Chartered Accountant David Malone, Chief Executive of the Irish League of Credit Unions, believes that credit unions are uniquely positioned to fill the gaps left by the departure of major banks and cater to the needs of small businesses and individuals, offering a personalised and community-focused approach Having recently achieved the top ranking in the Ireland RepTrak 2023 study of corporate reputation, credit unions are now poised to provide a real alternative to traditional retail banks for the full range of financial services products.  The credit union sector’s strong local presence with over 500 locations across the island of Ireland demonstrates a clear community focus now combined with soon-to-be-enacted new legislation, which will see credit unions unlock their full potential to become the country’s primary financial services institution of choice. David Malone, Chief Executive of the Irish League of Credit Unions (ILCU), an advocacy body for credit unions in Ireland, believes the unique ethos and DNA of credit unions place them in a strong position to fill the void left by the departure of KBC and Ulster Bank, as well as other service gaps. “There have been significant changes in the financial services sector since the global financial crisis,” he says. “Twelve retail banks were operating in Ireland back then. It’s down to three now. That has led to a lack of customer choice, particularly in the mortgage and SME lending markets, where competition is highly concentrated between the three pillar banks.  “Along with that, we have seen bank branch closures, decimating Irish towns and even where branches remain, decision-making has migrated from the local branch to the centre.” That centralisation has created problems for customers, says Malone.  “For example, small businesses have a real challenge trying to get loans from banks,” he notes. “There is limited interaction with local bank branch managers. Many such loans are turned down. A small business owner can visit their local credit union and sit with staff to explain their business and its needs. Our staff have that vital local knowledge and will understand the specific needs of the business that, in many cases, can help in providing the appropriate loan finance.”  Building relationships Malone joined the ILCU as Head of Finance and Deputy CEO seven years ago, after spending over ten years in audit and assurance with PwC.  “I trained as a Chartered Accountant with PwC after doing my degree in Accounting and Finance and Masters in Accounting at DCU,” he says. “I am now a Fellow of the Institute. It’s a great qualification, providing a real platform for your career. “At PwC, I worked with a wide range of clients, from large Irish plcs to SMEs to Irish subsidiaries of multinationals. Going into different businesses and seeing how they are run was fascinating.” Auditing is much more than a numbers game, he explains. “You have to build relationships with audit clients. You are there to add value and recommend improvements to the client’s financial processes.” He was drawn to the business world as a student during his summer job. “I worked for five summers in my aunt’s business, which was a busy tour operator during the 90s. I learned all about customer service and how the true value of timely and reliable financial information is key to decision-making and strategic direction.” Malone was appointed ILCU CEO in July 2022.  “In conjunction with our board, I had been leading the transformation programme for the organisation prior to that,” he says. “The programme aims to deliver on our new purpose to lead, support and sustain the development of credit unions on the island of Ireland. “Our areas of focus include facilitating collaboration of credit unions, repositioning the credit union brand, and effective advocacy to government and regulators. We also provide a significant suite of professional services to member credit unions in areas such as risk and compliance, legal, human resources and training.” The evolution of credit unions “Our transformation has brought significant additional expertise into the organisation with a number of new skill sets adding huge value as we deliver our purpose,” Malone notes. Malone is excited by the evolution of credit unions. “Credit unions have a 42 percent share of the personal lending market. They have issued close to half a million loans in the last year. In addition, credit unions in over 200 locations across the country are now providing current accounts that are potentially accessible by over two million credit union members. These can be accessed through an app and support Apple Pay and Google Pay. Credit unions now account for over 10 percent of new current accounts opened.” The new legislation, the Credit Union Amendment Bill, is a game changer, Malone says. It allows for the establishment of Credit Union Service Organisations (CUSOs) by groups of credit unions. These CUSOs enable credit unions to pool resources to invest in back-office infrastructure that will enable more credit unions to provide a wider range of financial services, particularly SME lending and mortgages. The new legislation also allow credit unions to provide services to members of other credit unions where the credit unions agree and allows credit unions to pool loans and risk between each other. “Credit unions have significant funds to lend,” says Malone. “They are not relying on the wholesale money markets for their funding. Instead, members continue showing confidence and trust in credit unions by depositing their savings.  “A number of credit unions now offer some of the lowest interest rates in the mortgage market. Credit union mortgage lending has increased by 25 percent in the last year. There is circa €11 billion of funds in credit unions that is available to be lent and can be used to fund small businesses, help people buy their homes, and support community organisations. The new legislation will help credit unions significantly increase their footprint in these areas. “Digitalisation presents great opportunities,” he explains. “Credit unions embrace technology by providing online payments, digital membership and loan applications. However, there is an important difference: credit unions are not digital only; they are digital with the essential human touch. Credit unions are omnichannel, so you can go into a branch or call on the phone and get an answer in real-time.” There is also the issue of financial exclusion. “People still need access to cash, and with banks closing branches and removing ATMs around the country, credit unions have an important role to play in providing that access.” Trusted organisations Malone believes that personal service is the chief reason for credit unions’ top ranking in the Ireland RepTrak 2023 study of corporate reputation.  “We got under the bonnet of that ranking, and we found the key contributors are our human, friendly and authentic service. The study emphasises attributes such as trust and respect, which are core to the ethos of credit unions which are locally owned and managed. We are proud to be at the heart of communities nationwide working towards a more inclusive society, where no one is left behind.” That contrasts sharply with some of the other lenders in the market. Malone is concerned about the impact of ‘buy now pay later’ (BNPL) and personal contract purchase (PCP) products on borrowers. “People don’t realise they are accumulating significant amounts of small debts with these products,” he says. “When people get a loan from the credit union, it’s very transparent and open. We want a lifetime relationship with members. It’s not short-term. Credit unions have helped members consolidate debts to deal with issues created by those products.” He explains that credit union loans are very different to other loans.  “For example, credit union loans provide flexibility, including no early repayment penalties. There is also loan protection insurance that effectively repays the loan in the event of a member’s death. This is a unique credit union benefit that you won’t get with the bank.  “I recently learned about a young person in their twenties whose parents had died. The parents had bank and credit union loans. The credit union loans were paid off automatically as they were covered by the insurance. The bank offered a repayment plan. Our approach is so different to other credit providers. We genuinely care about our members.” That membership is ultimately the critical point of difference, he believes.  “Our members are much more than customers; they are part owners of their credit union. They have a say in how it’s run. Members can volunteer to be on the board and committees. The boards are made up of community volunteers who have the locality’s best interests at heart. They selflessly give their time to credit unions. I would encourage any Chartered Accountant to consider becoming a credit union director, as it is enormously rewarding. “We see credit unions becoming primary financial institutions of choice migrating from the periphery to the front and centre of the financial services landscape,” he continues. “We are building on over sixty years of service to communities around Ireland. We are here to stay, not retrenching or closing – quite the opposite. We are growing and moving forward. We are building on a great reputation and great customer experience. We are offering a much wider range of products and services across the country, and that’s great news for members and the people of Ireland.”

The Pre-Budget Submission 2024 tackles challenges in Ireland, from the ‘green’ transition to inflation and housing supply, offering recommendations to benefit businesses, says Gearóid O’Sullivan Each year, Pre-Budget Submission is prepared under the auspices of the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I).  It is a particularly influential document as it represents not only the views of Chartered Accountants but also our peers in other professional accountancy organisations. The Pre-Budget Submission is overseen by the CCAB-I’s Tax Committee South, of which the membership is predominantly Chartered Accountants. Pre-Budget Submission 2024 This year’s Pre-Budget Submission addresses several key issues impacting business in Ireland, from the so-called ‘green’ transition to the impact of inflationary pressures and, of course, ongoing supply issues on all sides of the residential property market.  The aim of any tax measure is ultimately to support the economy and wider society. Therefore, to the extent a measure represents an initial cost to the Exchequer, the hope and intention is that there is a corresponding benefit that exceeds the cost.  In some instances, the benefit is purely financial, e.g. our recommendation to permanently legislate for the Special Assignee Relief Program (SARP) and, in others, the benefit is a desired change in behaviour, e.g. our recommendation to introduce a ‘Help-to-Insulate’ scheme. Measures to alleviate capacity issues in the residential property market The residential property market faces issues on both the rental and retail sides.  On the rental side, we continue to advocate for measures to make renting more attractive, particularly for small-scale and accidental landlords.  Despite tax legislation recognising taxable profits in many cases, often small-scale and accidental landlords find themselves in a cash-flow negative position when the tax bill and any loans on the property are taken into account.  While it is reasonable to mention the economic benefit achieved through property ownership over the longer term, the cash-flow impact is often driving these small-scale and accidental landlords out of the rental market.  