Balancing the recent news that the UK tipped into recession at the end of 2023 with calls from politicians in his own party to reduce taxes in what is most likely an election year, Chancellor Jeremy Hunt delivered the UK’s Spring Budget 2024 last Wednesday. According to the Chancellor, the main announcements centred around “more investment, more jobs, and lower taxes”. Read the Institute’s reaction to the Budget. The VAT registration threshold will increase to £90,000 from April 2024 and full expensing which provides 100 percent capital allowances for investments in new plant and machinery by companies will be extended to leased assets, when affordable. The higher 28 percent rate of Capital Gains Tax on residential property disposals will be reduced to 24 percent from 6 April 2024. From April 2025 the remittance basis regime for non-UK domiciled individuals and the furnished holiday lets regime will both be abolished. However, the big ticket announcement was the 2 percent reduction in the rate of National Insurance Contributions for both employees and the self-employed, which will take effect from 6 April 2024. According to the Chancellor’s speech, the Northern Ireland Executive will receive an additional £100 million under the Barnett Consequential (which compensates devolved administrations with funding where Budget measures do not apply UK-wide). And, as announced as part of the package to restore the Northern Ireland Executive, the government will establish an Enhanced Investment Zone in Northern Ireland using £150 million in funding, which will “be able to be used flexibly across spending and tax levers”. Details on the Northern Ireland Enhanced Investment Zone will be published “soon”. The government also committed £2 million “to boost global investment and trade opportunities for Northern Ireland.” Members will also be interested to hear that HMRC’s long planned consultation on “Raising standards in the tax advice market” has been launched and essentially examines options to strengthen the tax agent regulatory framework, including requiring tax advisers to register with HMRC if they wish to interact with HMRC on a client’s behalf. The Institute will be responding to this consultation and engaging with members on this important issue. The analysis in this and subsequent stories is based on the Spring Budget 2024 publications of HMRC and HM Treasury and specifically the main red book publication. The Spring Finance Bill 2024 is expected to be published later this week, in the meantime supporting documents are available, as is the Spring Budget 2024 overview of the tax legislation and rates. A further set of tax administration and maintenance announcements will also be made on “Tax Administration and Maintenance Day” on Thursday 18 April.

Revenue has updated the Tax and Duty Manual regarding games and sports bodies exemptions under  section 235 TCA 1997 to include:  the insertion, by Finance (No. 2) Act 2023, of a definition of sport which includes both competitive and recreational sport; and  a summary of the High Court case concerning the "sole purpose" test in section 235(1) TCA 1997. 

Revenue has updated the Tax and Duty Manual regarding Schedule E deductions for employed consultants and non-consultant hospital doctors (NCHDs). The updated manual provides information on claiming a flat rate expense deduction in 2024. 

Revenue has updated the Tax and Duty Manual which provides guidance on the taxation of domestic employees by domestic employers. The updated manual provides clarity on how domestic employees declare income from the domestic employer and includes updated bank account details. 

Revenue has updated the Tax and Duty Manual regarding the levy on certain financial institutions (the bank levy) provided under Section 126AA SDCA 1999. The manual has been updated to reflect that the levy provided under section 126AA has not been extended beyond 31 December 2023 as it has been replaced by a revised bank levy for the year 2024, provided for under section 126AB SDCA 1999. 

Revenue has recently published the following new VAT guidance:  VAT treatment of negotiation services in respect of financial services.   VAT treatment of construction services. The reverse charge construction Tax and Duty Manual marked as no longer relevant.  the VAT treatment of fixtures and fittings.  In addition, the VAT guidance on the Supply of Property has been updated to provide further clarity in relation to taxable supplies of property. 

Revenue has updated the Capital Acquisitions Tax Manual which provides guidance on the Statement of Affairs (Probate) Form SA.2 and the probate application process. Updated guidance regarding application for clearance under section 48(10) CATCA 2003 to distribute benefits to non-resident beneficiaries is provided for persons that are submitting their request through MyAccount.   In addition, guidance regarding the appointment of an Irish resident agent where beneficiaries are non-resident has been redrafted to align it with the applicable sections in the Capital Acquisitions Tax Consolidation Act 2003. 

Revenue has updated the Tax and Duty Manual regarding unapproved share options to reflect changes introduced in Finance (No.2) Act 2023. By virtue of section 128 TCA 1997, from 1 January 2024 the taxation of a gain realised on the exercise, assignment or release of share options no longer falls under individual self-assessment. Instead, employers are responsible for collecting income tax and USC from employees on share option gains and remitting those taxes to Revenue as part of the payroll process.   A consequential amendment was made to the Social Welfare Act with regard to the collection of PRSI by employers. 

