Budget 2025 needs to tackle rising business costs, tax complexity and housing shortages to enhance Ireland’s global competitiveness and support domestic and foreign enterprises, writes Tom Woods On 1 October, Budget 2025 should prioritise addressing key competitive challenges in the Irish economy, such as attracting, supporting and scaling Irish and foreign businesses, as well as tackling rising employment costs, international talent competition, and affordable housing availability. Tax simplification Ireland is facing a rapidly changing global tax environment, and the outcome of the US elections could significantly impact this environment and Ireland's attractiveness as an investment location. US tax measures designed to lower the US corporate tax rate to one more comparable with OECD peers and to protect the US tax base are scheduled to expire at the end of 2025. Despite this uncertainty, Ireland has a unique chance to present itself as a stable and secure destination for FDI. It is vital the opportunity is taken in Budget 2025 to introduce measures that will strengthen Ireland's competitive edge and attractiveness for inward investment. Ireland needs a broad and flexible participation regime that will support it as an international holding company location. We have called for introducing a participation exemption for foreign dividends to complement the participation exemption in place for capital gains. A branch exemption should also be introduced. Simplification of the tax code needs to be a priority in Budget 2025 to support enterprise and entrepreneurship. According to the KPMG Enterprise Barometer 2024, six in ten domestic businesses and entrepreneurs are concerned about the administrative complexity associated with the Irish tax system, particularly for smaller enterprises and entrepreneurs. Our pre-budget submission calls for the establishment of an Office for Tax Simplification to review the tax code, remove duplication, and simplify the system. By doing so, we can drive reform of overly complex tax rules that are adding to the cost of doing business and compromising competitiveness. This is particularly important now that the 12.5 percent corporation tax rate is less of a competitive advantage. SME investment SMEs employ more than 1.2 million people and are critical to our economic success, so they need access to capital and talent to develop and grow their businesses. Enhancements to the Key Employee Engagement Programme (KEEP) and the Special Assignee Relief Programme (SARP), as well as introducing a super deduction for payroll costs of highly skilled technology workers would help level the playing field for SMEs competing with multinational corporations in a tight labour market. Budget 2025 could also incentivise investment in SMEs by simplifying the Employment Investment Incentive Scheme (EIIS) and enhancing Capital Gains Tax (CGT) Entrepreneur's Relief. It is also critical to reverse the changes made to the CGT Retirement Relief in the last Finance Act. The availability of CGT retirement relief is vital to the development of multi-generational family-owned businesses and farms. These businesses and farms are the bedrock of the Irish economy, employing millions. Last year's changes will operate as a barrier to the transfer of Irish businesses and farms to the next generation. Employment cost reduction Ireland's high cost of employment has become a real concern for domestic businesses and foreign investors. Budget 2025 should introduce measures to reduce the cost of employment. Ireland needs a personal tax regime that attracts and retains skilled individuals. This is important for Irish and foreign-owned companies assessing Ireland as an investment location. The entry point to Ireland's marginal income tax rate is uncompetitive compared to many other jurisdictions, making it difficult to attract talent and highly skilled workers. We recommend raising the point at which the marginal rate applies to €50,000. We also recommend the introduction of an earnings cap of €75,000 on Employee PRSI and €100,000 on Employer PRSI, similar to social security caps in other countries, increasing workers' take-home pay, helping employers manage employment costs and supporting businesses growing and developing talent. Housing crisis The housing crisis is adversely impacting Ireland's attractiveness for investment. According to new data from the Central Statistics Office, 69,000 people emigrated from the Republic of Ireland in the 12 months to April 2024, the highest level of emigration since 2015. There were also significant inflows, but this is a missed opportunity to keep talented people in the Irish labour market. Several budgetary measures could be introduced to increase the housing supply, including incentivising employers to build and provide residential accommodation to employees with a corresponding benefit-in-kind (BIK) exemption for employees earning less than €50,000. Reintroducing a targeted and controlled form of Section 23 relief could also encourage the conversion of properties above retail units to residential use and encourage individuals to finance the development of new residential units for letting. Green technology Our ambitious climate goals will undoubtedly present challenges and opportunities for individuals, communities, and businesses. Tax policy could be used as an effective tool to encourage innovation in green technologies to help us meet these targets. The Government has several challenges to address, but strong exchequer returns should put the Government in a good position to deliver on a budgetary package of €1.8 billion in additional spending and €1.4 billion in tax measures as set out in the Summer Economic Statement.  Tom Woods is head of tax at KPMG in Ireland

