our last TIIN.   We estimate the transitional costs for all mandated businesses will total £561m, which equates to about £320 per business. This compares to £1,383m (about £330 per business) in our 2021 figures. Although the reduction in population size means transitional and continuing costs are lower overall than previously estimated, we recognise that the continuing customer costs per business are significantly higher. We are confident that these updated estimates in the TIIN present a more granular and informed position. These remain estimates, not a definitive statement of costs, but we have used the most robust methodology possible to estimate and set them out in a realistic and straightforward way. ABAB have also advised that they are comfortable with the revised assumptions.   We also know that, whilst there are costs in using MTD, we expect there to be benefits in the future. For example, using compatible software will reduce opportunities for error and help businesses and landlords get their tax affairs right first time. Evidence from MTD VAT also points to the use of compatible software encouraging businesses to digitalise other elements of their business due to productivity benefits. We are committed to extending these benefits to business, self-employed individuals and landlords who are registered for Self Assessment from April 2026. The government will continue to keep the decision on whether to mandate businesses and landlords with income below £30,000 to use MTD ITSA under review, although this group can still sign up voluntarily.”  Turnover less than £30,000 population  As announced at the 2023 Autumn Statement, for now, HMRC is not extending MTD for income tax to unincorporated business and landlords with turnover less than £30,000. In February 2024 HMRC published externally commissioned qualitative research conducted with small businesses with turnover between £10,000 and £30,000 per year. Key findings from the research are set out in detail at section 1.3 of the report.  Government response to November 2023 Public Accounts Committee ("PAC") report  In February, the Government published its response to the recommendations in the PAC’s report of November 2023 on Progress with Making Tax Digital.   The PAC’s findings were based on a report by the National Audit Office (NAO) in 2023, in addition to oral evidence provided in June 2023 by members of HMRC’s Executive Committee.   Both the NAO and PAC’s work on MTD provides important scrutiny and perspective on the programme, hence the Government’s response sets out how it is addressing each of the PAC’s recommendations.   According to HMRC, the response underlines the focus on having a clear and widely understood roadmap for delivery, further explains the position on a range of wider issues, including the assessment of HMRC’s view of its benefits, and provides details of its approach to working with the software industry.   Several of the PAC's recommendations are underpinned by evidence of work that has already been implemented or which is underway with the overall aim of accelerating towards expanding the testing programme in 2024/25, so that HMRC can fully test its IT functionality well ahead of April 2026. 

The Department of Social Protection (DSP) has begun to issue Personal Public Service (PPS) numbers ending with the character ‘B’. Readers using third party software are advised to check with their providers to ensure compatibility. 

Following the publication of new guidance on outbound payments defensive measures, contained in Chapter 5 Part 33 TCA 1997, Revenue has revised several Tax and Duty Manuals.  The revised manuals are:  Interest in respect of wholesale debt instruments (Part 08-03-11)  Corporation Tax: General Background - Dividends and Portfolio Investors (Part 02-02-01)  Distributions out of certain exempt profits or gains or out of certain relieved income (Part 06-04-02)  Dividend Withholding Tax (DWT) – Details of Scheme (Part 06-08A-01)  Technical Guidance notes in relation to the operation of Dividend Withholding Tax (Part 06-08B-01)  Treatment of Certain Patent Royalties Paid to Companies Resident Outside the State (Part 08-01-04) 

After the Spring Budget took place last month on Wednesday 6 March, the Spring Finance Bill 2024 (official title Finance (No. 2) Bill 2023-24) was published. The Bill reflects many of the tax measures announced as part of the Spring Budget. Second reading of the Bill has now been scheduled and will take place on Wednesday 17 April 2024.  Later this week on Thursday 18 April 2024, Tax Administration and Maintenance Day is due to take place. This now annual fiscal event is expected to contain details of the Government's work in simplifying administration of the tax system. Next Monday’s edition of Chartered Accountants Tax News will report on the announcements made in full. 

