This week we remind agents to copy client VAT authorisations across to the Agent Services Account before 16 February 2024 and earlier this month, the Labour Party published details of their business tax plan should the party succeed in winning the next General Election. HMRC has also announced that research is taking place into the recent changes to VAT penalties that took effect from 1 January 2023.  Labour’s Business Partnership for Growth  The plans published by the Labour party earlier this month in this publication confirmed the following in the event that the party were to win the upcoming General Election:  Corporation tax would not be increased from the current main rate of 25 percent;   Full expensing, Research and Development tax relief, the Patent Box regime and the annual Investment Allowance would all remain unchanged;   In its first six months, a new Labour Government would publish a roadmap for business taxation; and  Greater use of rulings and clearances to provide certainty to businesses looking to invest in the UK would be trialled.  VAT penalty reform research  HMRC has announced that it is working with an independent research agency to research the views of VAT-registered businesses on the changes in the VAT penalty regime that apply to VAT return periods commencing on or after 1 January 2023.  Selected VAT-registered businesses are being contacted up to 25 March 2024 to invite them to take part in an interview. Note that a business may still be contacted even if it has not received a VAT penalty.

Revenue has published an updated Tax and Duty Manual regarding the Universal Social Charge (USC) Regulations 2018. The manual has been updated to reflect the changes made to the operational aspects relating to the collection and reporting of USC as a result of USC Regulations 2023 (S.I. No. 700 of 2023).  The Regulations are updated:  To ensure that gains realised by the exercise/assignment/release of a right on or after 1 January 2024 and chargeable to income tax under section 128 TCA 1997 are treated as notional payments by the employer and the gain is calculated by reference to section 128(4) TCA 1997.  To recognise changes which limit the repayment and credit due for universal social charge to a 4 year period commencing from the end of the year of assessment in which the Income Tax month falls, to provide for refusal of a repayment to be notified in writing and a right of appeal by persons aggrieved by the application of the new measures and to provide that income tax assessing provisions in section 990 TCA 1997 apply to USC.  To provide that an employer may, in certain circumstances and where no payment of emolument is made during the last income tax month of the year, make a repayment of USC to an employee during the last income tax month of the year so that the employee can get the benefit of any unused rates and bands at the end of the year under the cumulative PAYE system. 

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 Bulletin is also available and the UK Government has provided a range of resources which aim to provide support as a result of the UK implementing the first stage of its new import controls which commenced from 31 January 2024 (see below for details). On the Northern Ireland front, the return of the Northern Ireland Assembly has resulted in a new committee being formed, the Windsor Framework Democratic Scrutiny Committee.   Resources to assist with new UK import controls  The UK Government has provided a range of resources which aim to provide support, help, and guidance as a result of the UK implementing the first stage of its new import controls which commenced from 31 January 2024 as part of the first phase of its Border Target Operating Model (“BTOM”). These are as follows:  Details of key contacts which can be used for urgent border issues relating to health certification and pre-notification;  Information on the UK Government’s approach to compliance and enforcement in respect of the BTOM;  An email from HMRC providing guidance on the customs requirements to move goods from Northern Ireland to Great Britain through Ireland; and  The latest Cabinet Office Borders Bulletin which contains important Border Target BTOM guidance for businesses.  Miscellaneous updated guidance etc.   Recently updated guidance, and publications relevant to EU exit are set out below:-  Software developers providing customs declaration software;  Known error workarounds for the Customs Declaration Service (CDS);  Importing SPS controlled goods that interact with ALVS;  How to apply for a repayment of import duty and VAT if you've overpaid (C285);  Designated export place (DEP) codes for Data Element 5/23 of the Customs Declaration Service;  External temporary storage facilities codes for Data Element 5/23 of the Customs Declaration Service;  Bringing commercial goods into Great Britain in your baggage;  Taking commercial goods out of Great Britain in your baggage;  Notices made under the Customs (Import Duty) (EU Exit) Regulations 2018; and  Notices made under the Customs (Export) (EU Exit) Regulations 2019. 

