ROS Pay and File extended deadline to 17th November 2021

 

 

 

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Revenue has confirmed that the extended ROS Pay and File deadline is Wednesday, 17th November 2021.

 

For self assessment Income Taxpayers who file their 2020 Form 11 Tax Return and make the appropriate payment through the Revenue Online System in relation to (i) Preliminary Tax for 2021 and/or (ii) the balance of Income Tax due for 2020, the filing date has been extended to Wednesday, 17th November 2021.

 

This extended deadline will also apply to CAT returns and appropriate payments made through ROS for beneficiaries who receive gifts and/or inheritances with valuation dates in the year ended 31st August 2021.

 

To qualify for the extension, taxpayers must pay and file through the ROS system. 

 

In situations where only one of these actions is completed through the Revenue Online System, the extension will not apply.  As a result,  both the submission of tax returns and relevant payments must be made on or before 31st October 2021.

 

 

Research and Development (R&D) Tax Credit – Revenue eBrief No. 089/21

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Revenue published Tax and Duty Manual Part 29-02-03 - Research and Development (R&D) Tax Credit today.

 

These updated guidelines clarify Revenue’s treatment of rental expenditure as well as including information on the treatment of subsidies received under (i) the Temporary Wage Subsidy Scheme (TWSS) and (ii) the Employment Wage Subsidy Scheme (EWSS).

 

According to previous guidance material on this matter issued on 1st July 2020 Revenue’s position was that ”rent is expenditure on a building or structure and is excluded from being expenditure on research and development by section 766(1)(a) TCA 1997″.

 

Since then, Revenue’s position has been the source of continuous discussion and debate with many disagreeing with Revenue’s interpretation of the treatment of rent in relation to R&D claims.

 

Clarity had been sought from Revenue with regards to their position on rent in relation to both historic and new claims for Research and Development tax relief.

 

In this latest update, Revenue has clarified that rent will qualify in such circumstances where “the expenditure is incurred wholly and exclusively in the carrying on of the R&D activities.”

 

According to Paragraph 4.2 of the updated Revenue Guidance Manual:

“In many cases expenditure incurred on renting a space or facility, which is used by a company to carry on an R&D activity, may be expenditure that is incurred “for the purposes of”, or “in connection with”, the R&D activity but will not constitute expenditure incurred wholly and exclusively in the carrying on of the R&D activity. The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities. Where the nature of the rented space or facility is such that it is integral to the carrying on of the R&D activity itself then it is likely that the rent can be shown to be more than merely ”for the purposes of” or “in connection with” the R&D activity.”

 

 

Therefore, it is possible for rental expenditure to be included as part of an R&D tax relief claim but only where that rented building is deemed to be integral to the carrying on of R&D activities.  According to Revenue’s guidance material, an example of a rental expense that may be considered qualifying expenditure might relate to the rental of a specialized laboratory used solely for the purposes of carrying out R&D activities. This is contrasted with the rental of office space necessary to house an R&D team, but which is not deemed to be integral to the actual R&D activity.  In this case, this rent would not be treated as eligible expenditure.

 

Revenue have confirmed that this position will only apply for accounting periods commencing on or after 1st July 2020. 

 

 

Revenue’s Manual has also been updated to include:

  • Confirmation that the EWSS and TWSS are considered State support and therefore expenditure from such assistance will not qualify for relief.  In other words, such amounts will reduce the qualifying allowable expenditure or qualifying R&D tax relief expenditure.
  • The COVID-19 practice for 2020, in relation to the use of a building in a ‘specified relevant period’ under section 766A TCA 1997.
  • A further example of a subcontractor who would not be eligible to claim the R&D tax credit.

 

 

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-29/29-02-03.pdf

 

 

The standard rate of Irish VAT is due to increase to 23% with effect from 1st March 2021

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The standard rate of Irish VAT is due to increase to 23% with effect from 1st March 2021.

 

The rate had been reduced to 21% for a six month period from 1st September 2020 to 28th February 2021.