Following representations at the recent meeting of the TALC Direct and Capital subgroup, Revenue has updated the Stamp Duty Manual for company reconstructions and amalgamations under section 80 SDCA 1999. The guidance has been updated to confirm that Revenue accepts that the transfer of a 100 percent shareholding of a company carrying on a business in its own right constitutes the transfer of an undertaking.   The manual has also been updated with the deletion of the following paragraph:  “In certain circumstances, the holding of an investment may constitute an undertaking, if there is active (as opposed to passive) ownership of the investment concerned. In this regard, Revenue will generally accept that a 100% shareholding may constitute an undertaking for the purposes of section 80.” 

Latest Exchequer figures show that tax revenues to the end of February were €12 billion, up 5.5 percent on the same period last year. Income tax receipts of €5.3 billion were recorded, a 5.7 percent annual increase, with VAT receipts up 4.8 percent compared to end-February 2023 figures. At €0.6 billion to end-February, corporation tax receipts were slightly down on last year.   An Exchequer deficit of €0.1 billion was recorded at the end of February (the deficit at the end of February 2023 was €2.5 billion, although this included the transfer of €4 billion to the National Reserve Fund). On a 12-month rolling basis, the Exchequer recorded a surplus of €1.5 billion. The underlying position for the period is a decrease of €1.5 billion with increased public expenditure offsetting growth in tax receipts.  Commenting on the latest figures, Minister for Finance, Michael McGrath said:  “Today’s figures largely represent the continuation of trends observed last month and towards the end of last year. The 7% increase in tax revenues in February compared to the same month last year is to be welcomed, and is further evidence in particular of the strength of the labour market. The 5.5% growth in tax revenues across the first two months of the year is broadly consistent with our forecast on Budget day. However, I would emphasise that it is too early at this stage in the year to draw any conclusions about the trajectory of tax receipts, particularly before the key corporation tax payment months. The coming months will provide a firmer indication of the pattern of tax receipts across the year. Overall, our economy has proven to be remarkably resilient against the backdrop of significant external uncertainty. In a more shock-prone world, it is essential that we maintain our public finances on a sustainable footing: this is the best way to ensure that we are in the strongest possible position to respond to external challenges. Work on drafting the legislation to provide for the Future Ireland Fund and the Infrastructure, Climate and Nature Fund is now at an advanced stage, and I look forward to bringing it to government shortly.” 

Last week, the TALC BEPS Sub-Committee convened its first meeting of the year. There was a significant and detailed discussion on various matters relating to the EU Minimum Taxation Directive (“Pillar Two”). The various representative bodies had submitted a significant number of queries in advance of the meeting. There was also a discussion on the guidance on the new outbound payments defensive measures.  Outbound Payments Defensive Measures – draft TDM and discussion of submissions  Practitioners noted that they were generally satisfied with the draft TDM. While a number of comments were made at the meeting, the overall guidance should be of great benefit to taxpayers and their agents as they apply the new provisions.  Pillar Two: Update on draft Revenue TDM and discussion of submissions  Practitioners submitted a significant number of queries in advance of the meeting which were discussed fully at the meeting. A number of matters remain for discussion at OECD Working Group level (which Revenue is a party to). The discussion will be laid out fully in the minutes which can be found at the usual place on Revenue’s website in due course. 

Last week, the TALC Indirect Taxes Sub-Committee convened its first meeting of the year. A delegation from Revenue’s Tax Registrations division presented to the group. We will make these slides available in due course. Below we include a summary of the key points for practitioners to consider when making a VAT registration application.  VAT Registration  Revenue advised that when making a VAT registration application, taxpayers and their agents should consider the following (and where possible include with the application):  Demonstrate that the applicant is an Accountable Person within the meaning of sections 5 & 9 VATCA 2010.  Provide a brief description of the business activity.  Provide documentary evidence of the business activity/trade in Ireland.  Provide documentary evidence of the business activity/trade from Ireland to other EU Member States (where applicable).  Clearly outline the place of supply of the relevant goods and/or services.  Provide evidence for the place of supply.  Where possible, provide incoterms of sale, details of duty paid, details of where ownership is exchanged, etc.  Revenue also explained that for ‘Intention to Trade’ applications, European Courts have clearly stated that tax authorities are entitled to “objective evidence of the intention”. Revenue guidance suggests that such evidence may include leases, contracts tools of the trade, etc. In addition business plans and other such supporting documentation would also assist in such applications.  Revenue then explained some of the reasons why applications are disallowed, including:  CRO-registered with mainly non-resident directors or a single Irish -resident director.  No proper place of establishment, e.g. use of an agent’s address, PO Box, or virtual/serviced office as business address.  No evidence of contracts or customers.  Inability to produce a valid invoice.  No employees, or only an agent/director listed as an employee.