Expatriate Taxes

UK Tax. Corporation Tax. Interest and Penalties on late payments. Instalment Arrangements.

Today, HMRC announced an increase in its interest rates, due to another increase in the Bank of England base rate, from 4.25% to 4.5%.  The new rates will take effect from Monday, 22nd May 2023, for quarterly tax instalment payments.  The aim of the late payment rate is to encourage prompt tax payment by UK Taxpayers and to ensure the system is fair for those individuals who pay their liabilities within deadline.

The new rates will take effect from Wednesday, 31st May 2023, for non-quarterly instalments payments.

Today, HMRC has announced increases to interest charged on both the late payment of tax as well as on tax repayments/refunds.

The two new increased rates of interest are:

• Late Payment Interest which is set at base rate plus 2.5%.  This will increase from 6.75% to 7% on 31st May 2023.
• Repayment Interest which is set at base rate minus 1% with a lower limit of 0.5% (known as the ‘minimum floor’).  This will increase to from 3.25% to 3.5% from 31st May 2023.

IN SUMMARY:

The interest rate on unpaid instalments of Corporation Tax liabilities will increase to 5.5% from 22nd May 2023.

The interest rate for the late payment of other taxes will increase to 7% from 31st May 2023.

The interest rate paid by HMRC on the overpayment of tax will increase to 3.5% on 31st May 2023.

For further information, please click: HMRC late payment interest rates to be revised after Bank of England increases base rate – GOV.UK (www.gov.uk)

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.

Irish VAT Rates. Return of Trading Details. Tax and Accounting Services. Irish and EU VAT. Reverse Charge Mechanism

As you’re aware, the standard VAT rate was temporarily reduced, as one of the COVID measures, from 23% to 21% for the six month period between 1st September 2020 and 28th February 2021.  The standard rate of Irish VAT is due to return to the 23% rate with effect from 1st March 2021.  This is particularly important to remember for invoicing and when completing your Return of Trading Details.

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 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.

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.

2017 Tax Reform for Economic Growth and American Jobs

The Biggest Individual And Business Tax Cut In American History

Top Line:

The U.S. tax code is overcomplicated and fails to create enough jobs, or provide relief to middle class families.

–          Since 2001, the U.S. tax code has faced nearly 6,000 changes, more than one per day.

–          Taxpayers spend nearly 7 billion hours and over $250 billion annually on compliance costs.

–          The U.S. has the highest statutory tax rate in the developed world, discouraging business investment and job creation.

President Trump is proposing the largest tax cut for individuals and businesses in U.S. history.

–          It will simplify the tax code, incentivize investment and growth and create jobs.

–          It will provide historic tax relief for middle income families and small business owners.

The Need For Comprehensive Tax Reform

An overly complex tax code is confusing and burdensome on American taxpayers.

–          The last major effort to successfully reform the U.S. tax code was over 30 years ago under President Reagan.

–          Today, according to the IRS’ National Taxpayer Advocate, the federal tax code is nearly four million words long.

–          Congress has made more than 5,900 changes to the federal tax code since 2001 alone, averaging more than one change a day.

–          The National Taxpayers Union estimates that Americans spend 6.989 billion hours at a cost of more than $262 billion on compliance and record keeping costs.

–          Instead of a single tax form, the IRS now 199 individual income tax forms and 235 business tax return forms.

–          Approximately 90% of taxpayers need help doing their taxes.

Today, with a corporate tax rate of 35%, U.S. businesses face the highest statutory tax rate in the developed world, and fourth highest effective tax rate, which discourages job creation or investment.

–          The U.S. is out of step with its competitors, having the highest corporate income tax rate among the 35 OECD nations and being the only nation that has increased its rate since 1988.

–          A lower business tax rate will discourage corporate inversions and companies from moving jobs overseas.

–          The high corporate tax rate keeps trillions of business assets overseas rather than being reinvested back home.

–          Even President Obama proposed lowering the business tax rate to 28 per cent to help spur economic activity.