The Department of Finance has published the Fiscal Monitor January 2024. Exchequer figures for January 2024 show tax revenues in January were €7.8 billion, nearly 5 percent higher than last year. Contributing to this were strong VAT receipts of €3.8 billion, which include spending over the Christmas period, and were 4 percent more than January 2023. Income tax receipts remain steady, up 2.9 percent on an annual basis, with €2.9 billion collected. January is not a significant month for corporation tax, and this is reflected in the numbers, with €57 million collected, up €7 million on the same period last year. Capital gains tax receipts of €96 million were down €16 million on last year while the take from capital acquisitions tax was broadly in line with 2023 with €19 million collected.  Commenting on the figures, the Minister for Finance Michael McGrath said:  “Today’s figures show that aggregate tax receipts continued to display steady growth at the start of the year, with tax revenues increasing by almost 5% compared to January of last year. This is a solid start to the year, and is a clear and welcome demonstration of the continuing resilience of our economy, notwithstanding the undoubted headwinds in the global economy. These figures come on the heels of data published by the CSO last week, which show a welcome moderation in the rate of inflation and that unemployment remains low at just 4.5 per cent.  It is essential that we remain vigilant to the risks to our public finances: the headline tax revenue figures for 2024 will, as has been the case in recent years, be heavily reliant on volatile corporation tax revenues, which showed considerable volatility last year. The first significant month for corporation tax revenue is expected to be March. I and my officials will be closely monitoring trends in tax receipts as they develop over the coming months.  A priority for me in the months ahead is to establish the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. These funds will be essential to protecting the sustainability of the Exchequer over the years ahead and work is continuing on the legislation that will underpin them.” 

HMRC’s latest schedule of live and recorded webinars for tax agents is available for booking. Spaces are limited, so take a look now and save your place. Are you interested in how HMRC uses the Litigation Settlement Strategy to try and resolve tax disputes through civil law? HMRC is holding a webinar next week on Friday 23 February which will look at the key principles of this strategy. Bookings for this particular webinar can be made now. A webinar is also being held tomorrow, Tuesday 13 February, on the National Minimum Wage; bookings can be made here. 

Do you use HMRC online services? Don’t be caught out by the planned downtime to some services. HMRC are warning about the non-availability of specific services on the HMRC website, a range of services are impacted. Check the relevant page for information on planned downtime.  

Check out the latest items on the Agent Forum. Remember, in order to view each item, you must be signed up and logged in.  All agents, who are a member of a professional body, are invited to join HMRC’s Agent Forum. This dedicated Agent Forum is hosted in a private area within the HMRC’s Online Taxpayer Forum. You can interact with other agents and HMRC experts to discuss topical issues and processes. 

The Council of the European Union has published the draft Joint Employment Report 2024. This joint report by the European Commission and the Council reviews the employment situation across Member States. It provides an overview of key developments in employment across the Union and identifies key areas for policy action.

BEPS Action 5 is the international standard for addressing harmful tax practices. At the October meeting of the OECD’s Forum on Harmful Tax Practices, the group was informed that the regimes in Hong Kong and the UAE are not harmful and that two regimes in Albania and Armenia have been abolished. As of February 2024, 123 harmful regimes have been abolished with a further 12 in the process of elimination/amendment.

A staggered board can support continuity, strategic stability and help to defend against takeovers. Dan Byrne outlines the pros and cons of this distinctive governance structure A staggered board is a type of board structure designed to provide stability and continuity at corporate governance level. It divides its directors into “classes” – each serving a different time length across staggered terms. Usually, more senior directors will serve longer terms. In modern governance, the structure of a company’s board of directors can help to steer an organisation’s strategic direction.  Different companies will structure their boards differently to achieve the results they want. Adopting a staggered board structure is one option. Staggered boards are designed to ensure that only some directors are up for re-election at any given time. This has the advantage of ensuring there is always continuity across different election cycles as only some faces will be new. It also reduces the likelihood of hostile takeovers, which usually need a rapid and large-scale leadership change to succeed.  The processes of a staggered board The operation of a staggered board involves dividing directors into classes; it could be as low as two or as much as five. Each class will be up for election/re-election at different times. Take the example of  a board with three classes: each class serves a three-year term, but only one class is up for election each year. In other words, at least two-thirds of the board will stay the same after any election.  In cases where the more senior directors serve longer terms, class one may be up for election every year, class two every three years, and class three (the most senior) every five years.  These rules will depend on the company. The advantages of a staggered board A staggered board can help to ensure continuity after each election and delay or outright eliminate the risk of hostile takeovers.  It can also reduces the logistics challenge of training and onboarding several new directors simultaneously. There will always be a healthy cohort of veterans to oversee any work needed in this area, feeding a culture of long-term planning. Disadvantages Much of the criticism directed at the staggered board approach comes from shareholders who effectively only have a say on the future of a third (or less) of directors at any given time.  This means shareholder criticism is less likely to be listened to and the board may be more concerned with itself or its relationship with management. Creating a staggered board If an organisation is thinking about instituting a staggered board, it must analyse the company’s governance thoroughly before doing so.  How much does your board depend on fresh, new experience? If it’s a lot, a staggered board might not be for you.  How concerned are you about a hostile takeover or activism? If the answer is ‘a lot,’ then a staggered board may be for you. You should also consider how much your company spends on onboarding: how easy it is to find relevant talent at the board level, and how confident you are in your current board? By asking the right questions, you may find that introducing a staggered board structure is beneficial for your organisation. Dan Byrne is a writer with the Corporate Governance Institute

