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Qualifying Disclosures. Prompted or Unprompted. Revenue Compliance Interventions. Audits and Investigations. New Code of Practice.

The Revenue Commissioners published a new Code of Practice for Revenue Compliance Interventions, which took effect from 1^st May 2022.  From that date onwards, if you receive a Revenue Letter or Notification to examine your tax affairs it will be described as a “Compliance Intervention”, classified under three risk levels: Level 1, Level 2 or Level 3.   The type of qualifying disclosure varies, depending on the risk level.

What is a Qualifying Disclosure?

According to Revenue’s most recent guidance material, “a qualifying disclosure is information you give to Revenue if you:

• have not reported all of your income or gains or
• have made an error on your tax return.

This qualifying disclosure may be unprompted or prompted.”

Under a Level 1 Compliance Intervention, an unprompted qualifying disclosure may be made.  This means a disclosure can be made at any time before a Revenue Audit Notification letter is issued or an investigation commences.  This includes a full disclosure of the tax underpaid, accompanied by full payment of the tax liability along with statutory interest.  Taxpayers can also avail of the self-correction without penalty option, provided tax returns are corrected within the required timeframe. An unprompted qualifying disclosure reduces (i) penalties and (ii) avoids publication on Revenue’s Tax Defaulters List.

Under a Level 2 Compliance Intervention, it is no longer possible to make an Unprompted Qualifying Disclosure from the date of issue of Revenue’s Letter of Notification.  However, a taxpayer can still make a prompted qualifying disclosure in relation to their tax underpayments. This is possible right up until the commencement of the compliance intervention.  The information to be included in a prompted qualifying disclosure is dependent on the category of behaviour giving rise to the tax default.  Taxpayers have 28 days to make a disclosure following notification of a Level 2 intervention.  A taxpayer can request an additional 60 days to prepare the prompted qualifying disclosure.  This Notice of Intention must be made within 21 days from the date of the compliance intervention notification.

A Level 3 Compliance Intervention is the most serious level of intervention and relates to investigations.  The taxpayer cannot make a qualifying disclosure in relation to the matters under investigation once notified of a Level 3 compliance intervention.

How do I make a qualifying disclosure?

According to Revenue’s most recent guidance material, “to make a qualifying disclosure, you must:

• give all relevant information about the issues that have resulted in tax being due

• state the amount of tax and interest due, and the periods for which they are due

• send this to Revenue in writing, sign it, or have it signed on your behalf

• include a declaration that as far as you know all information in the disclosure is correct and complete and

• include a payment for any tax or duty, and interest due for late payment.

To be accepted by Revenue, a disclosure must be accompanied by a payment of the tax or duty, and the interest due. It is possible to arrange for payment in instalments.”

For further information, please click:

https://www.revenue.ie/en/self-assessment-and-self-employment/making-a-disclosure/qualifying-disclosure.aspx

https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-compliance-interventions.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Budget 2023 – Corporate Tax, Personal Taxes Global Mobility, Employment Taxes, SARP, FED, KEEP

Today, Minister for Finance, Paschal Donohoe T.D., and Minister for Public Expenditure and Reform, Michael McGrath T.D. presented Budget 2023.  We have summarised the key measures included in this “cost of living” Budget including Ireland’s headline Corporate Tax rate remaining unchanged at 12½%.  A number of welcome personal tax and global mobility employment tax measures to benefit Irish employees and international assignees include an extension to the Special Assignee Relief Programme (SARP),  to the Key Employee Engagement Programme (KEEP) and the Foreign Earnings Deduction (FED).   The key Corporate Tax measures include amendments to the R&D tax credit, the extension of the KDB as well as the extension of the film tax credit, subject to a commencement order.

GLOBAL MOBILITY & EMPLOYMENT

In Budget 2023, Minister Donohoe announced an extension to a number of existing personal tax reliefs including:

• Special Assignee Relief Programme (SARP) is to be extended to the end of 2025.  The minimum income threshold for an employee to qualify for SARP is being increased from €75,000 to €100,000 for new entrants.  Existing claimants will not be affected by this change.  In other words, this higher qualifying threshold will not apply to current claimants availing of the relief.  For associated articles, please click SARP – 2023 Update – Accounts Advice Centre

• Key Employee Engagement Programme (KEEP) is to be extended to the end of 2025.  The lifetime company limit for KEEP shares will be raised from €3 million to €6 million.  KEEP is also being modified to provide for the buy-back of KEEP shares by the company from the relevant employee.