If this cohort of landlords were, in turn, selling their investment properties, there could be a sound basis from a policy perspective in maintaining the rules in their current iteration.  However, landlords will often have to first seek to evict and then sell. As such, vacancy represents a key policy issue for government when designing appropriate taxation rules for landlords. With the above in mind, CCAB-I has made several recommendations that we suggest will make letting sufficiently attractive for smaller-scale and accidental landlords: Local property tax should be available as a deduction against rental income. Expenses deductible under section 97 TCA 1997 should be aligned with Case I/II principles. Expenses that are revenue in nature and incurred wholly and exclusively for the purpose of the rental business should be deductible, and rental losses should be available for offset against other income. Capital allowance rates for fixtures and fittings should be increased from 12.5 percent to 25 percent per annum to facilitate landlords investing in the maintenance of properties, providing the works do not result in the termination of an existing tenancy. Landlords who retrofit a property to enhance the property’s energy rating should be able to claim a 100 percent capital allowance where the renovations do not result in the termination of an existing tenancy. The Government should introduce measures to bring parity to the taxation of corporate and individual professional landlords by introducing a flat rate of 25 percent on Case V income for small landlords who opted to become ‘professional landlords’ by waiving their rights under Section 34 of the Residential Tenancy Act (2014), giving additional security to their tenants. We have also suggested a reasonable capital gains tax (CGT) relief to incentivise property sales with tenants in-situ: Professional landlords should be given access to succession reliefs (e.g. CGT retirement relief) to improve the long-term investment proposition of the residential rental business. To encourage landlords to remain in the private rental market, CGT relief of four percent per annum should accrue for the length of time the asset remains a rental property. (This was specifically examined in a 2017 Report of the Working Group on the Tax and Fiscal Treatment of Rental Accommodation Providers.) In addition to the above, we are also recommending that Government increases ‘Rent-a-Room’ relief to match standardised average rents and to remove the ‘cliff-edge’ over which relief is completely removed. Measures to combat inflationary pressures The level of inflation in the Irish economy is putting significant pressure on households.  The European Central Bank began increasing interest rates in a bid to dampen inflation. There is a balance to be struck between tax measures to combat inflation and the policy aim of reducing spending capacity. With that said, there is scope for a reasonable change in the personal tax regime, which should not be incongruent with the policy objectives of the European Central Bank.  Earlier this year, CCAB-I responded to the Department of Finance’s consultation on Ireland’s personal tax system. The Pre-Budget Submission includes many of the points raised in that earlier submission, including a recommendation to move to indexation of the income tax bands and credits.  In Ireland, a taxpayer begins to pay tax at the higher rate from €40,000, although the average industrial wage is €46,800. Therefore, the application of an indexed approach to increasing bands and credits should ensure that tax bands and credits remain valuable year to year. Otherwise, while the Government may not raise bands and credits in a particular year, the real value of after-tax wage is likely to have decreased due to the impact of inflation. We also recommend changes to other areas of the personal tax system, including several changes to the CGT and capital acquisition tax (CAT) regimes. These include: The CGT annual exempt amount available under section 601 TCA 1997 should be increased to €5,000.  The CGT indexation tables in section 556 TCA 1997 should be extended beyond 2003 to the present day. The rates of CGT and CAT should be reduced to 20 percent. The lifetime limit for claiming revised entrepreneur relief under section 597AA TCA 1997 should be increased to €5 million. The category A threshold for CAT should be increased to €350,000 in line with a rate reduction. The CAT small gift exemption should be increased to €5,000. Employers’ PRSI should not be increased at this time. As in 2022, we are also recommending that further consideration is given to an intermediate rate of income tax. This is a longer-term ambition.  However, the current system is complicated by the fact that we have three separate taxes on personal income (income tax, USC and PRSI). As such, all these taxes could be redesigned into a single tax, and in this scenario, an intermediate rate of tax becomes a key tool. Further recommendations Pre-Budget Submission includes further recommendations on measures to assist climate change, support foreign direct investment, SMEs and entrepreneurs, and enhance the tax system generally.  The document is a key feature of the tax department’s annual output. It reflects the views of professional accountants across the country and is presented directly to the Department of Finance each year.  While the Government faces several challenges in this year’s Budget as it balances a substantial surplus with increasing societal needs, it is hoped that our recommendations will be considered in terms of the benefit we believe they will bring to businesses in Ireland. Gearóid O’Sullivan is a Tax Manager at Chartered Accountants Ireland 

