News feed from Chartered Accountants Ireland
Last feed update: Tuesday September 25th, 2018 11:43:43 PM
Tuesday September 25th, 2018 10:51:59 AM
What we have been up to…
Recently, a few of us from Chartered Accountants HQ went to the National Ploughing Championships. Here in Member Services, we are always looking for ways, times and places where we can meet members and to chat with people who might be interested in what we do: training with us or to access our services such as CPD courses. We figured this might be a good place to go.
We had a small stand in one of the exhibition halls (thankfully indoors but more of that anon) beside lovely “neighbours” from the Central Statistics Office, Revenue, Department of Employment Affairs and Social Protection, Office of the Director of Corporate Enforcement, a number of schools, National Adult Literacy Agency to name just a few. There was a great atmosphere in the hall and everyone was helpful and happy to be there at such a positive event.
“The Ploughing” has become legendary and now I see why. I had visions of arriving at the outskirts of the venue to sit in traffic for hours. The only time we stopped was pulling up in the car park. This could teach the strictest of military strategists a thing or two about logistics. Our guide pack told us exactly what block, row, stand and unit our stand was in…the map showed trees – it couldn’t have been any clearer.
To get this in context I had a look at the history of the event (on the go in one form or other since 1931 in case you’re asked at a table quiz) and the 2011 census which told me that over the three days of this event, some 291,500 were expected to attend…the closest population of a county to this is Galway with just over 250,000. I won’t bombard with any more statistics but this event really is massive. What’s really awesome about it is the scale and how well it’s managed.
Storm Ali made her way through the site on the first night, forcing the organisers to make the decision to close for the second day. When I arrived on Thursday I was told that the staff had been up and working throughout the night to have the site safely open for business – they were battening down the hatches all night and to me, it looked like nothing had happened. There was no evidence of the destruction Ali had caused.
So what was it like? Well, cold is the first answer but lovely is the real one. There was constant human traffic through the hall (I keep nearly writing “tent” but that doesn’t really tell the truth) and so many people stopped for a chat. Most conversations started with “can I have a pen?” but many evolved into how is your day, what do you do, where have you travelled from and so on. It was lovely to chat with our fellow exhibitors and find out what they do too. I must say that I really enjoyed it.
There were lots of people asking about becoming a chartered accountant, for themselves or a family member, about courses, about the profession in general. And they told us about where they had come from, what they hoped to see there, the best spots for a hot cup of tea…and a few members popped over to say hi too.
This was our first year there but I hope it will be the first of many…when we find out where it will be next year, but that's the worst-kept secret by now. I had never heard of Screggan before but I won’t forget it. See you next year...in a certain, to-be-announced county.
Amy Dawson - Member Services - was at the Ploughing as were colleagues Ciara Tallon - who organised getting us there - and Orla Aherne and Patrick Jordan who's attendance was sadly rained off.
Monday September 24th, 2018 11:05:32 AM
In his regular column in the Sunday Business Post, Dr Brian Keegan, Director of Public Policy & Taxation writes about US tax reform and the ongoing international tax debate. In the Irish Examiner, Brian discusses the upcoming Budget and says the Government must be more open to outside ideas. Commenting on the introduction of real time reporting for PAYE that starts on 1 January 2019 in the Irish Independent and the Irish Examiner, Brian urges employers to ensure that their employee records match Revenue’s records so that workers get paid correctly. The front page of the Sunday Independent Business section featured CCAB-I’s letter to the Government calling for urgent tax reform to support the SME sector.
Monday September 24th, 2018 11:04:07 AM
Saudi Arabia is the latest state to sign up to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. Saudi Arabia becomes the 84th jurisdiction to join the Convention, which now covers over 1,400 bilateral tax treaties.
Monday September 24th, 2018 11:03:38 AM
The “moment of truth” for Brexit negotiations will be the October European Council meeting according to European Council President Donald Tusk. The statement came following an informal meeting of EU leaders in Salzburg this week where EU leaders rejected the UK’s Chequers proposals much to the dismay of the UK Prime Minister Theresa May.
Agreement on how to avoid a hard border on the island of Ireland remains outstanding and EU leaders said that there will be no Withdrawal Agreement without a functioning backstop arrangement for the Irish border. And while the EU recognised that some elements of the proposals put forward by the UK government in its Chequers plans were positive, several elements plans for an economic cooperation with the EU will not work.
What’s the Irish issue again?
The EU wants a guarantee that there will not be a hard border on the island of Ireland and have proposed that a common regulatory area between the EU and Northern Ireland might just solve the issue. This would mean that Northern Ireland could effectively stay within the EU’s Single Market and Customs Union and the UK has rejected this. The UK doesn’t want a hard border, but it also does not want Northern Ireland to have a different customs regime to the rest of the UK.
The UK hasn’t come up with any other workable proposal in the eyes of the EU and hopes a future free trade agreement can be agreed which makes border checks unnecessary.
But the EU wants a border guarantee now and won’t agree an exit agreement until an agreement is reached on the border which makes a no deal Brexit still a possibility.
In recent weeks, in response to the UK’s rejection, there have been suggestions that the EU was going to redraft part of its border proposals. For example customs checks on the Irish border could take place on ships or at ports outside of Ireland (rather than on the border itself) with the support of technology. It’s worth reminding ourselves that technology is only part of the solution – it cannot remove the need for checks.
In response to these measures, the UK has said that it doesn’t want EU officials working at UK ports. So it seems we are back to square one. The EU has warned that the UK’s proposals need to be reworked and the UK has said the EU needs to evolve its position too. Are we in deadlock?