Adverse weather can bring disruption to businesses and their staff. Gemma O’Connor explains how an adverse weather policy can help employers to minimise its impact Adverse weather can bring power outages, high winds, and flooding and can cause major destruction of towns and villages across the country. Furthermore, employers dealing with storm and weather warnings may also face staff absenteeism. So, what can they do if employees are unable to be at work for the day because of the effects of poor weather conditions? Experts recommend putting an adverse weather policy in place. Pay obligations Payment obligation is a common topic employers ask about when bad weather strikes. A strict interpretation of the law allows employers to determine whether payment is owed to employees for workdays they miss due to extreme weather. If a company’s premises are open but employees are absent, there is no legal obligation to pay them for what is technically an unauthorised absence. Choosing to withhold pay should be considered with care, however. Doing so may affect staff morale and your reputation as an employer. Employees may also rely on prior experiences to argue that payment is due. If an has organisation paid absent employees during a previous weather warning, they will expect the same going forward. During an extreme weather event, it is possible that companies may need to close their premises. When employees are sent home or told not to come to work due to adverse weather, it is recommended that they be paid as normal. Employee options If employees can’t attend work due to the extreme weather, there are a few options available: Ask them to work from home and continue to pay them as normal. Allow them to make up any missed time later. With the agreement of the employees, the organisation could deduct any absences from their paid annual leave entitlement. Many people are already currently working from home. Employers with remote working arrangements should include a clause on working from home in their adverse weather policy. This clause could specify, for example, that staff are permitted to work from home during periods of bad weather and will be paid as normal even if the employer’s premises are closed. Change of roster An employer is entitled to change a roster at short notice in exceptional events, including extreme weather. Keep in mind that outside of these exceptional circumstances, however, employees are entitled to a notice of at least 24 hours for any roster change. Employee safety As an employer, the safety of employees should always be paramount. An employer’s statutory duty is to provide a safe place of work. This also includes ensuring that employees are not required to undertake a hazardous journey to get to work. Employers should know that, if public transport isn’t operating, they face a heightened risk of claims and reports to the Health & Safety Authority (HSA) by employees who suffer accidents on their way to work. Time for a policy Adverse weather can be a reminder and an opportunity to develop your own internal policy regarding how weather warnings will be handled. If this policy is reasonable and clearly communicated to employees, organisations can minimise their exposure to the winters of employee discontent. Gemma O'Connor is Head of Service at Peninsula Ireland

As 2024 unfolds amidst continued global challenges, Loretta O’Sullivan outlines why the island of Ireland will still likely see some economic growth We are just a few weeks into 2024 and it has already acquired many labels. It's the year of rate cuts, war and global elections. Despite this, the all-island economy is expected to be a year of growth. EY Ireland's Winter Economic Eye report forecasts reasonably solid growth in the Republic of Ireland (ROI) and a modest expansion in Northern Ireland (NI). Outlined below are the four forces we see shaping both economies in 2024. 1. A subdued external environment The world economy is recovering from a multitude of shocks – the COVID-19 pandemic, the war in Ukraine and decades-high inflation. The likelihood of a soft landing has increased, but geopolitical tensions, including the conflict in the Middle East and the Red Sea attacks, are among many headwinds. Prospects for key trading partners in 2024 are mixed, with growth set to slow in the US, but due to pick up in the Eurozone and the UK. 2. A turn in monetary policy After introducing a series of interest rate hikes in 2022 and 2023, the European Central Bank and the Bank of England are both on hold. Higher borrowing costs are expected to weigh on business spending decisions in 2024. Proactive digitalisation and decarbonisation agendas should provide support, however, and we can look forward to rate cuts later this year. The Irish government is also undertaking a large-scale capital spending programme to enhance public infrastructure and underpin digital and green transitions. In NI, the restoration of power-sharing and a Stormont Executive should encourage future investment. 3. Inflation is on the retreat Inflation has eased significantly and the passing on of lower wholesale energy prices to household bills and business costs, coupled with the transmission of monetary policy to economic activity, points to further easing ahead. In ROI, an inflation rate of 3.0 percent is forecast for 2024, falling to 2.0 percent in 2025. This downward trend will alleviate pressure on household purchasing power and improve consumer confidence, which bodes well for consumer expenditure. 4. Warm labour markets While the ROI and NI labour markets put in a strong performance in 2023, signs of softening are beginning to emerge and some cooling is likely this year. Nonetheless, unemployment rates are projected to remain low by historical standards and many businesses will continue to experience staff recruitment and retention challenges. Given the tight labour market and some compensation for past inflation, wage increases are also anticipated. This year is shaping up to be one of rate cuts, elevated geopolitical tensions and monumental elections. Yet, amidst these events, households and businesses can likely expect to see some growth across the two economies on the island of Ireland. Loretta O’Sullivan is Chief Economist and Partner at EY Ireland