TAX PERSPECTIVES
Sarah Meredith, Partner in Grant Thornton Ireland, outlines some of the of tax issues emerging on the horizon for clients
ENHANCED REPORTING REQUIREMENTS
An issue of particular concern is the imminent implementation of Enhanced Reporting Requirements (ERR) for employers on 1 January 2024. Employers will be required to report the details of non-taxable benefits (small benefit, remote working daily allowance, travel and subsistence payments) in real time, which makes this reporting requirement due on or before payment to employees.
ERR will provide Revenue with increased visibility of tax-free amounts being paid to employees, along with data capable of being analysed for compliance interventions. This will significantly add to the administrative burden for employers and there is concern as to whether businesses are sufficiently prepared for this significant change.
Budget papers noted that Revenue will conduct a range of targeted compliance management activities in 2024 and expect that additional Exchequer receipts will arise from increased taxpayer compliance in the areas of eCommerce, payroll and expenses reporting, and the cash/ shadow economy.
WAREHOUSED TAX DEBT
Up to €1.9bn of debt remains warehoused as a result of the schemes introduced to assist businesses during Covid-19. This consists principally of VAT and PAYE. Interest is chargeable on this debt and affected taxpayers have until 1 May 2024 to either repay the debt or agree a Phased Payment Arrangement (PPA).
Revenue has shown flexibility in this regard, both in the terms of the PPA and the period over which the debt is to be repaid. However, there is real concern over the ability of some businesses to repay the warehoused debt. Some firms may have been hoping that this debt would eventually be waived, but it is difficult to envisage this, particularly as this debt relates to fiduciary taxes, which Revenue has a statutory duty to collect.
R&D TAX CREDIT
Staying with the Budget announcement, the increase in the R&D tax credit from 25% to 30% will be welcomed by both large multinationals and indigenous SMEs. The increase will alleviate some of the additional tax suffered by groups within the scope of the OECD’s forthcoming Pillar Two tax changes.
Additionally, the refundable R&D tax credit (for year one) is increasing from €25,000 to €50,000 for smaller claimants, giving an immediate cashflow benefit for businesses (SMEs in particular). The R&D credit is one of the vital measures that helps Ireland remain an attractive place to do business in an increasingly competitive global environment.
VAT
From a VAT perspective, there will be widespread relief among clients that the 9% rate on gas and electricity has been extended for a further 12 months until 31 October 2024. This is an essential boost to companies already dealing with ever-rising costs in an environment defined by inflation (reducing but still historically high) and consistently raised interest rates.
RETIREMENT RELIEF
Clients are always interested in efficiently planning an eventual exit from their business. Effective corporate structuring and succession planning are constantly in high demand so that businesses run efficiently while also considering the optimal exit strategy, be that via sale or succession.
The increase in the Retirement Relief age limit, from 66 to 70, in the recent Budget may well feature in upcoming client discussions in this arena. The cap of €10 million on transfers to children was a surprise, and limits the benefits from this provision for high-value transfers of shares in businesses through the family.