An embattled UK Prime Minister
In a televised address after the meetings in Salzburg, Theresa May challenged the EU to come up with some counter proposals. “It’s not acceptable to simply reject the other side’s proposals without a detailed explanation and counter proposals,” Mrs May said. Today, the UK Prime Minister faces her divided Cabinet and is under pressure to abandon the Chequers proposals as some of the Cabinet feel that the plan keeps the UK too closely aligned to the EU.
A second referendum in the making?
Over the weekend, Labour leader Jeremy Corbyn said he would back a second Brexit referendum if the Labour party members supported it.
Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.
Monday September 24th, 2018 11:00:05 AM
A new Statutory Instrument updating the list of capital items that are classified as energy efficient equipment and that qualify for capital allowances has been signed by the Minister for Finance.
Monday September 24th, 2018 10:59:38 AM
Revenue updated its Stamp Duty manual on the residential development refund scheme to include details on how to claim a refund. Read more on Revenue.ie.
Monday September 24th, 2018 10:59:14 AM
Revenue has updated its R&D Tax and Duty manual to highlight the clawback procedure that should be applied when an R&D tax credit was claimed incorrectly. The manual provides specific guidance in relation to claims which are assessed under Schedule D Case IV.
Monday September 24th, 2018 10:58:51 AM
A report examining whether a vacant property tax could act as an incentive to bring unused properties back onto the market to address the housing crisis was laid before Dáil Éireann last week, and doesn’t support the introduction of a vacant property tax.
The report, proposed by Minister for Finance Paschal Donohue as part of last year’s Budget measures, doesn’t support the introduction of a vacant property tax given the already declining numbers of vacant properties in Ireland.
Among the six recommendations, the report suggests that a different rate of capital gains tax could be applied on sales of long term vacant houses and an exemption from local property tax could be given to owners vacate a house due to illness and make property available for rent.
Speaking at the launch of the report, Minister Donohue said “I will now examine the report and its recommendations, in conjunction with relevant Departments and will make my views known then.”
Monday September 24th, 2018 10:58:18 AM
Revenue is in the process of writing to approximately 12,000 people, reminding them to include Airbnb in their tax returns on foot of information it received from Airbnb relating to 2014, 2015 and 2016. If the individuals in question have not correctly dealt with tax due on the income from Airbnb lettings, then they may be entitled to make a qualifying disclosure to maximise penalty mitigation, and to avoid publication and prosecution.
In the letter, Revenue re-states its position that the income arising from Airbnb type lettings is not generally treated as rental income under Schedule D, Case V and does not qualify for rent-a-room relief. Instead, the income is treated as either Case I trading income or Case IV miscellaneous income depending on the frequency and regularity of Airbnb transactions.
Monday September 24th, 2018 10:57:41 AM
The deadline to make a submission under the requirement to correct legislation is now just days away on 30 September 2018. Remember that there are only three very specific cases where the deadline has been extended by HMRC.
Further to our story last month on this legislation, HMRC have provided the following update which reiterates the importance, as already recommended by us, of discussing the RTC legislation with the relevant HMRC contact, especially where the taxpayer has not received any of the letters mentioned:-
“One important point which you may or may not be aware of is that the RTC guidance on gov.uk was updated recently and a small amount of flexibility was introduced around the deadline. I would encourage anyone with an interest to study the guidance as a whole. It can be found at: https://www.gov.uk/guidance/requirement-to-correct-tax-due-on-offshore-assets
More specifically there is a new addition within the guidance which reads:
“if HMRC is already undertaking an enquiry into your affairs and on or before 30 September 2018 you inform the person conducting the enquiry that you wish to make a disclosure of offshore tax non-compliance and you then submit an outline disclosure to that person by 29 November 2018, you will not be liable to penalties for the failure to correct any issue detailed in the outline disclosure. The outline disclosure must provide details of the offshore tax non-compliance you have committed; the years involved; a summary of how the non-compliance came about; the amounts of tax that you believe you owe and a summary of the records that are available to help you make your disclosure.”
More generally, I understand that in most cases where an enquiry is under way the caseworker will be writing to the taxpayer to ensure that they are aware of the Requirement to Correct and to inform them of its consequences. These letters will, where appropriate, include a clear indication of the information that the caseworker considers relevant in that particular situation. If a taxpayer under enquiry has not received a letter they should certainly contact their caseworker to begin a dialogue about the RTC and what may be necessary to avoid the increased FTC penalties.”
Tell HMRC about your offshore income and assets has also recently been updated.
Monday September 24th, 2018 10:57:20 AM
The Institute is calling on all employers to engage with Revenue in advance of the fast approaching 1 January 2019 implementation of PAYE Modernisation. So far it appears only some 11,000 employers have provided Revenue with the List of Employees which is critical to the smooth commencement of the new system. According to Chartered Accountants Ireland Director of Public Policy and Taxation Brian Keegan, there is a real risk of some employees suffering harsh emergency tax in the January payroll - the first pay cheque after Christmas - unless these lists are right.
Revenue’s request to employers to provide these lists is presented by way of a banner on the ROS homepage screen for both employers and their tax agents. It is important to note that if there is a difference between the employer’s list as submitted and Revenue’s record then Revenue will take action.
For example, employees registered as working for that employer on Revenue’s records but not included on the employer’s List of Employees will be ceased on Revenue’s records. The cessation date will be recorded as the date the List of Employees is received by Revenue. This will mean that a Revenue Payroll Notification (RPN), which is the equivalent of the current P2C, will not be available for that employee in 2019.
We understand from discussions with Revenue that the employee will receive a revised Tax Credit Certificate (TCC) which will tell them they have been ceased on their employer’s payroll records; however, such employees may not appreciate the significance of the revised TCC.
Revenue published a manual on the List of Employees, the manual provides details on the information to be included on the list, how to upload the list, how Revenue will process the information and the action that will be taken.
You can read the Institute’s press release on this issue at this link.