Selling a business is a complex process and accountants have a crucial role to play in ensuring their clients achieve the optimal financial outcome. Niall Gaughan explains how As the financial landscape continues to evolve, accountants in Ireland are finding themselves at the forefront in helping to guide clients through the intricate process of selling a business. Beyond the immediate considerations of the sale itself, the post-sale period is critical to ensuring optimal financial outcomes. In this article, we explore the key elements accountants should consider when advising clients on selling a business, focusing on the importance of securing future financial stability, fostering strategic partnerships and succession planning. Anticipating the post-sale landscape Accountants must highlight the importance of proactive planning before a sale. Understanding the details of the financial landscape post-sale allows business owners to make informed choices that can have a significant impact on tax responsibilities, wealth preservation and overall financial health. This can help to ensure that clients are well-equipped to navigate any complexities that may emerge after the deal closure. Securing future financial stability Securing future financial stability post-sale is a critical consideration for both business owners and their advisors. Central to this endeavour is expert tax advice. Accountants play a pivotal role in guiding clients towards understanding the tax implications associated with a business sale. By carefully examining available reliefs, exemptions and allowances, accountants can help maximise after-tax returns, providing a solid foundation for the future. For instance, a comprehensive understanding of various reliefs can lead to substantial tax savings, laying the groundwork for securing the financial future of both the seller and the business. Fostering strategic partnerships When navigating the complexities of a business sale, fostering strategic partnerships is crucial. Accountants must pay careful attention to the strategic structuring of the sale, assessing alternatives such as selling shares or assets with a keen eye on the potential implications for both buyers and sellers. By leveraging their expertise and collaborating closely with other advisors, accountants can help clients select a structure that not only aligns with their financial goals but also fosters long-term strategic partnerships. These partnerships are crucial because they can provide significant tax advantages and facilitate a seamless transition process. Moreover, by aligning the interests of all parties involved, strategic partnerships lay a strong foundation for ongoing collaboration, which is essential for future growth and success. Securing the future beyond the sale Post-sale success is not solely contingent on immediate financial gains. Accountants should advocate for robust succession planning, especially within family businesses, considering factors such as family dynamics, business continuity and long-term financial objectives. By engaging in proactive succession planning, clients can safeguard their wealth, ensuring its sustained growth and the realisation of personal and family goals. This approach not only secures the financial future of the business but also aligns with the long-term vision and values of the family, setting the stage for continued success across generations. A strategic partnership for wealth management In the post-sale phase, a private banker with specialised competencies can support the unique requirements of handling the proceeds from a business sale. The business owner’s accountant can play a key role in selecting a private banker suited to their unique needs. Their competencies should include: Wealth preservation expertise: A private banker who understands wealth preservation strategies can help the client build a lasting legacy. Investment strategy: Competent private bankers should be adept at devising investment strategies aligned with the client's risk tolerance and financial goals, ensuring the continued growth of their wealth. Diversification and risk management: A private banker should be able to assist clients in diversifying their investment portfolio, mitigating risks associated with concentrated assets and optimising long-term returns. Personalised service: The ability to craft personalised financial plans that encompass the client's lifestyle, philanthropic aspirations and intergenerational wealth transfer, is a key competency for a private banker in this context. Clients are now keen to understand more about philanthropic options and sustainability. A good private banker should be able to facilitate access to deep knowledge and subject matter experts in these areas. Clients need a secure financial institution with a strong credit rating that offers immediate returns on their funds post-sale. Confidentiality and direct access to a private banker can help, as they will have access to expertise in financial markets and the ability to educate clients who are often experts in their fields – but not necessarily in financial management. Ensuring post-sale success The role of the accountant supporting a client through a business sale extends beyond the realms of financial statements and tax calculations. By proactively addressing the considerations outlined – expert tax advice, strategic structuring, succession planning and selecting the right private banker – accountants can guide their clients towards post-sale financial triumph. Niall Gaughan is a Director with Barclays Wealth in Dublin