• Foreign Earnings Deduction (FED) which is a personal tax relief for employees who are tax resident in Ireland and who travel out of the State to temporarily carry out employment duties in certain qualifying countries was extended for a further three years to the end of 2025. FED provides relief from income tax on up to €35,000 of income.

• Another significant development was the doubling of the Small Business Exemption from €500 to €1,000 effective from 2022. Employers will also be permitted to grant an employee two vouchers/non-cash awards in a single year, provided the cumulative value of the two vouchers does not exceed €1,000.

PERSONAL TAX

Key measures included in Budget 2023:

• A significant increase in the Standard Rate Cut-Off Point to €40,000 for single individuals and €49,000 for married couples with one earner. This means that a single person can now earn an additional €3,200 before paying tax at the 40% Income Tax rate.

• An increase of €75 in the Personal Tax Credit, Employee Tax Credit and the Earned Income Tax Credit (all currently set at €1,700). For the tax year 2023 onwards the new tax credits be each be €1,775

• An increase of €100 in the Home Carer tax credit. From 2023 it will be increased to €1,700.

• A reintroduction of the rent tax credit of up to €500 for renters in the private sector for 2023 to 2025. It will be possible to claim this tax credit on a retrospective basis in relation to rent paid in 2022.  One credit per person can be claimed per year.

• The Sea-going Naval Personnel Tax Credit has been extended to the end of 2023.

• An increase in the ceiling of the 2% USC rate from €21,295 to €22,920.

• The exemption from the top rate of USC for medical card holders, and those aged over seventy years earning under €60,000 will continue beyond 2022. In other words, the reduced rate of 2% USC will be extended until the end of 2023.

• There is no increase to Employer’s PRSI rates.

ENTERPRISE – Corporate Tax

The main corporate tax measures include amendments to the Research & Development tax credit and extensions to the Knowledge Development Box and film tax credit regimes:

• The Temporary Business Energy Support Scheme (TBESS) was introduced to support trading businesses. The scheme will be open to businesses carrying on a Case I trade that are tax compliant and have experienced a significant increase in their natural gas and electricity costs. Businesses carrying on trading activities will be eligible for a refund of 40% on the increase in electricity and gas prices, subject to a monthly cap of €10,000 per trade.  Detailed information on the scheme has not yet been published, however, it is believed the scheme will operate by comparing the average unit price for the relevant period in 2022 with the average unit price for the corresponding period in 2021. If the increase in average unit price is more than 50% then the business will be eligible for the scheme. Businesses will be required to register for the scheme and to make claims within the required time limits.  This scheme is subject to State Aid approval from the EU.

• Amendments will be made to the R&D tax credit regime with respect to how repayments are made under the scheme which will ensure the regime is regarded as a “qualifying refundable credit” for the purposes of the Pillar Two Model Rules. Currently the R&D tax credit is firstly offset against current and prior year corporate tax liabilities followed by repayment over three instalments. The current system is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D Tax Credit or to request for it to be offset against other tax liabilities. In other words, the changes will enable taxpayer companies to call for the payment of their R&D tax credits in cash or for these to be offset against its tax liabilities in this three-year fixed period. The existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year.  Transitional measures will be introduced for one year for those that already engaged in R&D activities and claiming the credit

• An extension to the Knowledge Development Box regime for a further four years to 31^st December 2026. Currently the KDB provides for a 6.25% effective rate of corporation tax on profits generated from exploiting certain assets, including patents and software developed through R&D activities carried out in Ireland. In preparation for the changes under the OECD Pillar Two agreement, the effective rate under the KDB regime is to be increased from 6.25% to 10%.  The policy document released by the Department of Finance states that the commencement of this rate will be determined by reference to international progress on the implementation of the Pillar Two Agreement but it is expected in 2023.

• The extension of the Film Corporation Tax Credit until December 2028. Film relief is granted at a rate of 32% of qualifying expenditure which is capped at €70 million.

PROPERTY

Help-to-Buy Scheme

The scheme will continue at current rates for another two years and will expire on 31^st December 2024

Vacant Homes Tax (“VHT”)

A VHT will apply to residential properties which are occupied for less than 30 days in a 12 month period.

Exemptions will apply where the property is vacant for “genuine reasons.”

The applicable tax rate is three times the existing local property tax (“LPT”) rate

Residential Development Stamp Duty Refund Scheme

The stamp duty refund scheme will continue until the end of 2025.

The stamp duty residential land rebate scheme allows for a refund of eleven-fifteenths of the stamp duty paid on land that is subsequently developed for residential purposes. was due to expire on 31 December 2022. It has been extended to the end of 2025.

Pre-letting Expenses on Certain Vacant Residential Properties

The limit for landlords claiming allowable pre-letting expenses is to be increased from €5,000 to €10,000.

