Brexit & Ireland
Kitty Miv, Editor
19 August, 2019
In this week's column, we will be looking at Ireland, which – understandably – in the run-up to the UK's Brexit deadline, has been seeking clarification on the likely impact of the British move (please go ahead and join the queue...), in addition to attempting to go about its own domestic and international tax business as usual.
In an early August pre-Budget submission, for example, Food Drink Ireland, the Ibec group representing the Republic's food and drink industry, urged the Irish government to issue a tax response in relation to the forthcoming impact that Brexit is likely to have on the sector.
FDI called for improvements to be made to the tax system to better support the development of indigenous enterprises, arguing that Irish SMEs are at a disadvantage to their UK counterparts in terms of their capital gains tax (CGT) treatment. It warned that "without significant improvements in the treatment of capital gains relative to the UK, Ireland risks losing high potential SMEs to the UK."
FDI recommended that the CGT Entrepreneurs' Relief be improved by introducing a 12.5 percent rate with no lifetime limit on capital gains and expanding the relief to passive investors. It said the Government should remove the EUR3m cap on value which can qualify for Retirement Relief on the transfer of shares and that the Government should consider removing the 90 percent cap to provide full relief from capital acquisitions tax under Business Relief.
Highlighting the potential impact of Brexit on the Irish food and drink industry, Director Paul Kelly explained that: "EUR4.5bn worth of food and drink exports go to the UK. In the event of a no-deal Brexit and the immediate imposition of tariffs, decisive steps would need to be taken. Tariffs are in effect a tax on trade and commerce and FDI is calling for their recycling into a tariff stabilization fund to offset serious damage to exports and job losses."
FDI urged that, as part of the response to Brexit, the Irish Government should ensure that further price differentials do not emerge between the Republic of Ireland and Northern Ireland due to increases in taxes or excises. It cautioned the Government not to increase VAT or duties on potentially mobile products or services.
Meanwhile, if not quite on the domestic front then certainly looking towards bolstering it, Ireland's Small Firms Association recently argued that better supporting SMEs through the tax system would mitigate the country's over-reliance on revenues linked to foreign direct investment.
According to SFA, Ireland's competitiveness is under threat. It therefore argued that the Government needs to take steps to "de-risk our economy from over-reliance on FDI and seize an important opportunity to future-proof our economic model." It said that the Budget needs to provide certainty to small businesses.
One of SFA's priorities is a reduction in capital gains tax (CGT). It recommended a reduction in CGT to 20 percent across the board (pointing out that, at 33 percent, Ireland's CGT rate is one of the highest among developed economies), in order to make investing in a business in Ireland more attractive. It also argued for an increase in the lifetime limit for gains under the CGT Entrepreneur Relief to EUR15m, and for the removal of the EUR3m cap on the value of business assets allowable for Retirement Relief.
Meanwhile, somewhat less pressingly, but still of importance to those affected, the Revenue this month updated its Pay As You Earn (PAYE) guidance for employers on the information they must submit regarding employees, and on the tax treatment of companies that reimburse the travel and subsistence expenses of office holders and employees.
The latter information is set out in Tax and Duty Manual (TDM), which has been updated to include information on the reimbursement of toll charges and the rules surrounding "e-working". It explains that the reimbursement of toll charges depends on the circumstances giving rise to the charges, and states that if an employee works part-time in an office and part-time at home, their work base is the office, meaning that expenses for traveling between their home and place of work cannot be reimbursed tax-free.
The TDM now includes specific guidance on: the reimbursement of travel and subsistence expenses by intermediaries, and reimbursements for assignees from Ireland working abroad on a foreign assignment. Come Brexit, this may well be useful information!
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