Exciting news! BrightPay is launching a cloud version of its popular payroll software in Ireland, just in time for the 2025 tax year. After seeing how successful the cloud version has been in the UK, they’re excited to offer the same innovation and convenience to its Irish users. Cloud-based solutions are gaining traction in Ireland, mirroring a global shift toward cloud computing. As Irish businesses adopt cloud technologies, payroll management is no exception. Cloud payroll software offers businesses and employees benefits such as better data management, enhanced collaboration, and greater flexibility. What makes BrightPay’s cloud-based software stand out from its existing solution? The cloud version of BrightPay maintains the same layout and interface you’re already familiar with, so existing users will have little to no training to get started. In addition to offering all the features of the desktop version, the cloud software introduces several advantages: Access from anywhere: Log in to BrightPay from any internet-connected device. Just open your browser and get started. Multi-user access: Multiple users can work on the same payroll file at the same time. Real-time changes: Updates to a payroll file are instantly visible to all logged-in users. Automatic updates: The software automatically updates to the latest version, including changes like National Insurance rates or minimum wage adjustments. Automatic data backups: BrightPay continuously saves your payroll data as you work. Secure hosting: Payroll data is stored on a secure, remote server rather than your local machine. Employee Self-Service Portal: Included with all licenses, this portal lets employees view payslips, request leave, and update personal information. Why switch to the cloud version? The new cloud features are designed to improve flexibility and collaboration, allowing your team to work seamlessly from anywhere, anytime. Enhanced security measures ensure your sensitive data is protected, and with automatic updates, you’ll always stay compliant with the latest regulations. Join the waitlist today to be one of the first to experience the new software. This article is sponsored by BrightPay

Comments from Cróna Clohisey, the Institute’s Director of Advocacy and Voice in relation to Ireland’s tax base and our tax system appeared in a recent piece in The Sunday Times. 

Revenue has published the Pre-filing Notification Forms for the R&D Tax Credit. Companies are now required to notify Revenue of its intention to file a claim for the R&D Tax Credit for accounting periods commencing on or after 1 January 2024. The pre-filing notification must be in writing in the form prescribed by Revenue and must be filed at least 90 days before the claim for the credit is made. The forms are available on Revenue’s R&D Tax Credit page and at the links below:  Research and Development pre-filing form 766C  Research and Development pre-filing form 766D 