Imelda Hurley, CEO at Coillte, the semi-state forestry company, talks about her passion for sustainability and the importance of Ireland’s climate action and biodiversity agenda for the Irish economy and society  Imelda Hurley knew from an early age that she was destined for a career in business. Hurley tells Accountancy Ireland about her career path and how Coillte’s strategic vision will further support its contribution to Ireland’s climate targets, optimising the multiple benefits from forestry.  Tell us about yourself and the start of your career. I grew up on a family dairy farm just outside Clonakilty in West Cork. My first job was with Clonakilty Black Pudding, a little-known brand back then, but now a very successful and entrepreneurial operation. I completed a Business Studies degree at the University of Limerick. Following that I joined Arthur Andersen and became a Chartered Accountant. During that time, I had the opportunity to engage with multinationals and indigenous companies. That gave me a great lens into how organisations successfully operate, develop and implement strategy. How has your career evolved since you qualified as a Chartered Accountant? A: I always had an ambition to become a CFO and eventually a CEO. My career experience has been from farm to fork to forestry, working in the food, agribusiness and agriservices businesses across a variety of ownership structures.  During my role as CFO and Head of Corporate Sustainability at PCH International in China, I had the opportunity to learn more about sustainable product development and supply chain management.  That was over 10 years ago, when few organisations were talking about sustainability. I’m left reflecting on how times have changed over those 10 years and how there is an increased focus on sustainability today.  You were appointed as CEO of Coillte in November 2019. Tell us about your role and what attracted you to the position. I really enjoy the outdoors and nature. Coillte gave me a great opportunity to work in a business with a commercial focus, but also a business delivering social good. I joined Coillte in November 2019 and I spent much of the first two years navigating the pandemic. I wanted to ensure that Coillte emerged from the pandemic as a sustainable, viable and vibrant organisation. I am pleased to say that when we reported our 2021 results, we delivered record revenues, record profitability and a record dividend to the State.  Coillte manages 440,000 hectares of primarily forested land, circa seven percent of Ireland’s land, with about 6,000 individual properties. We have just over 800 employees and 1,200 contractors working across three divisions: Coillte Forest, Land Solutions and Medite Smartply.  Coillte is the nation’s largest forester and producer of certified wood, a natural, renewable and sustainable resource and the largest provider of outdoor recreation space in Ireland. It enables wind-energy on the estate, processes forestry by-products and undertakes nature rehabilitation projects of scale. When you were presented with your Businessperson of the Year Award in December, you were described as an “advocate for sustainable business practices and a leader in sustainability discussions”. Why is sustainability important to you? We are on a journey that requires us to leave the planet in a better place than we found it. There is a financial balance sheet but also an environmental and social balance sheet. Good business brings these together. From my perspective, I accepted the award on behalf of Team Coillte, all of whom work every day to balance and deliver the multiple benefits of forestry.  Tell us about the strategic vision you launched last year and Coillte’s plans for the next 12 months and beyond. In April 2022, we launched a new forest strategic vision focusing on four pillars – Forests for Climate, Wood, Nature and People. This vision sees us, as an example, enabling the creation of 100,000 hectares of new forests by 2050. Those forests will sink approximately 18 million tonnes of CO2.  We are also working on how we manage our existing forests to capture an additional 10 million tonnes of CO2 by 2050.  We have an ambition to redesign approximately 30,000 hectares of peatland forests through a programme of rewetting or rewilding for climate and ecological benefits and also aiming to enable the generation of one gigawatt of renewable wind energy by 2030.  From a people and recreational perspective, we are targeting to enable €100 million of investment to create world-class visitor destinations by 2030.  In July 2022, we launched Beyond The Trees, Avondale at Avondale Forest Park in County Wicklow and in June of this year, we opened the newly refurbished Avondale House, further adding to Avondale Forest Park experience, which has had over 300,000 visitors since June 2022. Our ongoing focus is to continue to ensure a strong, viable, vibrant Coillte that focuses on optimising our contribution to Ireland’s Climate Action plan, while continuing to deliver sustainably certified timber to support the decarbonisation of the built environment.  Our strategic vision also involves increasing from 20 percent of the estate being primarily managed for nature and biodiversity to 30 percent by 2025 and to 50 percent in the long-term. Another major focus for us is workforce capacity, planning for our organisation and the industry more broadly. We have 440,000 hectares under management and between now and 2050 the State has an ambition to increase forest cover from 11.6 percent to 18 percent. As such there will be a requirement to attract more people into our sector going forward. Are you glad you made the decision to qualify as a Chartered Accountant and what career advice would you offer your younger self? A: In the early years of my career, I looked up to others. Ultimately, I realised what was much more important was to follow my own path and enjoy the journey. You have to do what makes you happy and if you work hard and are determined, good things will come.  