 

Please be aware that the VAT rate reduction from 13.5% to 9% for certain goods and services, mainly within the tourism and hospitality sectors, will continue to apply until 31st December 2021.  Please follow link for more details:   https://www.revenue.ie/en/vat/vat-rates/what-are-vat-rates/second-reduced-rate-of-value-added-tax-vat.aspx

 

To prepare for the VAT rate change, there are a number of practical issues that taxpayers should consider as follows:

 

1. Update your Systems

 

2. Amend your Pricing structure if necessary.

 

3. Review and/or Revise your Contracts

 

4. Amend your Sales invoices

 

5. Don’t forget the Reverse Charge Mechanism especially for invoices dated pre 28th February but in circumstances where they’re received after 1st March 2021.

 

6. Credit notes - If you initially raised an invoice charging 21% VAT but the customer requests a credit note after the VAT rate has changed i.e. after 1st March 2021, please be aware that you may be required to apply the 21% rate after the VAT rate has returned to 23%.

 

7. If your business pays VAT to Revenue on a monthly direct debit basis, you should check to see if you’re required to increase this amount after 1st March 2021.

 

8. Consider how to account for payments on account which are received in advance of the VAT rate change.

 

9. Annual Return of Trading Details – Please be aware that the Annual Return of Trading Details deadline date has been extended from 23rd January to 10th March 2021 to take account of the rate change in 2020.

 

Update to CGT Revised Entrepreneur Relief Manual

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According to eBrief No. 030/21, Revenue’s Revised Entrepreneur Relief Manual has been updated to reflect an amendment made to the relief under Section 597AA CTA 1997 by section 24 Finance Act 2020.

 

Revised Entrepreneur Relief is a relief from the standard Capital Gains Tax rate of 33% that would normally apply to the sale of a business.

 

It applies to individuals disposing of certain business assets.

 

The relief provides for a 10% rate of CGT to apply to chargeable gains arising on disposals or part disposals of “qualifying business assets” up to a lifetime limit of €1 million.

 

The term “chargeable business assets” includes:

  • shares held by an individual in a trading company and
  • assets owned by a sole trader and used for the purposes of his/her trade.

 

The term “chargeable business assets” excludes:

  • shares, securities or other assets held as investments
  • development land
  • goodwill disposed of to a connected company
  • assets which when disposed of would not give rise to a chargeable gain.
  • assets owned personally, outside the company, even in circumstances where such assets are used by the company or
  • shares or securities in a company where the individual remains connected with that company following the disposal.

 

The conditions include:

  • the qualifying business assets must have been owned by the relevant individual for a continuous period of three years in the five years immediately prior to the disposal of those assets.  It is important to remember that periods of ownership by spouses cannot be aggregated for the purpose of the three year continuous ownership condition.  It should also be borne in mind that periods of ownership of assets before and after incorporation of a business cannot be aggregated for the purpose of the  three year continuous ownership condition.
  • where a business is carried on by a company, individuals seeking to qualify for the relief must own not less than 5% of the shares in the qualifying company or 5% of the shares in a holding company of a qualifying group.  The requirement for an individual to have owned a holding of at least 5% of the ordinary share capital for a continuous period of three years in the five years immediately prior to the disposal has been amended by section 24 Finance Act 2020, so that the shares will qualify for relief if they were held for a continuous period of three years at any time prior to the disposal of those shares. 
  • For the purposes of accuracy and completeness, a holding company means a company whose business consists wholly or mainly of the holding of shares of all companies which are its 51% subsidiaries and a qualifying group means a group where the business of each 51% subsidiary, other than a holding company, consists wholly or mainly of carrying on a qualifying business.
  • The amendment in section 24 Finance Act 2020 applies to disposals of chargeable business assets made on or after 1st January 2021.
  • The individual must have been a director or an employee of the qualifying company or companies in a qualifying group and is required to spend at least 50% of his or her time working for the company or companies in a managerial or technical role and has served in that capacity for a continuous period of three years in the five years immediately before the disposal of the chargeable business assets.

 

 

For further information, please click the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-06-02b.pdf

European Commission to appeal GCEU’s judgment in the Apple State aid case

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Today, in a statement issued by Vice President Margrethe Vestager, the European Commission confirmed that it will appeal the judgment of the General Court of the European Union in the Apple State aid case to the Court of Justice of the European Union.