The vacancy period is to be reduced from 12 months to 6 months.

Levy on Concrete Blocks, Pouring Concrete and other Concrete Products

A 10% levy was announced in response to the significant funding required in respect of the defective blocks redress scheme. A 10% levy will be applied to concrete blocks, pouring concrete, and certain other concrete products

This levy applies from 3rd April 2023.

VAT

9% VAT rate for hospitality and tourism sector

The 9% VAT rate currently in place to support the tourism and hospitality sectors will continue until 28^th February 2023.

9% VAT rate on electricity and gas supplies

The temporary reduction in the VAT rate applicable to gas and electricity supplies (from 13.5% to 9%) will be extended to 28^th February 2023.

Farmers’ Flat-Rate Addition

The flat-rate addition is being reduced from 5.5% to 5% in accordance with criteria set out in the EU VAT Directive.

This change will apply from 1^st January 2023.

Zero-rated supplies

From 1^st January 2023 VAT on newspapers, including digital editions will be reduced from 9% to 0%.

For further information, please click: https://www.gov.ie/en/publication/4de03-your-guide-to-budget-2023/

and

https://www.revenue.ie/en/corporate/press-office/budget-information/previous-years/2023/budget-summary-2023.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Digital Services Taxes (DSTs) – Corporation Tax – Business Tax

On 5^th August 2022 the Irish Revenue Commissioners issued a new Tax and Duty Manual Part 04-06-03, which provides guidance on the tax deductibility of Digital Services Taxes (DSTs).  It states that DSTs are a turnover tax  levied on revenues rather than profits. Digital Services Taxes relate to the provision of digital services and advertising.  Revenue have confirmed that certain DSTs which are incurred wholly and exclusively for the purposes of a trade are deductible in respect of computing income of that trade for Irish corporation tax purposes.

For full information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-06-03.pdf

The guidance provides that certain DSTs incurred wholly and exclusively for the purposes of a trade (taxable under Case I and Case II Schedule D) are deductible in calculating the income of that trade for the purposes of computing Irish corporation tax.

The Revenue’s position is that Digital Services Taxes are a turnover tax.

They are levied on revenues associated with the provision of digital services and advertising and not on the profits.

The guidance provides that, in circumstances where the following DSTs have been incurred wholly and exclusively for the purposes of a trade, the Irish Revenue Commissioners will accept that they are deductible expenses in calculating the income of that trade:

• France’s Digital Services Tax;
• Italy’s Digital Services Tax;
• Turkey’s Digital Services Tax;
• United Kingdom’s Digital Services Tax; and
• India’s Equalisation Levy.

The Guidance material doesn’t distinguish between the two forms of equalisation levy under the Indian regime. At this time there is no clear guidance available however, it would be expected that that since both types of levy are so similar that both should be covered. If this situation applies to you, it is advisable to contact the Irish Revenue Commissioners to seek clarification via MyEnquiries.

This Guidance should be interpreted as an initial list.  According to The Revenue Commissioners “The list of DSTs above may be updated as required.”

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Residential Zoned Land Tax (RZLT) – New Irish Tax – Finance Act 2021 – New Property Tax

On 19^th July 2022 the Irish Revenue Commissioners published eBrief No. 148/22 in relation to Residential Zoned Land Tax (RZLT) which was a new Irish tax introduced by Finance Act 2021.  It applies to owners of serviced and undeveloped land that has been zoned for residential use.

For full information please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-22a/22a-01-01.pdf

Residential Zoned Land Tax (RZLT) applies to land that, on or after 1st January 2022, is zoned as being suitable for residential development and is serviced, with certain exclusions.

It does not apply to existing residential properties.

Where land is within scope of the tax on 1st January 2022, the tax will be charged from 1st February 2024 onwards.

RZLT is an annual tax, calculated at 3% of the market value of the land within its scope.

Owners of residential properties with yards and gardens greater than 0.4047 hectares will be required to register for RZLT, but will not need to pay it.

Each local authority will be required to prepare and publish a map identifying land within the scope of the tax.  This must be updated annually.

An owner of land which is zoned as being suitable for residential development and serviced on 1st January 2022 and where this development has not commenced before 1st February 2024 will be liable to file a return and pay the RZLT on or before 23rd May 2024, with certain exclusions.

Where land comes within the scope of the RZLT after 1st January 2022, the tax will be first due in the third year after it comes within scope.

The tax will continue to be payable each year in respect of the land unless a deferral of the tax applies or the land ceases to be liable to the tax.

RZLT will operate on a self-assessment basis.