William is a Chartered Accountant who had his own business, but due to circumstances beyond his control he lost his business, his home and suffered greatly as a result. Thanks to your donations, CA Support has helped William throughout these difficult times, and he has given his permission for us to share his story with you. As a Chartered Accountant, I worked with a professional firm until 1985 when the entire department in which I worked was made redundant. With a partner I started my own  business importing clothing and accessories from Hong Kong. It was very successful; the items were sold in exclusive outlets throughout the country. All went well until a supermarket chain sold identical items at a much lower price. My business partner left me with extensive business debts, so I had no choice but to sell my home. I was not aware CA Support until I rang to explain why I could not pay my annual subscription fee. It was a huge relief to discover that there was support available to me. I worked hard to get my qualification and wanted to keep my membership up to date. On the initial call I explained my circumstances and it was a relief to have a friendly non-judgmental voice on the phone. There was a lot of unemployment at the time due to a severe economic downturn. To help those affected, the Benevolent Society (CA Support) hired the ballroom in the Intercontinental Hotel in Ballsbridge and asked me to address the large audience of accountants. The Institute then set up a small department to assist and offer advice to those who were unemployed. I was very glad I was able to help. I don’t know how I would have managed in the years that followed without their support. I am a very independent person, so the lack of control over my life was extremely difficult to accept. I was unable to find employment, my age went against me and I was also told that I was over-qualified. I turned to writing and had some short stories and magazines published. But the money didn’t cover a fraction of my outgoings. Unfortunately, in the winter of 2013 I found myself homeless. I approached the DLR Housing Department and was initially promised accommodation but, the promise was not fulfilled. It was only with the help of a compassionate community officer and my rector that my situation was resolved. Thankfully, I now have a home again.  I don’t know if I will ever forget that fearful experience, of not knowing what was going to happen to me. I still struggle to find words to express how awful it was. With assistance from CA Support I was able to go in a new direction. I continued with my writing, gave a series of public talks on the effect of suicide on those left behind and I gave a talk on the emotional impact of homelessness on mental health at the request of The Irish Council of Churches. For this, I could draw on my own personal experience of having been homeless. I have no doubt that there are others who have stories to tell on how CA Support has helped their lives and continue to do so. Speaking for myself, I hope that those who can will continue to support this organisation. William Blackall Hear from others, like William, who have share their stories and received assistance from CA Support during times of crisis.  Video: Jane and Michael share their stories Video: Karen Rafferty speaks about the assistance and support she received when her daughter Niamh was diagnosed with a brain tumour.  Beneficiary Stories CA Support are supporting our members and their families always. If you would like to help or if you need help please contact us by email or on 01 637 7342 or 086 024 3294.

The European Commission (EC) has adopted the European Sustainability Reporting Standards (ESRS) on 31 July 2023. This marks a significant milestone in the development of European Sustainability Reporting Standards and is the culmination of great effort from the various parties tasked with its development- including the EFRAG Sustainability Reporting Board, the EFRAG Sustainability Technical Expert Group, its initial Project Task Force and respondents to the recent consultations on the ESRS. The EC has also published a press announcement and Q&As and have indicated that additional implementation guidance will be prepared and made available over the coming months. The standard will enter into force following its publication in the Official Journal of the European Union and the first wave of entities will report under the ESRS for periods commencing on or after 1 January 2024. The reporting requirements will then be phased-in over the subsequent years to various company types and sizes. If you wish to find out more about the ESRS, please see our recent free webinar "Further your knowledge about the European Sustainability Reporting Standards"

The OECD has published comments received on two toolkits to support developing countries in addressing base erosion and profit shifting (BEPS) when pricing minerals.  