 

On 15th July 2020, the General Court of the European Union found that no State aid had been given by Ireland to Apple and that the Irish branches of Apple had paid the correct amount of tax due under legislation.

 

Vice President Margrethe Vestager stated that

the General Court judgment raises important legal issues that are of relevance to the Commission in its application of State aid rules to tax planning cases. The Commission also respectfully considers that in its judgment the General Court has made a number of errors of law. For this reason, the Commission is bringing this matter before the European Court of Justice.”

 

 

Ireland had previously appealed the Commission’s Decision on the basis that the correct amount of Irish tax had in fact been paid by Apple and that Ireland had not provided State aid to Apple.  The judgment from the General Court of the European Union vindicates Ireland’s position.

 

The Minister for Finance, Paschal Donohoe T.D. said,

“I note the decision of the European Commission to lodge an appeal to the CJEU. Ireland has not yet been served with formal notice of the appeal. When it is received, the Government will need to take some time to consider, in detail, the legal grounds set out in the appeal and to consult with the Government’s legal advisors, in responding to this appeal.”

 

The funds in escrow of €13 billion will only be released when there has been a final determination in the European Courts on the validity of the Commission’s decision.

 

This appeal process could take up to two years.

 

 

For more information, please click: https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_20_1746

 

 

 

Capital Gains Tax – Treatment of allowable losses

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Revenue have confirmed in today’s ebrief No. 124/20 that there is no requirement for a person to include a capital loss in a tax return for the chargeable period in which the loss arises in such circumstances where there is no chargeable gain, arising in the same chargeable period, against which it may be offset.

 

Revenue’s Tax and Duty manual Part 19-02-05 has been updated.

 

Paragraph 5.1 clarifies Revenue’s position that, where an allowable loss arises in a chargeable period and there is no chargeable gain arising in the same chargeable period against which it may be offset, then there is no obligation for a person to include the loss in a tax return for the chargeable period in which the loss arises.

 

For further information, please click the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-02-05.pdf

New Developments in PAYE Services

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Following recent developments of the PAYE system,  employees and Proprietary Directors can now access details of their total pay and statutory deductions for 2019. They can also view their tax position for the year based on Revenue’s preliminary calculation.

 

New terminology and documentation have been introduced as follows:

  1. The Employment Detail Summary replaces the P60 for 2019 and subsequent years. is the official record of an employee’s pay and statutory deductions for the year.
  2. The Preliminary End of Year Statement is a calculation by Revenue of the employee or Proprietary Director’s income tax and USC liabilities for 2019 based on the payroll information submitted by employers throughout 2019.
  3. The Statement of Liability replaces the P21 Balancing End of Year Statement.

 

You can access the record of your payroll details for 2019 as follows:

  • Go to MyAccounts
  • Click on the PAYE Services Screen
  • Click on Employment Detail Summary
  • Click on Review Your Tax 2016 – 2019

 

This summary of payroll information or proof of income can be downloaded or printed for you to retain or it provided to third parties as required.

 

To calculate whether you have underpaid, overpaid or paid the correct amount of income tax and USC for 2019 you can request a Preliminary End of Year Statement by

  • Clicking on PAYE Services
  • Clicking on Review Your Tax 2016 – 2019
  • Clicking on Statement of Liability for 2019

 

If you have overpaid your taxes, based on the Revenue’s records, please be aware that the refund will not issue automatically.   You will need to file an Income Tax Return for 2019 to include (i) your total income, (ii) any allowable deductions and (iii) your tax credits so that Revenue has been provided with full and complete information necessary to calculate your tax position.

 

In order to file an Income Tax Return, you should:

  • Go to MyAccount
  • Click onto the pre-populated form for 2019
  • Examine the information contained in the form to ensure it is correct
  • Insert all relevant information that has not been included in this pre-populated form including dividend income, deposit interest, health expenses, etc.