As readers will know, the Tax Administration Liaison Committee (TALC) is the forum where practitioners can make recommendations to achieve more effective and efficient tax administration. The Institute attends TALC under the auspices of the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I). There are several committees operating under TALC. Below we bring you updates from recent meetings of Main TALC, the TALC Indirect Taxes Sub-committee, and the TALC Direct and Capital Taxes Sub-committee.  Main TALC  The September meeting of Main TALC took place last week at Revenue’s Bishop’s Square offices. The agenda included an update from Revenue Technical Services (RTS), Enhanced Reporting Requirements (ERR), and Pillar Two. At the meeting we also raised the matter of customer service standards, noting certain issues which have been brought to our attention by members in recent months. Revenue acknowledged our concerns and committed to a full discussion at the December meeting of the group. We also noted the ROS downtime on Saturday 7 September.  On RTS, Revenue informed the group that it will be hosting webinars on 26 and 27 November 2024 to assist taxpayers making submissions to the RTS. The purpose of the webinars is to enhance the quality of submissions made to it and input has been sought from Main TALC on specific areas of focus for the webinars. The group noted that the webinars will be of great benefit to taxpayers.  Regarding ERR, Revenue updated the group on returns submitted to date. The latest data shows that returns have been made by 41,797 employers for around 665,000 employees representing in-scope benefits of €975 million. The majority of the payments made relate to travel and subsistence.  Lastly, on Pillar Two, Revenue noted that it is significantly increasing its resources to manage Pillar Two. There has also been a significant body of work throughout the summer to prepare for the commencement of Pillar Two compliance cycles in 2025.  TALC Indirect Taxes Sub-committee  At the recent meeting of the TALC Indirect Taxes Sub-committee, the group discussed various matters including issues arising with RCT and the VAT reverse charge mechanism, the status of the EU VAT in a Digital Age (ViDA) file, the recent VAT Modernisation (VATMod) consultation, and the categorisation of certain psychotherapeutic and counselling services for VAT purposes.  On the status of ViDA, Revenue officials noted that at the ECOFIN meeting in June, a Member State had exercised its veto due to a perceived issue with the “deemed supplier” obligations. A further update will hopefully be available at the next meeting in November.  Regarding the recent VATMod consultation, Revenue informed the group that a findings’ report issued. In total, there were 1,100 responses. The group agreed to arrange a meeting to discuss the findings’ report and Revenue acknowledged the quality and breadth of feedback provided.  TALC Direct and Capital Taxes Sub-committee  At the recent meeting of the TALC Direct and Capital Taxes Sub-committee, the group discussed various matters including RCT and the VAT reverse charge mechanism, the review process for Tax and Duty Manuals (TDMs), the tax treatment of Islamic financial transactions, TAC determination 44TACD2024, and the requirement to provide a breakdown of distributions from an Approved Retirement Fund (ARF), as well as various guidance updates.  The issue regarding RCT and VAT reverse charge relates to a question on the part of an RCT contract which the VAT reverse charge applies to. Revenue noted that the reverse charge only applies to construction services. The matter is also being considered by the TALC Indirect Taxes Sub-committee and officials from Revenue are aware of the discussions in both groups.  On the TDM review process, practitioners noted that issues with wording applied to TDMs while under review. There is a concern that the phrase, “The guidance may not reflect Revenue’s current position” is too broad. In the absence of a specific explanation on what is actually under consideration at a particular time, it casts any technical position into uncertainty until such time as the manual is refreshed or reinstated. Revenue will consider betters options in this regard but also noted the importance of appropriate wording.  In relation to 44TACD2024, practitioners queried whether this would influence Revenue’s approach to dealing with ARFs. Revenue noted that the case was determined on its facts and does not have precedential value. 

Last week, the Court of Justice of the European Union (CJEU) handed down the final judgment in Commission v Ireland (C-465/20 P). The case concerned tax rulings provided to two companies in the Apple Group which approved the methods used by those companies to determine their taxable Irish profits in relation to the trading activity of their respective Irish branches. In 2020, the General Court annulled the Commission’s decision that the tax rulings constituted illegal State-aid.   The Commission appealed the decision and in November 2023, Advocate General Pitruzzella’s opinion recommended that the CJEU should set aside the judgment of the General Court and refer the case back to that court. Rather than referring the case back to the General Court, the CJEU instead gave final judgment in the matter and so the matter is now concluded. In a press release issued last week, it was noted that  the CJEU “considers that the state of the proceedings is such that it may give final judgment in the actions”.  In a statement issued last week, the Minister for Finance, Jack Chambers TD noted that the country’s tax system is built on certainty and predictability. The minister acknowledged that many of the largest multinational companies operating in Ireland have been doing so for many decades and are significant employers. He also observed that the global tax environment has changed dramatically over the last decade and that the Irish Government has been at the forefront of these developments.  In a subsequent press release on the Escrow Fund (in which the contested taxes have been held), the Department of Finance noted that the funds will be released following the issue of tax assessments by the Revenue Commissioners. In relation to the matter of a third country adjustment (i.e., where overseas’ tax authorities deem tax to be arising in their country), the department stated it was not aware of any such claims at this time. 