Monday September 24th, 2018 10:55:32 AM
The Northern Ireland Tax Committee, in conjunction with Chartered Accountants Ulster Society, is holding a half day event on Making Tax Digital next Tuesday 2 October in Belfast. There are a limited number of spaces left so book now to secure your spot.
Members taking part in the current income tax or VAT trial are asked to contact Leontia Doran to share their experiences on the trial to date. Leontia is also happy to take questions on Making Tax Digital from members who are unable to attend the event. The questions will be forwarded to HMRC for their response.
Last week HMRC also published new MTD guidance aimed directly at affected businesses. The list of software suppliers supporting MTD for VAT has also been updated.
Monday September 24th, 2018 10:54:51 AM
From 6 April 2017, registration is required for new trusts by 5 October after the end of the relevant tax year. For 2016/17 only, the deadline for new trusts was extended from 5 October 2017 to 5 January 2018 with existing trusts required to report by 31 January 2018. Therefore, new trusts in 2017/18 must register by 5 October 2018.
The Trust Registration Service (“TRS”) was introduced by HMRC for 2016/17 in response to the Fourth EU Money Laundering Directive. The FAQs produced by HMRC covering the TRS were published by Chartered Accountants Ireland as HMRC were not able to publish this in time on GOV.UK. HMRC is now in the process of publishing this guidance piece by piece on GOV.UK.
HMRC did not impose a penalty on any failures to register by 31 January 2018 if registration was completed no later than 5 March 2018. It is not expected that the 5 October 2018 deadline for 2017/18 will be extended this year.
The penalty system for late registration was also announced on 5 March 2018 and applies in 2017/18 to any trusts required to be registered by 5 October 2018 but registered after this date. Download the Institute’s briefing note on the Trust Registration Service now.
Monday September 24th, 2018 10:53:35 AM
This month’s update features the latest on Making Tax Digital for business and Agent Services.
“Digital Services Update August 2018
Making Tax Digital for Business (MTDB)
Progress of MTDB continues on both the VAT and Income Tax pilots as we work closely with a growing number of software developers on testing the technology and the user experience. This is helping us build a better system by accessing the number of both successful submissions and issue resolutions, a key part of the Private Beta pilot.
The MTD VAT Notice 700/22 was published on GOV.UK on 13 July. This provided definitive information on some key issues and also provided some useful scenarios in respect of the practicalities involved with MTD VAT.
At the same time we published information about some of the software developers that we are working with.
Software suppliers supporting Making Tax Digital for VAT https://www.gov.uk/government/publications/software-suppliers-supporting-making-tax-digital-for-vat
This has been updated four times since publication emphasising the dynamic nature of this area as more developers register with us, and have their products ready to demonstrate and test.
Our final publication on 13 July was the Making Tax Digital for Business Stakeholder Communication Pack https://www.gov.uk/government/publications/making-tax-digital-for-business-stakeholder-communications-pack
In this we have provided information to support agents and businesses that need to make the transition to digital VAT business record keeping and submission of VAT returns using MTD-compatible software from 1 April 2019.
The VAT Private Beta pilot continued to develop and test the service with different customers and software products, adding to those previously successful. We acknowledge that many businesses want to be involved in the pilot, but we are building slowly and surely to maximise performance and reliability. We will gradually start increasing the numbers of businesses, of increasing complexity that can take part.
We held a further three webinars for VAT on 24 and 25 July. All were virtually full, and we continue to receive questions, indicating that not all agents are up to speed or have a solid grasp of MTD. Would it be beneficial for VCG members to see the more worrying questions (anonymised)? Would that help inform any educational actions going forward?
Recordings of previous Making Tax Digital webinars are available on the Help and support for Making Tax Digital page on GOV.UK.
Finally, we advised last month that we were taking part in a pilot to develop podcasts. We have scripted the first edition, for people new to MTD, and will hopefully record this towards the end of the month. Podcasts will be shorter than the webinars and we will assess their impact and effectiveness to help get the MTD messages out to agents, and perhaps businesses too.
MTD Agent Services and Income Tax Pilot
Agents can set up an agent services account and sign up to use software to send Income Tax updates to HMRC on behalf of their clients.
Currently the pilot is open to
self-employed businesses with income from one business, and
landlords with income from property.
Agents can now
Create an agent services account (accessed from GOV.UK)
Link existing Self Assessment (SA) and VAT client relationships to their agent services account (accessed from their agent firms’ agent services account homepage)
Sign up SA clients to MTD for Income Tax quarterly reporting (accessed from GOV.UK)
Link their agency MTD-compatible software to HMRC (accessed through their software)
Submit updates through their agency MTD-compatible software on behalf of a client
View MTD data and calculations on behalf of a client through software
Additionally, an agent can now access a digital authorisation service from their agent services account for a new MTD SA client (a digital 64-8 for MTDfB). Their new client can digitally confirm this authorisation to HMRC.
The existing paper 64-8 process can still be used for Self Assessment, and any new
clients added to an agency’s Government Gateway credential in this
way will be recognised for MTD SA.
Agents will soon be able to manage users within their agent services account. This function
will allow agent firms to create additional Government Gateway IDs to allow multiple agents within the firm to access administrative services available through the agent services account, such as signing clients up to MTD VAT or registering Trusts.
A number of software developers are carrying out trials with their existing agent customers to trial their MTD product for Income Tax - please contact your software provider if you are interested.
Information and guidance
We have published additional information and step by step guidance in Agent Update 66.
Agent Services Account
Agents will need to create an agent services account if they:
want to register a Trust using the Trust Registration Service
want to voluntarily participate in Making Tax Digital for Business (MTDfB)
are amongst the small number of agents taking part in the whitelisted “Agents for Individuals” pilot service.