Tax Reform for Economic Growth and American Jobs: The Biggest Individual And Business Tax Cut In American History

Goals For Tax Reform

–          Grow the economy and create millions of jobs

–          Simplify our burdensome tax code

–          Provide tax relief to American families-especially middle-income families

–          Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

–          Tax relief for American families, especially middle-income families:

–        Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%

–        Doubling the standard deduction

–        Providing tax relief for families with child and dependent care expenses

Simplification:

–          Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers

–          Protect the home ownership and charitable gift tax deductions

–          Repeal the Alternative Minimum Tax

–          Repeal the death tax

Repeal the 3.8% Obama care tax that hits small businesses and investment income

. Business Reform

–          15% business tax rate

–          Territorial tax system to level the playing field for American companies

–          One-time tax on trillions of dollars held overseas

–          Eliminate tax breaks for special interests

Process

–          Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input.

–          Working with the House and Senate, the Administration will develop the details of a tax plan that provides massive tax relief, creates jobs, and makes America more competitive – and can pass both chambers.

Information courtesy of WHfactsheet04262017.pdf

For further information, please click: https://trumpwhitehouse.archives.gov/articles/president-trump-proposed-massive-tax-cut-heres-need-know/

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 for IT Companies. Mini One Stop Shop (MOSS). EU VAT. Electronically Supplied Services. B2B and B2C supplies. Reverse Charge Rules

For many businesses moving to Ireland, especially I.T. companies, a considerable amount of research and planning into our tax regime is usually carried out in advance.  From experience, however, the question these companies rarely ask themselves is “what are the key VAT issues affecting our company if we locate to Ireland?  This article will examine EU VAT rules for businesses (B2B) and private consumers (B2C), the Reverse Charge Rule, electronically supplied services, Mini One Stop Shop (MOSS), VAT Compliance, etc.

The current Irish VAT rules are as follows:

• The place of supply for businesses established in the E.U. who provide electronically supplied services to private consumers within the E.U. is the E.U. member state in which the supplier is established.  For example, if an I.T. company established in Ireland supplies digital materials via the market to a private consumer living in France, the place of supply will be Ireland and the Irish business will be liable to charge and account for VAT @ 23%.

• The general rule for B2B transactions is that the place of supply of an electronically supplied service is the E.U. member state in which the business customer is established.  In this situation the customer must account for VAT under the “Reverse Charge Rule.”

• For B2B transactions where the supply of electronically supplied services is made to a Business Customer outside the E.U. there are no VAT implications.

• For businesses established in the E.U. to a non-taxable consumer outside the E.U., the place of supply of electronically supplied services is where that person usually resides or has a permanent address.

• For businesses established outside the E.U. to a private, non-taxable consumer within the E.U., the place of supply of electronically supplied services is where the consumer normally resides.  For example, if a U.S. based business supplies software material via the market to an Irish consumer, then the place of supply will be in Ireland.

What does that mean to the Supplier or I.T. Business/Company?

The supplier of these services will be obliged to register and account for VAT in every E.U. member state in which they have private, non-taxable customers.  There is, however, a “Special Scheme” where non E.U. businesses need only register in one E.U. state.

When we talk about “electronically supplied services” we mean:

• Website supply, web hosting, distance programme and equipment maintenance.
• Software supply and upgrades.
• Supply of distance teaching.
• Supply of film, games and music.
• Supply of artistic, cultural, political, scientific and sporting as well as entertainment broadcasts and events.
• Supply of images, text and information and making databases available.

There is a more detailed definition of “electronically supplied services” in Article 7 of Council Implementing Regulation of 15^th March 2011 (282/2011/EU).

For further information, please click: https://eur-lex.europa.eu/eli/reg_impl/2011/282/oj/eng

If a U.S. software company supplies software upgrades to private clients in twenty eight E.U. member states, does that company have to register in every one of those states?

The “Special Scheme” is optional and enables a non E.U. supplier making supplies of electronically supplied services to private, non-taxable individuals within the E.U. choose one E.U. state in which to register and pay VAT in respect of the supplies it makes within and throughout the E.U.

For example, a U.S. business/company supplies web hosting services to private consumers in Ireland, the UK and Germany.  The U.S. business can opt to register for the “Special Scheme” in Ireland which means:

• it charges Irish VAT to its Irish customers.
• it charges UK VAT to its UK customers and
• it charges German VAT to its German customers
• it registers in Ireland using ROS (Revenue Online System).
• it prepares and files a single quarterly VAT Return and pays all the relevant VAT to the Irish VAT authorities.
• The Irish VAT Revenue then distributes the UK VAT to the UK Revenue Authorities and the German VAT to the German Tax Authorities.