Does your Northern Ireland based company or client support a lower rate of corporation tax for the region? If so, read on for how you can participate in our campaign to reignite the path to a lower rate of corporation tax for the region.   The Corporation Tax (Northern Ireland) Act 2015 contains the legislation for how a lower rate of corporation tax would work practically in Northern Ireland. However, this is subject to very specific rate-setting arrangements which mean that this rate-setting power may not be exercised unless Treasury regulations have been made. These Treasury regulations are subject to very specific conditions specifically the continued commitment of the NI executive to “take all the actions necessary to demonstrate that its finances are on a sustainable footing for the long term”.  The support of the Institute’s members for a lower rate of corporation tax in Northern Ireland has now waned in recent years with a recent Ulster Society survey showing that approximately two thirds of our members continue to support this initiative.  On foot of this ongoing support combined with the restoration of the Northern Ireland Assembly and a new government in Westminster, Chartered Accountants Ireland is embarking on a new campaign to engage with and equip policy makers with the information and tools necessary to pursue a lower rate of corporation tax for the region as one of a range of economic levers to drive growth and employment.  We are seeking companies in Northern Ireland who support this campaign and who are prepared to tell us why they support a lower rate and what it would mean for them and the region. These quotes will be included in a position paper which is expected to be launched before the end of 2024. Contact tax@charteredaccountants.ie to participate.    

In this legislative update, the Chancellor has confirmed that a tax road map for business will be outlined at the Budget on 30 October and the sunset clauses of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) scheme have officially been extended to 2035. A date has also been announced for the 2025/26 Scottish Budget.  Business tax roadmap  As part of its pre-election manifesto, the new government promised that a business tax roadmap for the duration of this parliament would be delivered in order to provide businesses with certainty over the coming years when planning investments. Although no specific timetable was provided in the manifesto, this was promised within the first six months.   During recent Treasury questions, the Chancellor has now confirmed that an outline of this roadmap will be published at the Budget. This will include a commitment to cap corporation tax at 25 percent for the duration of the current parliament. Full expensing (100 percent first year allowances for new plant and machinery expenditure of companies) will also be retained.  Given the Chancellor’s comments, it seems that what will be announced on Budget Day will only be an outline of the roadmap which is likely to be finalised thereafter in conjunction with wider stakeholder input.  EIS and VCT scheme sunset clauses extended   Finance Act 2024 extended the EIS and VCT scheme to shares issued on or before 5 April 2035. However, this was subject to domestic and international subsidy obligations being met. It is now confirmed that these formalities have been completed hence earlier this month The Finance Act 2024, Section 11 (Extension of Enterprise Investment Scheme Relief and Venture Capital Trusts Relief) (Appointed Day) Regulations 2024 were laid.   This means that the sunset clauses are now officially extended from 6 April 2025 so that shares in a company (for EIS relief) or in a VCT that are issued before 6 April 2035 will qualify for relief, subject to the relevant conditions being met.  Scottish Budget date   Scotland’s 2025/26 Budget will be presented to the Scottish Parliament on 4 December 2024. This will set out the Scottish Government’s proposals for devolved taxes (such as the Land and Buildings Transactions Tax) and the income tax rates paid by Scottish taxpayers (other than on dividends and interest). It is also expected that the Scottish Government will publish its Tax Strategy on the same day which aims to set out the medium-term objectives for the Scottish tax system.  

During the summer, the Exchequer Secretary to the Treasury published a Written Ministerial Statement that also featured an update on the UK’s Pillar 2 legislation. The update confirmed that the Undertaxed Profits (UTPR) rule will be implemented in the UK for accounting periods beginning on or after 31 December 2024. Draft legislation was also published on the Country-By-Country reporting anti-avoidance rule. HMRC has provided more detail in an email to Chartered Accountants Ireland which reads as follows: “OECD Pillar 2: The government is publishing draft legislation to translate an internationally agreed anti-avoidance rule into UK legislation. The draft legislation stops attempts by multinational enterprises to avoid Pillar 2 top-up tax by exploiting a temporary simplification in the rules. The legislation will apply from 14 March 2024 and will prevent multinational enterprises that enter into certain avoidance transactions from accessing the simplification.  In addition, to provide certainty for affected businesses, the government is confirming that the UK will introduce the Undertaxed Profits Rule (UTPR) of Pillar 2 for accounting periods beginning on or after 31 December 2024 and will continue efforts to ensure the UK rules are effective and up to date.   The draft legislation on the anti-avoidance rule can be accessed on gov.uk here and we welcome any comments to pillartwoconsultation@hmtreasury.gov.uk.”  HMRC has also published further guidance on the multinational Top-up Tax and Domestic Top-up Tax for consultation. HMRC is seeking views on this further draft which includes new and updated pages of the manual. This release of the draft HMRC guidance manual includes all previously released pages (including updates in some cases) in addition to newly drafted pages.  HMRC invites comments from stakeholders on this draft guidance. Publication of the manual will begin following the review of consultation responses. Feedback is requested by 23 October to pillar2.consultation@hmrc.gov.uk.  A supplementary release of draft guidance will also follow in due course. This will include remaining draft guidance on flow-through entities, joint ventures, the insurance sector, additional top-up amounts, and the undertaxed profits rule (UTPR).  