In addition to creating an agent services account, those agents volunteering to participate in MTDfB can also test the following services:
linking existing SA clients to the agent services account - this involves linking existing Government Gateway IDs to the agent services account, so an agency can act on behalf of their client in Making Tax Digital (MTD) without needing to be re-authorised by that client
subscribing a client to the MTD service - an agency can subscribe any existing SA client who has previously authorised the agency to act for them in SA e.g. 64-8 authorisation is in place
requesting MTD authorisation from a new client (a digital 64-8) - an agency firm with an agent services account can invite any customer who has already signed up to MTD to authorise them to act on their behalf in MTD SA
completing a quarterly update for a client - an agent must have MTD-compatible commercial software to do this. You can find software suppliers for sending Income Tax on GOV.UK.
A recording of the Talking Points meeting on the Agent Services Account is now available https://register.gotowebinar.com/recording/7760096172351923971
Venture Capital Schemes
Publication of the Venture Capital Schemes commencement regulations
The changes made by the Finance Act 2018 to the venture capital schemes – the Enterprise Investment Scheme, the Seed Enterprise Investment Scheme and Venture Capital Trusts – have taken effect from the dates announced at Autumn Budget 2017. See the Venture Capital Schemes Manual for more details of the new rules.
HMRC regularly warns about the risks of malicious software being deployed to devices. Cybercriminals use a variety of methods to try to install malicious software (malware) on computers.
Many of these infections rely on persuading individuals to open an email attachment or visit a malicious website.
People are a critical point of defence and should form an integral part of any organisations cyber security strategy. Success in defeating Cybercriminals is unlikely to be achieved through technical means alone.
Creating a positive security culture, in which staff awareness and behaviours are enhanced, can be achieved through a variety of methods. The NCSC provide guidance for organisations to increase staff awareness and reduce impact from Cybercrime as part of the 10 Steps to Cyber Security.
Examples of practical application of security awareness, specific to the phishing threat, can include: –
Identifying users with privileged access (such as permission to install software), minimise the number of users who require access and improve the vigilance of those who do genuinely require such access.
Phishing training, this can vary from straightforward examples based training through to more sophisticated ethical phishing campaigns to test and monitor staff behaviours, identify and track improvements.
Safe use of Software as a Service (Saas)
Businesses increasingly rely upon a variety of software delivered as a service. These are typically cloud hosted and accessible across the internet, rather than previous models of privately and/or locally hosted services. This presents a new set of risks to users of these services.
Examples of this type of tool are the web based issue tracking and project management tools Trello and JIRA.
Recent reporting has highlighted instances where documents have been left available on public boards that are available to users outside of their intended audience.
This has highlighted the risk of loss of intellectual property and personally identifiable information through the incorrect configuration of such services.
This is typically caused by a lack of awareness of best practice when configuring access controls to posts/boards. Particularly the incorrect use of public boards for private material.
We are aware that information regarding accountancy and accountancy software/tools has been placed on Trello within publicly visible boards that have also been google indexed.
Organisations using or who have previously used these or similar services may wish to review their guidance on use of these services to ensure that any content is not set to public, unless that was the explicit intention.
Instructions on changing Trello board visibility can be found here:-
More information on the topic of SaaS security guidance can be found on the NCSC internet guidance pages.
END OF HMRC UPDATE
Monday September 24th, 2018 10:51:41 AM
Updated toolkits and phishing scams feature this week.
The Finance Act 2018, Section 14 and Schedules 4 and 5 (Commencement) Regulations 2018 have been published. These regulations bring into force certain amendments made in Finance Act 2018 to the enterprise investment scheme, seed enterprise investment scheme and venture capital trust reliefs
The property rental toolkit for 2018 has been published
HMRC has updated the list (List 3) of professional bodies and learned societies, approved by HMRC for the purpose of section 344 ITEPA 2003 (allowable deductions from earnings for fees and subscriptions paid to professional bodies/learned societies). The list includes all bodies approved up to October 2017
The guidance on how to recognise when a contact from HMRC is genuine, and how to recognise phishing or bogus emails and text messages has been updated for the latest scams
Notice 760: Customs Freight Simplified Procedures (CFSP) and 480: Expenses and benefits - a tax guide have been updated
PAYE: National Insurance contributions settlement return (NSR Appendix 7B) and PAYE: National Insurance contributions settlement return (NSR Appendix 7A) have both been updated
Inheritance Tax account (IHT400) has been updated
The list of approved payers for foreign entertainers has been updated
Monday September 24th, 2018 09:38:18 AM
The Ulster Society has announced a new sponsorship partnership with Hunter Savage, as part of the firm’s commitment to the Accountancy sector in Northern Ireland.
The partnership will create and deliver two new events to complement the annual calendar schedule for Members.
On Thursday 18 October we will be hosting our inaugural Young Professionals Belfast Food & Drink Tour with Caroline Wilson from Taste & Tour. This will be a great opportunity to enjoy some of Belfast's hidden gems and sample award winning food along the way.
Another much anticipated event on Wednesday 14 November will be our Sparkling Seasonal Supper with local celebrity chef Paula McIntyre creating a tasting theatre in the Titanic Hotel Belfast. This will be an amazing opportunity for the Ulster Society Ladies Networking group to enjoy a relaxed evening with Paula preparing, cooking and serving a selection of locally sourced produce along with hints and tips on how to create these in your own kitchen!
Ronan Savage, Recruitment Director commented that he was delighted to have secured a three year partnership with Chartered Accountants Ulster Society by creating these new events we hope to provide further opportunity for members to network and enjoy a great social events alongside the best of Northern Ireland produce!
Ulster Society Chairman Niall Harkin said "We’re very pleased to announce this new three-year partnership with Hunter Savage and to bring some exciting new events to our membership, in particular our Young Professionals Group and to our Ladies Networking Group. We look forward to working with our new partner to create some enjoyable events and great networking opportunities for our membership."