 

Once you have submitted your Income Tax Return,  it will be processed by Revenue and a Statement of Liability will issue along wtih any refund due for the 2019 year of assessment.

 

The refund can be paid in two ways: (i) directly into your bank account or (ii) by cheque posted to your home address.  if you wish to have the refund transferred electronically, you must:

  • Go to MyAccounts
  • Click onto MyProfile
  • Insert the BIC, IBAN and full name on the bank account in the relevant sections

 

If, however, the Preliminary End of Year Statement shows that you underpaid your taxes for the 2019 year of assessment, you must file an online Income Tax Return to include all relevant income, allowable deductions, tax credits, etc.  This can be done through MyAccount.  Once Revenue has processed the information, a Statement of Liability will issue.  This document will outline how any underpayment is be recovered.  Options include adjusting your tax credits and standard rate cut-off point over one or more years.

 

The Revenue Commissioners will write to taxpayers who have underpaid tax based on their preliminary calculations, requiring them to complete and file an Income Tax Return for 2019.

 

In circumstances where the taxpayer does not file a return, the Revenue Commissioners will write to them again, this time outlining how the underpayment is to be collected.

 

 

US Senate approves Swiss/US DTA protocol

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On 17th July 2019, the U.S. Senate approved the 2019 Protocol to amend the Switzerland USA Double Taxation Agreement.

 

Formally, the protocol will enter into force on the date the instruments of ratification are exchanged.

 

The core element of the protocol of amendment is the exchange of information.

 

The protocol provides for the following changes:

  • Currently there is no differentiation between tax evasion and tax fraud in Switzerland. This was in line with the international standard on information exchange. Switzerland applied this to in excess of one hundred jurisdictions however, the United States was not one of them. The protocol will erase this difference within the context of administrative assistance in relation to the U.S. It will also apply to other categories of information requests.
  • For pillar 3a solutions (i.e. dividends paid to individual retirement arrangements), it will provide for an exemption from the source country (i.e. the Us) withholding 15% tax on cross border dividends from 1st January 2020 provided the protocol of amendment comes into force in 2019.
  • Mandatory binding arbitration of unresolved competent authority cases will be implemented where the competent authorities cannot reach agreement in the mutual agreement procedure. This will eliminate exposure to double taxation.
  • Under the new provision, the United States will be able to make group requests under the FATCA Agreement. The IRS will submit the group requests to the Swiss Federal Authority. The affected Swiss financial institutions will have ten days to deliver the required information on receipt of the request from the Swiss Federal Authority.

This milestone in the Switzerland and USA tax relationship is likely to make Switzerland far more appealing to U.S. multinationals.

UK Private Residence Relief

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If you have recently moved to the UK and intend selling your home in Ireland, please be aware that even if you qualify for Principal Private Residence Relief under Section 604 TCA 1997 in Ireland you may not qualify for UK Private Residence Relief.

This article is aimed at individuals who have become UK resident and who are in the process of selling their Irish principal private residence.

 

In general, you do not pay Capital Gains Tax when you sell or ‘dispose of’ your home if all the following conditions apply:

  • you have only one home and you’ve lived in this property as your main home for the entire time you’ve owned it
  • you have not let part of it out (Please be aware that this does not include having a single lodger)
  • you have not used part of the property for business purposes only
  • the grounds, including all buildings, are less than 5,000 square metres in total
  • you did not buy the property with the sole or main intention to make a gain

If all the above conditions apply you will automatically get a tax relief called Private Residence Relief.

 

 

Your period of ownership begins on the date you first acquired the dwelling house or on 31st March 1982 if that is the later date. It ends when you dispose of or sell the property.

The final 18 months of your period of ownership will always qualify for Private Residence Relief regardless of how you use the property during that time but providing the property has been your only or main residence at some point.

 

 

The following periods of absence are treated as periods of occupation for the purposes of calculating Private Residence Relief:

  • Any periods of absence, for whatever reason, not exceeding three years in total
  • Any period of absence when carrying out the duties of your employment outside the United Kingdom
  • Any periods not exceeding four years in total which are due specifically to employment requirements.