From 2024 onwards, owners of the land in scope will be required to register for RZLT and then (i) make an annual return to Revenue and (ii) pay any tax liability in May of each year.

Interest, penalties and surcharges will apply in cases of non-compliance, including undervaluation of the land in scope and late filing of returns, etc.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Cryptocurrency. Capital Gains Tax (CGT). Personal Tax. Remittance Basis

On 27th April 2022 Revenue updated its guidance material to provide clarity on the tax treatment of transactions involving crypto-assets, particularly in relation to Capital Gains Tax (CGT) and the remittance basis of Tax.  This latest publication also provides worked examples.

The terms “cryptocurrency” and “cryptocurrencies” are not defined.

The Irish Central Bank places cryptocurrencies, digital currencies, and virtual currencies into the same category of digital money. It is important to bear in mind, however, that although defined in this manner, these “currencies” are unregulated and decentralised which means that no central bank either guarantees them or controls their supply.

Throughout Revenue’s updated document the term “crypto-asset” is used, which includes cryptocurrencies, crypto-assets, virtual currencies, digital money or any variations of these terms.  Revenue state that the information contained in their most updated guidance is for tax purposes only.

Under Section TCA97 Ch4 s71–5, an individual who is resident in Ireland but not Irish domiciled is liable to Irish income tax in full on his/her/their income arising in Ireland, and on “non-Irish income” only to the extent that it is remitted to Ireland.

This is known as the remittance basis of taxation.

It’s important to keep in mind that the remittance basis of taxation does not apply to income from an office or employment where that income relates to the performance of the duties of that office or employment which are carried out in Ireland.

Section 29 TCA 1997 is the charging section for Capital Gains Tax.

s29(2) TCA 1997 states that a person who is Irish resident or ordinarily resident and is Irish domiciled is chargeable to Irish CGT on gains on all disposals (on his/her/their worldwide assets) arising in the year of assessment regardless of whether the gains are remitted to Ireland or not.

s29(4) TCA 1997 states that an individual who is Irish resident, or ordinarily resident,  but not Irish domiciled is chargeable on gains arising on disposals of Irish assets in the year of assessment as well as on remittances to Ireland in the year of assessment in respect of gains on the disposals of foreign assets.  In other words, an Irish resident/ordinarily resident but non domiciled individual is liable to Irish CGT on remittances in respect of gains arising on the disposal of assets situated outside the state.

From professional experience, the location of the crypto asset is often difficult to prove.

According to Revenue’s most recent publication:

“… where a crypto-asset exists ‘on the cloud’, it will not actually be situated anywhere and therefore, cannot be
viewed as ‘situated outside the State’.”

If the crypto-asset isn’t located anywhere and isn’t, therefore, considered to be a “disposal of an asset outside the state” then the remittance basis of taxation does not apply and the gain arising will be liable to Irish Capital Gains Tax based on the residency rules of the individual.

As you can see, it is very much the responsibility of the taxpayer to be able to prove the location where the gain arose on the disposal of the crypto-assets.

Revenue have outlined their record keeping provisions in relation to all taxes as follows: https://www.revenue.ie/en/starting-a-business/starting-a-business/keeping-records.aspx

In situations where the records are stored in a wallet or vault on any device including a personal computer, mobile phone, tablet or similar device, please be aware that these records must be made available to Revenue, if requested.

As with all taxes, full and complete records must be retained for six years in accordance with legislation. It is important to keep in mind that these provisions apply to all taxpayers, including PAYE only taxpayers.

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Personal Tax Advisors Dublin. Qualified Accountants and Tax Consultants for individuals.

Today, 14th April 2022. the Irish Revenue published guidance (Revenue eBrief No. 090/22) on the tax treatments of Ukrainians, who continue to be employed by their Ukrainian employer while they perform the duties of their employment, remotely, in Ireland.  The Guidance material outlines a number of tax concessions which will apply for the 2022 tax year under PAYE (Employment Income) and Corporation Tax.

PAYE

As you’re aware, income earned from a non-Irish employment, where the performance of those duties is carried out in Ireland, is liable to Irish payroll taxes irrespective of the employee’s or employer’s tax residence status. However, by concession, the Irish Revenue are prepared to treat Irish-based employees of Ukrainian employers as not being liable to Irish Income Tax and USC in respect of Ukrainian employment income that is attributable to the performance of duties in Ireland.

Ukrainian Employers will not be required to register as employers in Ireland and operate Irish payroll taxes in respect of such income.

Please be aware that this concession only relates to employment income which is (a) paid to an Irish-based employee (b) by their Ukrainian employer.