Hunter Savage is a leading niche recruitment consultancy, specialising in Accountancy & Finance, Law, HR and Financial Services. The firm believes in adopting a personal, consultative approach to recruitment, tailored to the candidates and employers they work with. They work with ambitious individuals and employers, getting to know them in detail and helping to put together perfect partnerships.
Hunter Savage can be contacted on 028 9008 0031, or you can follow them on social media platforms to keep updated on jobs, news and events.
Monday September 24th, 2018 09:07:23 AM
Sunday Business Post, 23 September 2018
“It's not Ireland's fault that US tax law looks like it was written by somebody on acid.” This remark, by Kevin Hassett, chairman of the White House council of economic advisers drew laughter from the crowd attending the US Embassy’s “Racing towards a Trillion” conference in the Phoenix Park last week. It was a disarming way to signal to the crowd that the times are indeed changing, but I suspect Dr Hassett doesn't really believe the truth of his “acid” analogy.
The 2017 US Tax Cuts and Jobs Act kills off the idea that US corporations could cheerfully make money offshore to their hearts content without paying US taxes as long the cash wasn’t brought back to the States. That was a notion which dates from the Kennedy era. It was an expansionist policy designed to encourage US companies to grow abroad, with the added prospect of Uncle Sam ultimately reaping 35% from the foreign rewards of his corporate offspring. But it was an idea of its time, and the times have changed.
All this is relevant to Ireland, and not just because of the very high levels of US investment in this country. The new US tax regime has a far greater significance than our domestic concerns because it hammers another (very large) nail into the coffin of the international consensus as to how cross-border businesses should be taxed.
Up until relatively recently, almost all countries levied taxes on foreigners by reference to a network of internationally agreed tax treaties. By and large these required a business to have a significant physical and management presence in a particular territory before any taxes could be applied on their activities. This concept was further supported by a complicated set of rules to ensure that companies couldn't arrange for their cross border profits only to arise in countries with low tax rates. Now there is a perceived problem that the old tax rules disregard cross-border trade flows. Their effect is to leave countries with very large markets at a disadvantage, because if management and value creation isn't located in those countries, they can’t tax the corporate profits driven by substantial sales within their territories.
Signs of this crumbling consensus can be found in the UK and Australian attempts in the last five years to tax what they call diverted profits - money which is generated offshore by virtue of sales in their countries. The EU itself has had a go at breaking the cross border tax consensus with its Common Consolidated Corporate Tax Base project. This would artificially reallocate profits to different countries by reference to sales, as well as employment and capital investment levels. The current debate on digital taxation erodes the consensus even more. The suggestion is that value is in some way created (and therefore should be taxed) in the territory of the consumer when the consumption takes place via a website.
Against such a backdrop, the US Tax Cuts and Jobs Act looks almost reassuringly protectionist. While the headline has always been about the US corporation tax rate reduction from 35% to 21%, the real mischief lies in its policing provisions. The returns on US corporate know-how abroad are guaranteed to be taxed, under a regime known as GILTI. But exploit that knowledge Stateside, and companies will do better under a regime known as FDII. Prozac has replaced acid in US tax system design.
This new vision of the US Internal Revenue Service dancing at the crossroads of international trade is not without its opponents, not least because it seems to throw some elements of the old rulebook (like anti-transfer pricing rules) out the window. Even the World Trade Organisation has rowed in with a challenge to the FDII regime, on the grounds that it creates an unfair trade subsidy.
A dilemma for businesses with US interests is that the US Tax Cuts and Jobs Act is not yet a fully formed creature. The 2017 act provides a framework for the new tax regime, but the details of how the framework will apply are governed by regulations. A substantial part of these have yet to emerge. For instance, while the new rules allow the US to police and charge tax on the returns on foreign intellectual property, there are still no regulations governing how credit might be given for foreign taxes already paid on such returns, if at all.
That puts companies in a bit of a bind when it comes to future investment decisions. Adding to the confusion is that quite a few of the US provisions are time limited, with 2025 being a critical date at which some of the tax relief provisions will become less generous, and when some of the anti-avoidance provisions will bite harder.
Nevertheless the international debate is now less about how much multinational corporations should be charged as about where those tax charges should be paid. That’s a big factor in attracting foreign investment and the jobs it brings. The US Tax Cuts and Jobs Act clearly says any company with a footprint in the US should be paying its taxes in the States and is indifferent to more modern arguments about market sizes or the location of value creation.
The small size of the Irish economy in an international tax debate could be our greatest weakness, but it could also transpire that it is our greatest advantage. Will the great nations on either side of the Atlantic condone an international tax system where the profits of their companies are ultimately taxed in the BRIC bloc of nations (Brazil, Russia, India and China) by reason of those huge markets? It certainly looks like the US won’t ever condone that. With a corporation tax yield in the single billions, Ireland may end up being too small to worry about in a battle between economic giants.
Brian Keegan is Director of Public Policy and Tax at Chartered Accountants Ireland
Friday September 21st, 2018 11:34:02 AM
By Tom Maguire
The EU’s Anti-Tax Avoidance Directive (ATAD) has to be implemented into our law over the next number of years. This year’s Finance Bill will legislate for the Controlled Foreign Company Rule (CFC) contained within the directive.
The draft CFC legislation contained in the feedback statement from the Department of Finance goes beyond the ATAD’s requirements. Among various other issues, it seeks to ensure that companies can have income attributed to them rather than to the controlling company. Further, the ATAD requires that the controlling company own 50% of the voting rights and capital profits available for distribution, whereas the draft legislation contained in the feedback statement uses a provision existing within current Irish legislation that includes a company’s ability to acquire such rights in the future.