The OECD, the EU, and members of the OECD Global Forum have engaged with the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (UEMOA) to develop three community legal tax instruments to strengthen the fight against base erosion and profit shifting (BEPS) and improve tax transparency in West Africa. The instruments provide ECOWAS Member States a harmonised tax framework for transfer pricing and exchange of information.

OECD research observes that tax-to-GDP ratios remained below pre-pandemic levels in most Asia-Pacific countries in 2021. The research suggests that regions where the ratio rose saw a corresponding rise in international trade, higher commodity prices and a relaxation in travel restrictions.

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. The latest Trader Support Service bulletin is also available and we issue a final reminder that the deadline for applying for the new UK Internal Market Scheme to ensure applications are processed in time to move goods in the green lane under the Windsor Framework (“WF”) is today, Monday, 31 July. Last week the House of Lords Protocol on Ireland/Northern Ireland Sub-Committee published its report into the WF. The Institute provided evidence to the Committee during the course of its inquiry; our recommendation on the need to conduct an education campaign on the WF, especially for suppliers in Great Britain, is specifically mentioned on page 26 of the report and is one of the Committee’s key recommendations on page 28 of the report in Chapter 3 which deals with the movement of goods. Miscellaneous updated guidance etc. Designated export place (DEP) codes for Data Element 5/23 of the Customs Declaration Service; Transit newsletters — HMRC updates; External temporary storage facilities codes for Data Element 5/23 of the Customs Declaration Service; Check simplified procedure value rates for fresh fruit and vegetables; Border Force customs offices list; Apply for an Advance Origin Ruling; Classifying edible fruit, vegetables and nuts for import and export; Data Element 2/3: Document and Other Reference Codes: Licence Types – Imports and Exports of the Customs Declaration Service (CDS); Claim a waiver for duty on goods that you bring to Northern Ireland from Great Britain or countries outside the UK and EU; Report payments and view your allowance for non-customs state aid and Customs Duty waiver claims; Check if you can claim a waiver for goods brought into Northern Ireland; and Reference Document for The Customs (Northern Ireland) (EU Exit) Regulations 2020

This week we bring you news of a change in the UK’s Country by Country (“CbC”) reporting rules, and HMRC has provided a note on the VAT place of supply rules in the context of education and training. A warning has been issued about a new type of phishing scam, and HMRC has changed its approach to appointing reporting companies under the Corporate Interest Restriction legislation. Agent Update: issue 110 is also available. And finally, the form to acquire overlap relief information from HMRC in the context of basis period reform, which we told you about a few weeks ago, is expected to be launched by HMRC on 29 August. CbC reporting notification requirement removed As a result of The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) (Amendment) Regulations 2023, companies within the UK are no longer required to make an annual CbC reporting notification stating which legal entity within the Multinational Enterprise (“MNE”) is the Ultimate Parent Entity, and will be filing the CbC report. This applies to both UK-headed MNEs with a consolidate group revenue of €750 million or more, and UK resident entities of non-UK MNEs who are required to complete the notification in the UK on behalf of their parent entity. This change in legislation took effect from 26 July 2023. HMRC’s Joint VAT Consultative Committee (“JVCC”) paper on the VAT place of supply rules and education and training HMRC’s JVCC, of which Chartered Accountants Ireland is a member, has responded to a query on the place of supply rules in the context of education and training services. The paper sets out the treatment of the various types of education services and confirms how HMRC sees them being treated for the purposes of the place of supply rules. Read the full email from HMRC. HMRC warning about new phishing scam HMRC has recently detected a new criminal phishing scam offering people tax rebates by email, and have posted a warning on its various digital media channels:- Instagram; X (formerly Twitter); LinkedIn; and Facebook. Corporate interest restriction — HMRC no longer appointing reporting company Companies impacted by the corporate interest restriction (“CIR”) legislation are able to appoint a ‘reporting company’. This company is then required to submit the CIR return which must be submitted within 12 months of the end of the reporting period. In a recent update to the CIR guidance, if a company does not nominate a reporting company by the required deadline (usually 12 months from the end of the accounting period), HMRC is no longer appointing the reporting company. The reporting company must be:- liable to UK Corporation Tax; non-dormant; and authorised by at least 50 percent of the group’s non-dormant companies (which are liable for UK Corporation Tax) to be appointed as the reporting company.