In order for the above concessions to apply, two conditions must be met:

1. The employee would have performed his/her/their employment duties in Ukraine but for the war there and
2. the employee remains subject to Ukrainian income tax on his/her/their employment income for the year.

Corporation Tax

The Irish Revenue will disregard for Corporation Tax purposes any employee, director, service provider or agent who has come to Ireland because of the war in Ukraine and whose presence here has unavoidably been extended as a result of the war in Ukraine.

Again, such concessionary treatment only applies in circumstances where the relevant person would have been present in Ukraine but for the war there.

For any individual or relevant entity availing of the concessional tax treatment, it is essential that he/she/they retain any documents or other evidence, including records with the individual’s arrival date in Ireland, which clearly shows that the individual’s presence in Ireland and the reason the duties of employment are carried out in the state is due to the war in Ukraine.  These records must be retained by the relevant individual or entity as Revenue may request such evidence.

For further information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2022/no-0902022.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

VAT. International VAT. VAT Compliance. VAT Advisory Services. Tax Services

Today the Irish Government announced the following measures to help with the rising costs of energy, in addition to the cost of living measures of €2 billion which were previously announced.  Please be aware that this temporary VAT rate reduction has not be extended to home heating oil, which will remain at it’s current VAT rate of 13.5%:

• A temporary reduction in the rate of VAT on the supply of gas and electricity, from 13.5% to 9%, from 1st May until 31st October (at an estimated cost of €46 million to the Exchequer).
• An additional once off €100 lump sum to households eligible for the fuel allowance (for an estimated 370,000 recipients).
• A further reduction of 2.7% per litre in the excise levy on marked gas oil or green diesel.
• The reduced rates of excise duty on petrol (20 cents per litre), diesel (15 cents per litre) and green diesel (2 cents per litre), which were announced last month, will be extended to Budget Day at the end of August (at a cost of €80 million to the Exchequer).

The Minister for Finance also confirmed that the Public Service Obligation (P.S.O.) Levy will be set to zero by October 2022.

For full information, please follow link:  https://www.gov.ie/en/press-release/0a129-government-announces-further-measures-to-help-households-with-rising-cost-of-energy/?_cldee=lcXqBawaGsFsOWw3I_ME4giIjrsplWXd-72lcBtEruyHtX5gNJK0C75jcfN8DtDRoL9I-M69U5_UiLjbKHtHpQ&recipientid=contact-baa265b900fae71180fd3863bb3600d8-34a5f9f973f64e0ead12cc385e40b831&esid=f492a4af-0abc-ec11-983f-6045bd8c5c09

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

EU and Irish VAT. Revenue Compliance Interventions. Audits and Investigations. Section 56 Authorisation

Today, Revenue published e-Brief 45/22.  In it, the Irish Revenue Commissioners updated their VAT guidance material in relation to the operation of the Section 56 authorisation regime to provide further clarity in relation to qualifying persons, imports as well as the cancellation of authorisations.  The section 56 authorisation enables the holder of such to receives supplies of goods and services in Ireland at the 0% rate of VAT.  This is known as a ‘56B’ authorisation.

Broadly speaking, a VAT registered entity is eligible to apply for a Section 56 authorisation where over 75% of their annual turnover is derived from qualifying sales including intra-community supplies of goods, exports and certain contract work.

The definition of a “qualifying person” is an accountable person whose turnover from zero-rated intra-Community supplies of goods, export of goods outside the EU and supplies of certain contract work equates to 75% or more of their total annual turnover for the twelve month period preceding the making of an application for Section 56 authorisation. (Section 52 FA 2021 amended the definition of “qualifying person” in section 56 VATCA 2010).

Start Up Situations

Previously, a person could only apply for a section 56 authorisation where they could demonstrate that they qualified for one in the twelve month period prior to making the application.  The updated Guidance material now includes an exception to this requirement for start-up entities, on an interim basis, provided certain criteria are met:

1. their turnover from zero-rated intra-Community supplies of goods, exports and certain supplies of contract work will exceed 75% of their total turnover in the first twelve months of trading

2. they satisfy all other conditions as set out under Section 56 and

3. the start up entity is a subsidiary of, or is otherwise connected to a company that is in possession of a current Section 56 authorisation.

The third condition will cause difficulties for many start-up companies, since in many cases they are new individual companies with no related entities. As such, it would appear the start-up would be required to wait the full twelve months before making a VAT56B application.

Renewals of existing Authorisations

e-Brief 45/22 confirms that for renewals of existing valid authorisations, the turnover figure, from audited financial statements for an accounting year end falling within the twelve month period preceding the application, may be used.