From this, it would appear that Ireland may be leaning towards a 'best in class' or more stringent approach regarding the implementation of the CFC rule whereas other countries may not. In my view, it is necessary that a desire to engage in best practice does not lead to Ireland agreeing to non-mandatory or more onerous provisions which are contrary to its competitive offering and position going forward.EU Tax Intermediaries’ directiveThe EU Tax Intermediaries’ directive, which requires mandatory reporting by tax intermediaries and the automatic exchange of information by the tax authorities of member states for certain cross-border arrangements in relation to individuals, companies and other entities, took effect earlier this year. The directive, which takes the form of an amendment to the Directive for Administrative Cooperation (DAC), is part of the efforts to tackle tax abuse and ensure fairer taxation in the EU, and broadly reflects the elements of action 12 of the BEPS project on the mandatory disclosure of potentially aggressive tax planning arrangements.
The directive will provide EU tax authorities with information about such schemes by requiring intermediaries, such as tax advisors, accountants, banks and lawyers, who design and promote tax planning schemes for their clients, to report to the tax authorities in the country in which they are resident, and any cross-border tax planning arrangement they design or promote that contains specific broadly defined criteria (hallmarks). That EU member state then will share the information with all other member states on a quarterly basis. Penalties will be imposed on intermediaries that do not comply with the transparency measures.
If the taxpayer develops the arrangement in-house or is advised by a non-EU adviser, or if legal professional privilege applies, the taxpayer must notify the tax authorities directly. The directive will apply as from 1 July 2020, and member states will have until 31 December 2019 to transpose it into their national laws and regulations. It should be noted that arrangements, the first step of which is implemented between the date the directive entered into force (25 June 2018) and its effective date (1 July 2020), would have to be reported by 31 August 2020. However, it is likely that we will not see the legislation implementing the directive until Finance Act 2019 so taxpayers need to be aware that transactions being entered into currently may have to be reported.
My viewThe implementation of the above directive will create substantial change to our law and practice. In my view, the CFC rule, if implemented in the form suggested by the Feedback Statement, goes beyond the requirements of the ATAD and may bring about tax competitiveness questions.
My predictionIt is to be hoped that the suggested CFC rule in the Feedback Statement will be amended to take account of competitiveness comments which should be reflected in responses to the above statement.
You can read the full Pre-Budget 2018 document here.
Tom Maguire is a Tax Partner in Deloitte.
Friday September 21st, 2018 10:41:19 AM
Over 100 attendees representing Institute members and other stakeholders were in Chartered Accountants House last Monday (17 Sept 2018) to meet with representatives of the Financial Reporting Council (‘FRC’) and hear presentations on UK and Irish GAAP. The FRC sets accounting standards for Ireland.
Anthony Appleton, Director of Accounting and Reporting Policy at the FRC discussed the development of FRS 102 from when it was first issued in 2013 to the most recent amendments to the standard, the Triennial review 2017 amendments. Jenny Carter, Director of UK Accounting Standards at the FRC presented on the Triennial review 2017 amendments, highlighting in particular the changes made regarding directors’ loans to small entities; intangible assets in a business combination; investment property rented to another group entity; classification of basic financial instruments; and the definition of a financial institution, and also looked at what’s next in terms of changes to the standards.
The FRC presentation was accompanied by a presentation by Eimear McGrath from KPMG and Barbara McCormack from Chartered Accountants Ireland on the key financial reporting requirements of the small and micro companies regimes in the Republic of Ireland.
The event was chaired by Terry O’Rourke, chair of the Institute’s Accounting Committee.
Friday September 21st, 2018 10:02:02 AM
Of course, in an ideal world, no one wants gender quotas. Real gender equality means selecting people solely on merit and without having to resort to gender targets or balance because one gender isn't given an advantage, by law or by personal bias.
However, the problem is that the world is far from ideal, and very far from a meritocracy, as shown by the mass under-representation of women in most boardrooms in Ireland. As long as that is the case, quotas are the best way of moving towards the meritocratic ideal.
Ireland has, in fact, addressed this issue, albeit belatedly. Under laws introduced in 2014, all state boards are required to have a minimum of 40% of both men and women. However, there is no penalty for boards that don’t have the appropriate gender balance. And so, more than half of the country’s state boards are falling short of the gender quotas set down in law, according to the Irish Independent in a survey conducted in 2017.
In 2003, the Norwegian government passed a law that required listed companies to have at least 40% of board members to be women. The law was enacted in 2006 and in the event of non-compliance, the company would be delisted. Existing companies were given an initial grace period of two years.
Many decried that mandatory quotas were the wrong way to promote women but they have caught on. In Belgium, Germany and France, women make up 30-40% of board directors in large listed firms, three to five times the share of a decade ago. In the USA, representation has increased to 20% despite having no quotas, showing that quotas could be contributing to changing attitudes.
No organisation wants to appoint board members who do not have what it takes to contribute to the boardroom. So, quotas force companies to think more deeply about how to recruit, develop, support, retain and reward female talent at all levels. Making quota’s mandatory will address this issue in a number of ways but, most importantly, could help shift societal attitudes and break the psychological barrier of only men being associated with boards rather than women.
It also ensures there are more women appointed to nomination committees whose job it is to make sure that they recruit strategically for a more diverse world and will provide role models and mentoring to support a future supply of women to boards and to senior management.
We have many fine examples of world-class female directors and CEOs in this country, but we need more. Quotas will help.
David W. Duffy is the founder of the Governance Company and author of A Practical Guide for Company Directors.