In this week’s miscellaneous updates, a new form should be used to apply for healthcare cover in the EU and certain other countries and HMRC has published updated guidance on avoidance and evasion. The UK and Romanian governments have also agreed a reciprocal arrangement for VAT refunds and HMRC has issued a reminder that as the PAYE electronic payment deadline for September 2024 falls on a Sunday, payment must be made by 20 September. And finally, HMRC is holding a webinar on paying the national minimum wage in the care sector.  New form for applying for a healthcare certificate  HMRC has published a new form (CA8454) which should be used to apply for healthcare cover in the EU and certain other countries (Iceland, Liechtenstein, Norway or Switzerland). The form can be used if a person wishes to apply for the S1 healthcare certificate for their dependents, or themselves and their dependents, when taking maternity, paternity or adoption leave in those countries. A new interactive guidance tool intended to help workers find the correct form to use is also available.  Updated HMRC avoidance and evasion guidance   HMRC has published updated versions of the following documents:  a list of litigation decisions where it is HMRC’s view that tax avoidance was involved, and details of live corporate criminal offences (CCO) investigations. This legislation means it is a criminal offence if a corporation fails to put into place reasonable procedures to prevent associated persons from criminally facilitating tax evasion. According to this publication, at the time of writing HMRC currently has 11 live investigations and a further 28 live opportunities under review.  UK and Romania agree reciprocal VAT refund arrangement  The UK and Romanian governments have agreed a reciprocal arrangement for VAT refunds. Under the EU’s 13th Directive, UK businesses not established in Romania will be able to claim refunds of VAT paid on goods and services in Romania relating to their business activities. Businesses will be entitled to claim VAT incurred on or after 22 August 2024.   All claims must meet the eligibility criteria and application requirements set out by the Romanian tax authorities (Agenția Națională de Administrare Fiscală, ANAF/ National Agency for Fiscal Administration) to be paid.  Reminder: earlier September PAYE electronic payment deadline   HMRC has reminded employers in the August 2024 Employer Bulletin that as the September 2024 electronic payment deadline falls on a Sunday, to ensure that an electronic payment reaches HMRC on time, cleared funds must be paid into HMRC’s account by Friday 20 September 2024, unless the employer is using faster payment.  National Minimum Wage webinar  Paying the National Minimum Wage (NMW) correctly and protecting workers’ rights is a vital part of being an employer in the care sector. HMRC recognises that this is not always straightforward, and mistakes are easy to make.  HMRC, Gangmasters and Labour Abuse Authority (GLAA) and the Employment Agency Standards (EAS) inspectorate all work to support employers in avoiding those mistakes and get things right first time.   HMRC’s National Minimum Wage team are offering live webinars where they will be joined by colleagues from the GLAA and the EAS to talk through common issues found in the care sector, and how employers can protect workers’ rights. There will also be a panel of experts on hand from all three organisations to answer questions. 

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 as is the latest Brexit and Beyond newsletter from the Northern Ireland Assembly EU Affairs Team.  Miscellaneous updates to guidance and publications  Internal temporary storage facilities (ITSFs) 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,  Top-up your Customs Declaration Service duty deferment account,  Pay into your Customs Declaration Service cash account,  Pay for imports declared using the Customs Declaration Service,  Moving Rest of World sheepmeat, poultry and beef to Northern Ireland.