Interaction with postponed VAT accounting arrangements

As Section 56 Authorisation allows the importation of goods at 0% VAT rate, the holder of a section 56 authorisation is, therefore, not permitted to use postponed accounting arrangements.

Cancellation of an Authorisation

The cancellation of a VAT56B arises where Revenue is not satisfied that there is a continuing entitlement to such authorisation.

Revenue will cancel the authorisation, by notice in writing, in circumstances where:

1. the authorised person is no longer a qualifying person

2. the information provided, or the declarations made when applying for the authorisation were proven to be materially false, incorrect, or misleading

3. the authorised person fails to comply with the “Post authorisation obligations” outlined.

Where the authorisation is cancelled, a formal written notice will be issued to the accountable person outlining the grounds for cancellation.

Revenue can request documentation and proof from the accountable person in circumstances where it has reservations regarding the entitlement of that person to a Section 56 Authorisation.

The cancellation may be appealed to the Tax Appeals Commission.

For further information, please click: Section 56 Zero Rating of Goods and Services – [Section 56 Zero Rating of Goods and Services] (revenue.ie)

If you wish to make an appointment to discuss this area of tax, please email us at querie@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Revenue Compliance Interventions – Income Tax, Corporation Tax, VAT – Risk Review, Revenue Audits and Investigations

The Revenue Commissioners published a new Code of Practice for Revenue Compliance Interventions today which will be effective from 1^st May 2022 and will apply to all compliance interventions notified on/after that date. The revised Code applies to all taxes (including Personal Tax, VAT, Corporate Taxes, etc.) and duties, with the exception of Customs.  Revenue’s new compliance framework outlines different levels of tax compliance intervention.  Briefly, Level 1 interventions are designed to support compliance without the need for a more in-depth intervention.  Level 2 interventions comprise a Risk Review or a full Revenue Audit.  Level 3 interventions, however, are Revenue Investigations and are used to tackle serious fraud and tax evasion.  Once a Revenue investigation is initiated, it is not possible for the taxpayer to make a qualifying disclosure in relation to the matters under investigation.

The revised Code reflects Revenue’s new Compliance Intervention Framework and the key changes include:

1. A three tier designation of Revenue Interventions and
2. The introduction of Risk Review categories of Intervention.

Level 1

Level 1 Interventions are aimed at assisting taxpayers to bring their tax affairs in order voluntarily.  They are designed to support compliance by reminding taxpayers of their obligations. They also provide them with the opportunity to correct errors without the need for a more in-depth Revenue intervention. These include the following:

1. Self-reviews
2. Profile interviews
3. Bulk issue non-filer reminders
4. Actions that fall under the Co-operative Compliance Framework.

The expected outcomes of Level 1 Interventions:

1. Liability under relevant tax head(s).
2. Statutory Interest
3. Reduced penalties. In situations where self correction is an option, no penalties should arise.
4. No Prosecution.
5. No Publication.

In Summary:

• Level 1 interventions can only occur where the Revenue Commissioners have not already engaged in any detailed examination, review, audit or investigation of the matters under consideration.
• Examples include VAT verification check letters requesting backup documentation to support refund claims, reminder notifications in relation to outstanding tax returns, questionnaires for R&D Tax Credit claims, requests to self-review on specific issues, etc.
• A Level 1 Intervention allows for an unprompted qualifying disclosure.
• Unprompted qualifying disclosures cannot be made at any level other than Level 1.
• The definition of a Profile Interview has changed in the new Code. A Profile Interview will now be used by Revenue to familiarise itself with a specific taxpayer.  Previously it was used to assess a set of taxpayer risks to ascertain whether or not a Revenue audit was required.
• If the Revenue Commissioners identify a compliance risk during a Profile Interview, they may initiate a Level 2 or Level 3 intervention.
• A Level 1 Compliance Intervention allows for (i) self corrections and (ii) unprompted qualifying disclosure.
• When making an unprompted qualifying disclosure, it is essential to disclose the tax defaults for the tax heads and the tax periods which are the subject of the disclosure. To be completely compliant, the taxpayer must also include all previously undisclosed tax defaults in the ‘deliberate default’ category under any tax head and/or any tax period.

Important Change

According to the new Code, self-corrections can continue to be made the taxpayer is within the relevant time limits

From 1^st May 2022 any such self-corrections must be made in writing.

The submission of an amended return on ROS will no be longer sufficient to qualify as a written notification.

Therefore, to qualify as a self correction, a written notification must be provided as well as any amendment made on ROS.