Friday September 21st, 2018 09:17:43 AM
By Moira Dunne
It’s September and our traffic has reverted to “normal”. For most of us, this means longer journey times and busier trains and buses. Our daily commute can really drain our energy and time feels wasted but it doesn’t have to be. With a little advance planning and clever use of your smartphone or tablet, you can be productive on your daily commute. The key is to find tasks that will fit into your commuting routine and then get yourself organised.Plan aheadThe trick is to get organised in advance. Be proactive by downloading the right apps on your phone, saving article content to your phone, packing the newspaper supplements into your bag and carrying a small notebook and pen. Tasks
Take a look at our list of ideas. What can you build into your daily commute?
Get your social media updates out of the way, professional and personal.Listen to podcasts that you have previously saved.Read the supplements from the weekend newspapers to stay up to date on what is going on in your industry.Read professional articles you have saved using apps like Pocket, Google Keep and even LinkedIn.Create your daily to-do list using apps like Evernote or Onenote. This will save you time once you're in the office and help you plan for your day.Clear your work inbox of anything trivial or extraneous, and prioritise the other emails.Brainstorm ideas for a project or plan with colleagues using Slack.Capture ideas using a dictation app like Speechnotes or iTalk recorder if you're in the car.
RelaxRemember that different activities may suit your mood on different days depending on the circumstances. Can you get good Wi-Fi? Do you have to stand? Do you have enough energy to focus on work? If not, it's always good to relax, just do nothing and let your mind declutter.
Moira Dunne is the Founder of beproductive.ie
Friday September 21st, 2018 08:26:03 AM
Thirty-nine percent of smartphone users in the UK, the equivalent of 17 million people, believe they use their smartphone too much according to the latest research from Deloitte. Generation Z smartphone users (16-24 years old) are particularly concerned about their usage habits, with 61% (4.3 million young people) believing they use their device too much.
Deloitte’s eighth annual Mobile Consumer Survey analyses the mobile usage habits of 4,150 people between the ages of 16 and 75 in the UK. The research has found that 87% of respondents now own or have access to a smartphone, up from 62% in 2012.
Can’t put it down
The study found that 56% of parents think their children use their phone too much, while 43% of people think their partner uses their phone too much. Additionally, 55% use their smartphone for personal purposes during work hours, and 23% of these are "often" distracted at work as a result of doing so.
Of the 39% who admit to overusing their phone, 83% would like to do something about it. One in five (21%) make an effort to limit their usage and usually succeed, while 35% try and fail, and 27% would like to try, but do not.
Paul Lee, Head of Research for Technology, Media and Telecoms at Deloitte, commented: "The smartphone has been altering our lives, mostly for the better, for eleven years. It is now an integral digital tool for work and play but users, particularly younger consumers, are becoming increasingly wary of overindulgence.
"Over the next 12 months, the latest mobile operating software upgrades will enable tens of millions of smartphone users in the UK to start measuring their usage levels. Whilst this will be a significant step forward in the maturing relationship between people and their favourite device, smartphone usage is likely to remain key part of the national conversation for years to come."
Deloitte’s study also revealed some of the effects of smartphone overuse. Of those who believe they use their phone too much, 44% feel more distracted when trying to complete a task. In addition, 46% of respondents feel they constantly need to check their phone. More than a quarter (27%) experience fear of missing out (FOMO) when they cannot get to their device. 12% of respondents experience physical pain from overusing their smartphones – including sore thumbs and headaches.
Lee added: "Smartphones are, and will continue to be, incredibly useful devices. People have always loved communication, from telegrams to postcards, and the same is true for text messages and social media notifications. Smartphones' ability to distract can cause problems, but it is increasingly becoming easier to address this, and to change consumer behaviours."
Smartphone saturation; market maturation
Deloitte’s research also found that the UK smartphone market has changed considerably over the last few years.
SIM-only contracts, which enable users to upgrade their data and airtime without having to upgrade their phone, have increased in popularity in recent years; 32% of phones in the UK are on a SIM-only contract, up from 19% in 2015.
Smartphone owners are also holding on to their devices for longer before upgrading, with 59% of respondents saying they acquired their device in the previous 18 months, down from 62% in 2017 and 66% in 2016.
Dan Adams, head of telecommunications at Deloitte, commented: "The popularity of SIM-only contracts is one of a number of reasons that have contributed to the slowing of the smartphone replacement cycle. Other factors, such as a burgeoning second-hand smartphone market, improving refurbishment and the lack of visual differentiation in recent iterations of smartphones, may encourage people to settle for a three-year old hand-me-down rather than a brand new device.
"Smartphone innovation remains unrelenting, however, and consumers will soon realise that forthcoming invisible upgrades, such as 5G, artificial intelligence and machine learning, will ultimately trump changes to physical appearances."
Vox populi: over 55s embrace voice assistants
The usage of smartphone and smart-speaker voice assistants is on the rise, according to Deloitte’s research. Overall ownership of smart speakers has more than doubled in the last year, rising from 5% to 12% of respondents. However, for older consumers aged 55-75 years-old, adoption of smart speakers has trebled since 2017, increasing by six percentage points to 9% in the last year.
Usage of voice-assisted speakers is highest amongst over 45-75 year olds, with 63% using a smart speaker on a daily basis. In contrast to their older peers, only 40% of 18-24 year olds who own them use a smart speaker daily.
Lee added: "Voice assistants are appealing to older generations who are less inclined to swipe and type than their younger peers.
"Whereas millennials and Generation Z users have grown up using digital devices to type, tap and swipe, older users are much more comfortable speaking a request to a machine, avoiding the need to find reading glasses, or navigate to an on-screen menu."
Source: Deloitte UK.
Friday September 21st, 2018 08:13:56 AM
PwC Ireland has released its annual pre-Budget survey. The results point toward a high level of confidence among Ireland's business leaders ahead of Budget 2019. Those polled pinpoint improving the national infrastructure, reducing personal tax burdens, dealing with the housing crisis to support the labour force and boosting Ireland's competitiveness as key priorities to be addressed on 9 October.