Legislation day earlier this month featured changes to the UK’s Pillar Two draft legislation and specifically how the Under Taxed Profits Rule (“UTPR”) will be implemented in the UK. At Autumn Statement 2022, the Government announced that it intended to introduce the multinational top-up tax and the domestic top-up tax for accounting periods beginning on or after 31 December 2023, and that it would also implement the UTPR with effect no earlier than accounting periods beginning on or after 31 December 2024. Draft UTPR legislative provisions have now been published to reflect this and these will not take effect until they have been included in the next Finance Bill and Regulations have been laid by HM Treasury to set a commencement date, which will not be before accounting periods beginning on or after 31 December 2024.  As part of the draft legislation published earlier this month, the Government has also set out amendments to the multinational and domestic top up taxes, which implement the Income Inclusion Rule (“IIR”) and Qualified Domestic Minimum Top-up Tax (“QDMTT”) in the OECD’s Pillar 2 rules. These amendments aim to respond to stakeholder observations and ensure consistency with the OECD model rules and administrative guidance. This draft legislation is available here. HMRC is seeking representations on all the draft legislation by 12 September 2023.  Earlier this month, the OECD published new administrative guidance on the Pillar 2 IIR and QDMTT and an update to the Globe Information Return. The administrative guidance includes:   A safe harbour for domestic minimum taxes which aims to protect the UK tax base and reduce administrative burdens for business by removing the need to make multiple calculations;   Agreement on the information to be reported to tax authorities, including provisions to protect taxpayer confidentiality and options for reducing burdens;   Further provisions for the treatment of tax credits, which include technical amendments to ensure UK businesses can better access the rules, and clarification of the treatment for marketable tax credits; A time limited safe harbour from the UTPR (the backstop rule), where a country’s nominal tax rate is above 20 percent; and  Detailed guidance on currency conversion rules and substance-based income exclusion (“SBIE”).  The Government is committed to ensuring the UK rules are consistent with the globally agreed approach hence future amendments to the legislation are likely to reflect this new guidance.    

As part of the recent publication of HMRC’s Annual Report and Accounts for 2022-23 (see earlier feature on this), HMRC also published new estimates for the level of non-compliance in research and development (“R&D”) tax reliefs. The Government also published HMRC’s Approach to R&D Tax Reliefs which sets out HMRC’s compliance approach in this area in more detail. The next R&D workshop with HMRC is at the beginning of September and will include a prolonged session on this. Hence HMRC is  keen to have your questions and thoughts as soon as possible in advance of that workshop so that some more detailed, thematic answers can be provided at the session. Chartered Accountants Ireland is represented on HMRC’s R&D forum and would welcome your feedback on this new publication as we are concerned that this is deterring genuine R&D tax relief claimants. Read the full email from HMRC below. “We have recently completed new analysis to better understand the size and scope of non-compliance in the R&D reliefs, based on the most detailed work that has ever been carried out on them (a post-payment, random sampling exercise conducted by our R&D specialists). The updated estimate of the overall level of error and fraud for both reliefs for 2020-21 is 16.7% (£1.13bn), which is significantly higher than the previously published estimate of 3.6% for 2020-21. The majority of this non-compliance is in the SME scheme, where error and fraud for 2020-21 is estimated as 24.4%. This methodology for estimating the level of non-compliance in these reliefs represents international best practice, but introduces a two-year time lag on the estimates due to relying on post-payment enquiries. As a consequence, many of the changes that the government has introduced in the last three years to reform the schemes are not reflected in the latest estimate.  Over the last three years, HMRC has more than doubled the number of people working on R&D compliance. This includes an extra 300 people tackling non-compliance. In addition to this increased resource, the government has announced new policy measures to counter non-compliance. Some are already in place with others coming into effect from August.  The Government is absolutely clear that this level of non-compliance within the R&D tax reliefs is unacceptable, and today HMRC has published HMRC’s Approach to R&D Tax Reliefs. This document sets out what the latest HMRC analysis tells us about the scale and shape of non-compliance in R&D tax relief schemes, details the action taken by the government to date, and sets out the department’s compliance approach to R&D.  As a key stakeholder in R&D tax reliefs, we want to work with you to deliver the significant improvements in the regime that are needed. We know this will take a collective effort.”