Level 2

One of the more fundamental changes to the revised Code is the introduction of the ‘Risk Review’ as a Level 2 Intervention. Level 2 interventions are used by Revenue to confront compliance risks ranging from the examination of a single issue within a Tax Return to a full and comprehensive Revenue Audit.  An ‘unprompted qualifying disclosure’ will not be available to a taxpayer who receives notification of a Risk Review in respect of the specified tax head and tax period.  Taxpayers will, however, have the option to make a prompted qualifying disclosure when notified of a Level 2 intervention.

There are two types of Level 2 Interventions:

1. Risk Reviews
2. Audits

Level 2 Interventions – Risk Review

• A Risk Review is generally a desk based intervention which focuses on a particular issue or issues contained in a tax return or a risk identified by Revenue’s own system.
• Unlike level 1 interventions, there is no option for a taxpayer to make a self-correction or an unpromoted qualifying disclosure once they have been notified of a level 2 compliance intervention.
• A written notification will be issued to the taxpayer.
• The notice will specify the scope of the tax review, outlining which information is to be provided within a twenty eight day period.
• The notification will also clarify whether the intervention is a risk review or an audit.
• The review will take place twenty eight days from the date of the notification.
• Generally, Risk Reviews will be carried out by correspondence.
• Taxpayers will have twenty one days in which to notify Revenue if they intend to make a prompted qualifying disclosure.
• A prompted qualifying disclosure can be made within twenty eight days of a notification of a level 2 intervention, with the possibility of requesting an additional sixty days.
• In circumstances where a prompted qualifying disclosure is made, it must be made along with the relevant tax and statutory interest paid, before the expiry of the twenty eight day period.
• The prompted qualifying disclosure must include all underpayments in respect of that particular tax head for the period in question and not just the particular issue which is the subject of the Risk Review. If the taxpayer fails to disclose any underpayments at this point then it is likely that higher penalties could ensue along with an increased risk of publication on Revenue’s Tax Defaulters List.
• A prompted qualifying disclosure may allow the taxpayer the opportunity to mitigate penalties, avoid prosecution and/or avoid publication on the tax defaulters’ list.
• Failure to respond to the Risk Review Notification may result in an on-site visit by Revenue or a full Revenue Audit.

Level 2 Interventions – Revenue Audit

A “Revenue Audit” is an examination of the compliance of a taxpayer.  It focuses on the accuracy of specific tax returns, statements, claims, declarations, etc. Broadly speaking, the operation of a Revenue Audit will remain the same under the revised Code.  An audit will be initiated where there is a greater level of perceived risk.  Also, please keep in mind that an audit may be extended to include additional tax risks depending on information discovered by Revenue during the audit process.

The main stages in a typical Revenue audit are unchanged under the new Code and can be summarised as follows:

1. The taxpayer receives a Notification Letter which confirms the type of compliance intervention to be undertaken as well as the tax head(s) and period(s) covered. The notice also contains the audit commencement date and location in addition to the books and records to be made available for inspection.
2. The audit will commence twenty eight days after the date of the notification.
3. It is possible for businesses to request an alternative date in circumstances where the commencement date is not feasible for them.
4. A pre-audit meeting can be carried out, where necessary, to ascertain the nature and availability of electronic records.
5. It is possible to make a prompted qualifying disclosure before the start of the Audit. In order to make such a disclosure, tax and statutory interest must be paid in full.  A penalty does not need to be included.  The taxpayer must sign a declaration that the disclosure is complete and correct.
6. Taxpayers may request an additional sixty days in order to prepare a prompted qualifying disclosure. This must be done within twenty one days of the date of the Audit Notification.
7. Opening meeting – At the start of this meeting, the Auditor explains the purpose of the audit and indicates how long it should take. At this point, the Taxpayer has the opportunity to make a prompted qualifying disclosure.  This meeting provides the taxpayer with the opportunity to demonstrate to Revenue the tax controls in place. The Revenue auditor will examine the books and records as well as the prompted qualifying disclosure, raise queries and interview the taxpayer.  The information and explanations provided by the taxpayer will define the focus areas of the audit as well as influencing its outcome.
8. Revenue will meet the Taxpayer to outline the audit findings.
9. If the tax return is correct, the taxpayer will be informed as soon as there is certainty. If, however, the return requires amendment, the Auditor will discuss this with the Taxpayer and provide written clarification.
10. At the close of the audit there will be a final meeting to agree on the total settlement when the taxpayer should pay the required amount to the Auditor.
11. Following on from the audit, assessments may be raised or actions carried out to recover additional or disputed tax liabilities, where necessary.