In the return of our weekly miscellaneous updates, read the latest news and information bulletin from HMRC and a new digital service is to be launched from March 2025 for alcohol duty approval, returns, and payments for UK producers. HMRC is writing to some taxpayers to confirm that boiler upgrades may qualify as repairs and details of common errors made in corporate interest restriction returns have been published. The Government has also published a Written Ministerial Statement on the addition of an anti-abuse rule to the UK’s Pillar Two rules and HMRC has published its framework for co-operative compliance, a set of principles that both large businesses and HMRC should apply to the way they work. And finally, the regulations which provide for offset of tax under the off-payroll working rules came into effect from 6 April 2024.  Correction to treatment of boiler upgrades  We understand that in 2023, HMRC sent letters to wealthy taxpayers and their appointed agents which said that boiler upgrades were capital and not revenue in nature and did not constitute a repair.   In recent weeks HMRC has been contacting the same taxpayers to advise that this was not correct. Note that the original letter asked those who received it to check the property pages of their 2021/22 Self-Assessment return. The letter sets out that anyone who amended their return to treat a boiler upgrade as not being a repair should email responseteam5@hmrc.gov.uk if they believe they are entitled to claim more tax relief on such expenses as a result of this incorrect advice.   Pillar Two - addition of anti-abuse rule   Last month, the UK Government published a Written Ministerial Statement setting out details of the addition of an anti-abuse rule to the UK’s Pillar Two rules. This will be legislated for in a future Finance Bill but will apply from 14 March 2024 and not from 15 December 2022 as recommended by the OECD.  The addition of this anti-abuse rule is in response to Administrative Guidance published by the OECD in December 2023 which includes anti-avoidance rules where multinational enterprises sought to enter into certain transactions or arrangements with the intention of exploiting the Transitional Country by Country Reporting safe harbours for the Pillar Two regime.   Off-payroll working tax offset now possible  The Income Tax (Pay As You Earn) (Amendment) (No. 2) Regulations 2024 came into effect from 6 April 2024. These regulations allow HMRC to offset taxes already paid by a worker and their intermediary on income from engagements under the off-payroll working (IR35) rules against a subsequent PAYE liability of the deemed employer in respect of the same income.  

Revenue has updated the Tax and Duty Manual regarding the deduction of tax from interest payments by certain deposit takers.   The updated manual provides that deposit interest arising on the following deposits can be paid without deduction of Deposit Interest Retention Tax (DIRT):  a deposit that is solely in respect of a general payment, and work related payment if applicable, under the Mother and Baby Institutions Payment Scheme, and  a deposit that is solely in respect of monies that are beneficially owned by a Pan European Pension Product. 

The Parliamentary Budget Office (PBO) has published a paper titled Budget 2024: A Distributional Impact Analysis of Government and Opposition Tax and Welfare Packages on Irish Households. The paper analyses, by disposable household income decile and family type, the costs and distributional impacts of the government’s Budget 2024 tax and welfare packages and those proposed by Sinn Féin, Labour, Social Democrats and People Before Profit.  A fully interactive version of the results, allowing for direct comparison of the different Budget 2024 packages, is also available here. 

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 Office Borders bulletins are also available. Read the email from HMRC about the beginning of physical checks of imports from the EU of certain sanitary and phytosanitary (SPS) goods from 30 April 2024, which is effectively the next part of the UK’s Government’s implementation of its Border Target Operating Model and see below for some useful new resources in relation to the Windsor Framework.  Windsor Framework resources  The Northern Ireland Assembly’s EU Affairs Team recently published some new resources on the Windsor Framework which includes a summary of the UK and EU legislation required to implement it, information and flowcharts on the Stormont Brake, applicability motions, and the work of the Democratic Scrutiny Committee, and a timeline of the key events and milestones.  Miscellaneous updated guidance etc.   Recently updated guidance, and publications relevant to EU exit are set out below:-  Importing SPS controlled goods that interact with ALVS;  Data Element 2/3 Documents and Other Reference Codes (National) 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 Customs Declaration 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.   

The Parliamentary Budget Office (PBO) has recently updated its comparative tool which allows users to compare their 2022 PAYE annual earnings to others in their county. It also helps them to assess affordability of property in the county. 

Revenue has updated the CAT Manual which provides an overview of the rules that apply for CAT purposes where a person receives a benefit as a result of the exercise of, the failure to exercise, or the release of a power of appointment. The updated guidance has been revised and refreshed throughout to provide clearer and more comprehensive guidance on the application of these rules. 

Businesses can only grow if owners are able to give time and attention to new ideas. Moira Dunne outlines how you can win back time to put towards developing your business In most businesses, the primary focus is on customer satisfaction and delivering products and services to the highest standard. To stay competitive and evolve, however, businesses must also continuously develop and improve their offerings. Coming up with new ideas to innovate isn’t a problem for many business owners who are able to carve out time to work on them – but for others, doing so can be a challenge. So, what is the best way to prioritise business ideas within the cut and thrust of a busy day, often while juggling urgent requests from important stakeholders? We know that, if we don’t develop the business, it can stagnate. This can lead to anxiety that makes us want to do everything at once, resulting in decreased productivity and little business growth. Win back time To include longer-term development activities in your schedule, you need to start working smarter to free up some time each week. There are three simple steps that can help you take back time to focus on bigger projects that can ultimately move the dial for your business. 1. Think Think about what you need to do to develop the business. Do you need a strategy? Do you need to improve your products? How can you innovate in new areas? Start capturing those great ideas that swirl around your head on paper. Then, review the list, prioritise and make a plan to deliver. 2. Understand Before you can win back time, you first need to understand where time is currently wasted. By using a simple time log template or any task tracker app, you can gain insights into your time usage. Popular apps include ToDoist.com, Monday.com or Zapier.com. This exercise can reveal patterns and trends that allow you to adjust your focus and activities to win back time – this time can then be redirected into higher-value business activities. 3. Identify Winning back time each week may require some hard decisions. Consider the following: What is the best use of your skill, knowledge and experience? Do you spend too much time on tasks that could be delegated? Do you focus on the operational work because the more strategic projects are harder to think about or work on? Are you reluctant to delegate because you don’t think tasks will be done to your standard? These are all common challenges when a business wants to grow and develop. You may decide to let go of tasks you enjoy working on. You may have to trust others within the team to step up and do the job. Be prepared to train some team members to achieve the long-term gain that benefits the business. Changes you can make today Actions you can take to win back time today will vary from business to business. Here are some for your consideration: Complete high-value tasks early in the week to give you momentum and motivation, which will also minimise the odds of getting pulled off track. Spend less time on low-value tasks by batching them together to complete at set times in the day. Leave the low-focus tasks until your low-focus time of day. Give yourself permission to say no. Protect time for high-value work by establishing routines, such as days without meetings or time blocks when you do not look at emails. Delegate or outsource what you can. Include regular reviews and feedback to ensure success. Share a document with the whole team to capture new ideas on an ongoing basis. Review this document at a set time, list and prioritise, then select the key ideas to progress. Moira Dunne is Founder of beproductive.ie