 

In order for these periods of absence to qualify as “deemed occupation” there must be a time both before and after the absence when the dwelling house is the individual’s sole or main residence. It is important to keep in mind that absences due to the conditions of an employment will qualify for the Relief even if the individual does not return to the dwelling house afterwards provided the reason for not their returning is due to their contract of employment requiring them to live somewhere else.

 

Any period of absence which requires the individual to live in job/work related accommodation will qualify for Private Residence Relief if there is an intention to occupy the dwelling as a main residence at some point.

 

HMRC will, by concession, allow a period of up to one year before the individual begins to occupy the property as his/her principal private residence to be treated as a period of occupation provided the property is then occupied as his/her only or main residence. In exceptional cases, HMRC may extend this period to two years.

 

From April 2015, the PRR rules were amended so that a property may only be treated as an individual’s main or sole residence for a tax year where that person or his/her spouse/legally registered partner has either:

(a) been tax resident in the same country as the property for the tax year in question (For further information on residence rules please follows this link:  https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1) or

(b)  has stayed overnight in the property at least 90 times in that UK tax year.  Time spent in another property owned in the same jurisdiction/country can also be included in the ninety day count so that the total number of days in all properties in the territory in question are added together.

 

The new rules apply equally to a UK resident individual disposing of an overseas home as well as to a non-UK resident disposing of a home in the United Kingdom.

 

Finally, Lettings Relief may be available in circumstances where Principal Residence Relief is restricted because all or part of a property has been rented out.

This Relief is particularly important for individuals who, due to the current economic climate, experience difficulty selling their former home and, as a result, find they need to rent it out while they’re trying to sell it.

A maximum gain of £40,000 per owner is exempt from Capital Gains Tax provided that property has at some time been the main or only residence of the owner.

From 6th April 2020 there will be a change to this Relief whereby Lettings Relief will only be available in situations where the owner shares occupancy with the tenant.

 

Form 46G

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Traders (including farmers), professionals and other persons carrying on a business, as well as non-trading or non-profit making organisations and bodies of persons (including charitable organisations and statutory bodies) are required to file Forms 46G annually containing details of payments made by them to third parties for services provided.

 

For individuals / persons (other than companies) the return should include payments made

  1. in the twelve month period to 31st December each year or
  2. up to the date on which accounts of the trade or profession are normally prepared

The Form 46G must be filed on or before 31st October of the following year.

 

For companies, the Form 46G should cover all relevant payments in an accounting period and be submitted no later than 9 months following the end of the relevant accounting period.

 

A non-compliant taxpayer (i.e. where a taxpayer fails to deliver a true and correct return) may be liable to a penalty of €3,000. In addition to which a tax clearance certificate may not be granted and tax refunds may be withheld.

 

Details of payments must be returned where the total amount paid to one individual or company in the year exceeds €6,000.

 

Relevant payments include:

  • Payments for services provided in connection with the trade, profession, business etc.
  • Payments for services provided in connection with the formation, acquisition, development or disposal of the trade or business
  • Periodical or lump sum payments made in respect of any copyright.

 

Revenue provides a list of services that must be specifically disclosed. This list should be reviewed prior to filing a Form 46G on an annual basis.

 

The following categories of services were recently added:

  • Call Centre/Customer Service
  • Childcare
  • Fitness, Sport & Leisure Services
  • Fleet Management Services
  • Health & Safety Services
  • HR/Recruitment Services
  • Internet & Information Technology related services (including website design or re-design, cloud services etc.)
  • Landscaping/Gardening/Horticulture
  • Marketing /Business Analysis
  • Printing & Publishing
  • Research

 

Certain payments are not required to be disclosed such as:

  • Payments for essential services/utilities such as electricity, gas and telephone
  • Payments from which income tax has been deducted
  • Payments from which withholding tax has been deducted.  This includes payments which are subject to PAYE, fees paid subject to withholding tax, payments subject to Relevant Contracts Tax (RCT), etc.
  • Payments to non-residents
  • Payments for services where the value of any goods provided as part of the service exceeds two thirds of the total charge

 

For further details, please follow the link:

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-38/38-03-13.pdf