Level 3 Intervention

Level 3 interventions take the form of Revenue investigations. These would generally be focused on suspected tax fraud and evasion.  A ‘Revenue Investigation’ is an examination of a taxpayer’s affairs where Revenue believes that serious tax or duty evasion may have occurred.  As the Revenue investigation may lead to a criminal prosecution, it is always recommended to seek expert professional advice and assistance in such situations.

A taxpayer is not entitled to make a qualifying disclosure from the date of commencement of the investigation, however, a taxpayer can seek to mitigate penalties by cooperating fully with a level 3 intervention.

Taxpayers will generally be notified of a Level 3 intervention in writing.  However, in certain cases Revenue may carry out an unannounced visit or may carry out investigations without notifying the taxpayer in writing.

Just to reiterate, once an investigation is initiated, the taxpayer cannot make a qualifying disclosure in relation to the matters under investigation.

FINAL POINTS

The main changes in the new Code of Practice for Revenue Compliance Interventions are:

1. The new Risk Review which is classed in the same category as a Revenue Audit. Once a taxpayer is notified of a Risk Review, the option of making an unprompted qualifying disclosure is removed.  This means the taxpayer will be subject to increased penalties and possible publication on the Revenue’s Tax Defaulters’ list.
2. A Risk Review generally requires clarification of a specific tax related issue, however, in order for a prompted disclosure to qualify, the disclosure must cover all tax defaults in relation to that particular tax head and the period(s) outlined in the notification. If, however, the default is considered to be in the deliberate default category, the disclosure must cover all tax heads and all tax periods.
3. There is a 28 day period between the date of the Notification and the commencement of the Risk Review or Audit.
4. Under the new Code, where the tax underpayment or an incorrectly claimed refund is less than €50,000, publication on the Revenue’s Tax Defaulters’ list will not arise. This increased threshold relates to the tax liability only and does not include interest and/or penalties.
5. Under the new Code, the exclusion from mitigation of penalties in relation to disclosures pertaining to offshore matters has been removed. This means the taxpayer can now include tax defaults relating to offshore matters in qualifying disclosures and benefit from mitigated penalties.
6. The Revenue Investigation process remains largely unchanged under the new Code.

For full information, please click: https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-compliance-interventions.pdf

To book an appointment to discuss any Revenue correspondence you may have received in relation to a Level 1, Level 2 or Level 3 Intervention, please email us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Specialist VAT Advisors. International Tax Consultants. Tax Guidance. Finance Act Ireland

The VAT reclaim provisions contained in s74(4) VATCA 2010 have been abolished with effect from 1st January 2022.

From 1^st January 2022, a key change in the Finance Bill 2021 has been introduced in relation to the VAT treatment of cancellation fees, including non-refundable or forfeited deposits, retained by business in the event of a customer cancellation.

Cancellation fees including forfeited deposits would be liable to VAT on the basis that they are either (a) a payment for a vatable service or (b) a right to access a vatable service. This is especially relevant to businesses in the tourism industry including hotels and restaurants.

In this amendment, it would appear that the Irish Revenue Commissioners are applying the CJEU judgements in:

1. Air France–KLM C-250/14 and Hop!–Brit Air SAS C-289/14 and
2. MEO C-295/17 and Vodafone Portugal C-43/19

They also appear to be following HMRC’s lead, which, with effect from March 2019, changed its legislation stating that VAT would remain due on retained payments for unused services and uncollected goods.

Prior to 1st January 2022 the Irish Revenue Commissioners had taken the view that if the supplier received a deposit from a customer that the deposit should be treated as an advance payment and VAT would be due when the deposit is received.  If, however, the supply didn’t proceed then the vendor/supplier could claim a repayment of the VAT on the deposit.  This was on the basis that the receipt of the deposit was not considered to be VATable because no supply of service had taken place.  In other words, prior to the amendment in the Finance Act 2021, if the actual supply didn’t proceed, the supplier or vendor could still claim a refund of VAT which it previously accounted for on receipt of the non-refundable deposit.

Pre 1st January 2022, a number of conditions were needed to apply:

1. the supply didn’t take place because the customer has cancelled it.
2. the cancellation was correctly recorded in the books and records of the supplier.
3. the deposit was not refunded to the customer.
4. the customer wasn’t given any other consideration, benefit or supply in lieu of that amount.

The Finance Act 2021 change has deleted from our legislation the previous entitlement of suppliers to reclaim a refund of VAT in respect of the non-refundable deposit, however, it does not affect the VAT treatment of deposits that are refunded to customers.  The VAT relief should still be available on those deposits.

For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/vat/vat-guidance-notes-fa2021.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.