The research and development tax credit encourages new ways of thinking… just not, as it seems, from everyone, writes Dr Brendan McCarthy The most recent Worldwide R&D Incentives Reference Guide from EY demonstrates how most of the 46 jurisdictions discussed in the guide give preferential tax treatment to business research and development (R&D) expenditure in broadly similar ways. Subject to maintaining detailed records, eligible companies can typically offset the credit against their other tax liabilities or claim a refund in the form of cold, hard cash. When we consider the amount of money large pharmaceutical, medical device and other similar companies are likely to invest in R&D on an ongoing basis, it should come as no surprise that this credit can often run into many hundreds of thousands of euros, facilitating even further investment in R&D by both multinational companies and SMEs year after year. Ireland remains an outlier, however, in two important respects. First, for accounting periods commencing on or after 1 January 2024, eligible companies in Ireland can now claim a credit of 30 percent (previously 25%) of qualifying R&D expenditure, payable in three annual instalments. This amount exceeds that offered by most Western countries (in some cases by double digits) and is twice that offered by New Zealand, a similarly sized economy. However, apart from the level of the credit itself, what sets the Irish regime even further apart from most other jurisdictions is the concept of ‘key employees’. Recognising the reality that it is not companies that have innovative ideas but rather the people working for them, eligible companies have a further option: they can choose to use the credit to reduce the income tax liabilities of their R&D workers. Not all workers are eligible. Irish legislation stipulates that they must spend at least half of their time working in R&D, cannot be company directors, and cannot hold more than a five percent stake in their company. In other words, they must be bona fide R&D workers and cannot have a vested interest in the idea's success. Opting to surrender the credit in this way presents a dual benefit – not only does the company stand to benefit from the R&D underway, but the wider workforce is also incentivised to continue their good work. Even the most well-meaning of provisions can have unfortunate consequences, however. Having satisfied the criteria of being a key employee, the legislation states that the individual’s effective tax rate, after claiming the credit, can be no lower than 23 percent. This stipulation inevitably favours those paying tax at the higher rates (predominantly, the more senior and thus higher-paid workers), effectively leaving those paying the lower rates (the lower-paid, junior staff) out in the cold. Research has shown that employee input, or ‘voice’, can make a positive contribution to an organisation through, amongst other things, increased innovation, the identification of new and more efficient work practices, and the early detection and prevention of problems. This is irrespective of the employee’s rank or tenure within the organisation. Yet, this same research has also shown that employees, particularly those at the most junior levels, frequently withhold their voice on a wide variety of matters. One of the primary reasons for this is an overwhelming sense of futility, fuelled by an awareness of their low rank or position and a sense of ‘it’s not my place’. The requirement that the R&D worker’s effective tax rate can be no lower than 23 percent arguably adds fuel to this fire. By favouring those on higher incomes, the message seems to be that innovative ideas from lower earners are not worth the company’s time or investment. This baffling provision is not only overtly managerially biased but is patently contra to the spirit of the legislation, the primary objective of which was the promotion of new ideas and new ways of thinking. Moreover, it is hopelessly out of date. The provisions governing the R&D tax credit were first introduced into Irish tax two decades ago. Together with one of the lowest corporation tax rates on trading profits in the world, it remains central to the country’s efforts in attracting foreign direct investment. By leading the way in championing the contribution of ‘key employees’ and recently increasing the amount of the credit from 25 to 30 percent, successive Irish governments have not only shown a continued commitment to the R&D tax credit regime but also a willingness to make adjustments to its provisions, in a more equitable pursuit of its overall objective. So, it is fair to say that the Irish R&D tax credit encourages new ways of thinking… just not, as it seems, from everyone. It’s time we gave this some thought. Dr Brendan McCarthy is Assistant Professor in Tax at the University of Limerick