The U.S. I.T. business/company is eligible to use this scheme if it is not established in the E.U. and if it is not registered or required to be registered for VAT in any other E.U. member state.

From 1 January 2015, supplies of telecommunications, broadcasting and electronically supplied services made by EU suppliers to private, non-taxable individuals and non-business customers will be liable to VAT in the customer’s Member State.

The current place of supply/taxation is where the supplier is located, but from 1st January 2015 this will move to the place of consumption or the place where the consumer normally resides or is established.

Suppliers of such services will need to determine where their customers are established or where they usually reside.  They will need to account for VAT at the rate applicable in that Member State.  This is a requirement regardless of the E.U. state in which the Supplier is established or is VAT registered.

As a result of these changes, suppliers may need to register for VAT in every EU Member States in which they have customers. As there are no minimum thresholds for VAT registration, making supplies to a single customer in one Member State will necessitate VAT registration in that country.

With effect from 1^st January 2015, the Mini One Stop Shop (MOSS) will be introduced which means that instead of having to register in each E.U. member state, the supplier will have the option of declaring and paying the VAT due for all the member states in the E.U. state where the business is established via a single electronic declaration which can be filed with the tax authority in the state where the supplier is established.

The Mini One Stop Shop or MOSS scheme will be similar to the “Special Scheme” which is currently in place for non E.U. suppliers. It will allow for VAT on Business to Consumer supplies made in all or any of the twenty eight E.U. Member States to be reported in one electronic return.

What needs to be considered prior to the introduction of the Mini One Stop Shop or MOSS Scheme on 1^st January 2015 by businesses already established in Ireland or thinking about establishing in Ireland?

• It is essential to examine your contract to establish who exactly is paying you and if your customer is a taxable or non taxable person.  This is particularly important in the context of undisclosed agents / commissionaire structures, etc.

• You must determine where your B2C customers are located.  Your business may require additional contractual provisions and amendments to your systems to include this information.

• It is important to examine the impact of the different VAT rates in each E.U. member state on your margins.  This may require revising your pricing structure.

• What are the invoicing rules in other member states?

• What about compliance issues in individual E.U. member states?

• Are there any occasions in which you need to register in an individual member state?

One of the biggest problems envisaged with the MOSS systems is identifying the location of the customer.

It is essential for suppliers to correctly identify the customer’s location/permanent address/usual residence so they can charge the correct VAT rate applicable in that member state.

For most telecommunication, broadcasting and electronically supplied services, it will be obvious where the customer resides. The decision about the place of supply of those services should be supported by two pieces of non-contradictory evidence including credit card details and a billing address for example.

It is anticipated that there will be situations where the consumer’s location is less obvious.  As a result, the following rules have been compiled between the Member States to help businesses ascertain the place of supply in B2C TBE transactions.

According to the Irish Revenue website:

• ^{“If the service is provided at a telephone box, a telephone kiosk, a Wi-Fi hot spot, an internet café, a restaurant or a hotel lobby, the consumer location will be the place where the services are provided. Note: this rule applies to the initial service only (i.e. the connection to the telecom or internet service) and not to any over-the-top services delivered using the connection (e.g. downloading of games onto a laptop at a Wi-Fi hotspot);}
•  ^{If the service is supplied on board transport travelling between different countries in the EU (for example, by boat or train), the consumer location will be the country of departure for the journey;}
•  ^{If the service is supplied through an individual customer’s telephone landline, the consumer location will be the place where the landline is located;}
•  ^{If the service is supplied through a mobile phone, the consumer location will be identified by the country code of the SIM card;}
•  ^{If a broadcasting service is supplied through a decoder without the use of a fixed land line, the consumer location will be where the decoder is located or the postal address where the viewing card is sent.”}

In situations where the consumer advises you that they reside in a different location than previously thought, the supplier can change the place of supply but only if the consumer can produce three pieces of non-contradictory evidence to support that change of place of supply.

The evidence to be used in deciding the place of supply may vary depending on the industry but the most usual types of proof include the customer’s billing address, the address on his/her bank accounts, the IP address, etc.

For further information, please click:

https://www.revenue.ie/en/tax-professionals/tax-briefing/index.aspx

https://www.revenue.ie/en/tax-professionals/ebrief/index.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.