The results of the survey also include calls for measures to support entrepreneurship in the face of Brexit and mixed views on new international tax proposals.
Joe Tynan, PwC's Head of Tax, said: "Reflective of Ireland's robust economic growth, the survey shows a high degree of confidence. However, maintaining Ireland's competitiveness is vital in light of Brexit and other geopolitical uncertainties. The survey highlights the rising cost of doing business, available talent and residential housing as key concerns among the business leaders who participated. As a small open economy on the edge of Europe, ensuring that our economy has the capacity to absorb future foreign direct investment is critical."
Tynan also believes that Ireland needs to demonstrate and broadcast its commitment to international tax reform, which will help keep Ireland at the forefront of mind for businesses looking to locate their operations abroad.
"For Ireland, one of our biggest concerns is how to manage our international tax reputation. As a country, we have been very good at providing an environment where companies can align their intellectual property, employees and profits. However, we need to be careful that we move in line with other countries, not ahead.
"The recent corporate tax roadmap provides greater certainty about the future direction of tax change and builds on strides made toward a fairer and more transparent tax system in Ireland. Our challenge is to ensure that we have a sustainable tax model that provides a level of certainty and stability for business. Ireland has the ingredients to do just that."
Source: PwC Ireland.
Friday September 21st, 2018 07:58:56 AM
The majority of the UK's largest companies have adopted policies on boardroom diversity, but their reporting to stakeholders needs to improve. Research conducted for the Financial Reporting Council (FRC) by the University of Exeter Business School shows that only 15% of FTSE 100 companies fully complied with the UK Corporate Governance Code’s provision on diversity reporting by describing their policy on diversity, the process for board appointments, their objectives for implementing the policy, and progress on achieving them.
The FRC’s analysis shows that FTSE 350 companies' approaches to diversity are wide-ranging. While some do demonstrate a deeper understanding of diversity as an issue of strategic importance, the great majority appear to treat reporting as a compliance exercise, suggesting a lack of commitment.
The revised UK Corporate Governance Code, which takes effect from 1 January 2019, requires improved reporting on diversity. It calls on boards to include in their annual reports a description from their nomination committee of how they have applied the company's diversity policy including how this links to progress on achieving company objectives.
The revised Code has a renewed emphasis on succession planning and diversity reporting, encourages boards to think beyond gender diversity and to act to ensure appointment and succession planning practices promote diversity more broadly. The changes encourage companies to build diversity across their workforces to feed the development of a diverse pipeline for succession to senior management.
Board Diversity Reporting in 2018 provides a snapshot of diversity reporting across the FTSE 350 and identifies examples that lead the way in terms of quality and approach.
The key findings of the research include:
98% of FTSE 100 and 88% of FTSE 250 companies have a policy on board diversity, a considerable improvement since 2012 when this was first included in the UK Corporate Governance Code;
However just 15% of FTSE 100 companies report against all four measures stated within provision B.2.4 of the current UK Corporate Governance Code; and
Some companies are embracing the spirit of diversity in their narrative reporting, but many need to develop a clearer strategy to drive greater diversity at senior management level.
Tracy Vegro, FRC Executive Director of Strategy and Resources said: "There is almost universal acceptance that diversity contributes to more effective decision-making and mitigates the danger of group-think. Some of the findings of this report are disappointing and FTSE 350 companies should provide fuller disclosures on all diversity.
"We expected to see more of our largest companies providing greater information about their approach to boardroom diversity and insights on the actions they are taking to increase diversity at all levels, particularly those in the current UK Corporate Governance Code. To maintain a competitive edge and success over the long-term, UK companies need to consider how diversity and inclusion is relevant to the markets in which they operate, all their stakeholders and the communities they serve.
"We are writing to companies to challenge them to take a more strategic approach to diversity and inclusion, and to consider their approach to reporting on it."
Source: Financial Reporting Council.
Friday September 21st, 2018 07:49:37 AM
Speaking at the Dublin Economics Workshop in Wexford, Sharon Donnery, Deputy Governor of the Central Bank of Ireland, outlined five key lessons from the Irish financial crisis. The Deputy Governor began her remarks by saying: "Whilst not unique to the Irish experience, some are lessons which we in Ireland learned, to devastating effect, the hard way."
The five lessons outlined in the speech are:
The need to mitigate the build-up of systemic risk, with both macro-prudential and micro-prudential policy tools;
The need for all sectors of the economy – banks, individuals, households, businesses and government – to build resilience;
The type and quality of regulatory capital, and not just the level, are important for banks;
While some banks will inevitably fail, in order to protect taxpayers, we must actively prepare for their failure and ensure that impediments to resolvability are removed; and
The crisis showed the need for cross-border authorities, but further work must be undertaken to sustain the Banking Union.
Introducing her remarks, Deputy Governor Donnery said: "The crisis affected every aspect of Irish society, of the Irish economy, of the Irish banking system. A decade later, significant numbers of people across the country are still dealing with its legacies."
When discussing the macroprudential framework, Deputy Governor Donnery spoke about the Countercyclical Capital Buffer and the Other Systemically Important Institutions buffer. On the issue of the mortgage measures, she added: "We are very conscious that the deposit requirements are a heavy burden on many people trying to build for their future, but there is, I think, a public understanding that as hard as that is, these measures are necessary and better than the alternative.
"While the use of macro-prudential tools may not have averted the crisis a decade ago, the scale of the downturn in Ireland could have been limited and the high cost to citizens reduced," she said.
She concluded by saying: "We should keep the lessons from the crisis to the forefront of our mind, in our work, in our thinking, and in our communications. Then, our combined efforts to highlight and address risks and build resilience will make the financial system stronger and safer, thereby safeguarding stability and protecting consumers."
Source: Central Bank of Ireland.
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