New President Mary Honohan outlines her priority issues for the year ahead

132 Pages·2015·5.76 MB·English

2015 VOLUME 28 NUMBER 3 ISSN 1649-7899
Irish Tax Review
The Journal of the Irish Tax Institute www.taxinstitute.ie
New President Mary Honohan outlines
her priority issues for the year ahead
Also in this Edition:
„ Key Tips for 2014 Form 11 Filings „ Impact of 2015 VAT Changes and Future Developments
„ Tax Compliance for Offshore Investments „ VAT and RCT Interaction in Construction Operations
„ Section 481 Film Corporation Tax Credit „ Taxation of Foreign Investors in China and India
„ Investing for Section 189 TCA 1997 Cases „ UK Summer Budget 2015
„ UK Developments in the Remittance Basis of Taxation „ CCCTB: The Sequel
„ Domicile: Impact of UK Case of Perdoni v Curati „ Litigating Tax Deeds: Lessons from Recent Case Law
„ DC v DR: Provision from Estate of Cohabitee „ Justin McGettigan Consultant and Head of Tax, Eversheds
„ Capital Acquisitions Tax, recent clarifications „ The New Rates Trap
and a look back over the past 20 years
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2015 Number 3 Quickfind
Irish Tax Review Contents
Editor: Julie Burke Messages from Regular
Editorial Board:
Michael Ryan (Chairperson), Irish Tax Institute Features
Julie Burke (Editor), Colm Browne,
Helen Byrne, Fiona Carney, 16 Legislation & Policy Monitor
Eamonn Coates, Amanda-Jayne Comyn, Mary Healy, Tax Manager, Irish Tax Institute
Gabrielle Dillon, Eddie Doyle,
23 Direct Tax Cases: Decisions
John Fisher, Carol Hogan, Tom Maguire,
Lorraine Mulligan, George Thompson from the UK and the CJEU
Copyright © Irish Tax Institute 2015. Conor Kennedy, Barrister‑at‑Law
All rights reserved. No part of this 28 Compliance Deadlines
publication may be reproduced. 4 Digest
David Fennell, Director, EY
Published by/Origination by:
Irish Tax Institute, 8 President’s Pages 30 International Update
South Block, Longboat Quay, Joan O’Connor, Tax Partner, Deloitte
12 Chief Executive’s Pages
Grand Canal Harbour, Dublin 2 James Smyth, Tax Manager, Deloitte
Tel.: [phone] VAT Cases & VAT News
Fax: [phone]
Gabrielle Dillon, Director, Dermot O’Brien &
Email: [email protected]
Associates
Website: www.taxinstitute.ie
Printed by: Spectrum Print 46 Accounting Developments of Interest
Management Aidan Clifford, Advisory Services Manager,
Copy-edited by: ACCA Ireland
Aisling Flood
In-house origination by:
Judy Hutchinson Feature Articles
and Ela Zelmanska
Design and layout by: 52 Key Tips for 2014 Form 11 Filings 93 VAT and RCT Interaction in Construction
Ela Zelmanska
Olga Miller, Tax Director, Warren & Partners Operations
Production Liaison:
Sinead Scanlan, Senior Manager, Ted Holohan, Director, Indirect Tax, Deloitte
Judy Hutchinson
Advertisers please contact: Warren & Partners Alan Kilmartin, Senior Manager,
Jackie O’Dowd 56 Tax Compliance for Offshore Investments Indirect Tax, Deloitte
Tel: [phone] Ted McGrath, Partner and Head of Financial 98 Taxation of Foreign Investors in China
Email: [email protected] Services Tax, William Fry/Taxand Ireland and India
63 Section 481 Film Corporation Tax Credit Pat Convery, Director, PwC
John Gleeson, Partner, Grant Thornton Anne-Marie Sharkey, Senior Manager, PwC
Roisin Henehan, Director, Grant Thornton 103 UK Summer Budget 2015
67 Investing for Section 189 TCA 1997 Cases Peter Legge, Tax Partner,
Deirdre Lyons, Tax and Finacial Planning Grant Thornton (NI) LLP
Strategist, Davy Private Clients Francis Shields, Associate Director, Tax,
Grant Thornton (NI) LLP
71 UK Developments in the Remittance Basis of
Taxation 107 CCCTB: The Sequel
Audrey Lydon, Head of Private Client Services, Tom Maguire, Tax Partner, Deloitte
ISSN 1649-7899 EY, Dublin 114 Litigating Tax Deeds: Lessons from Recent
2015, Volume 28, Number 2 Pat O’Brien, Executive Director, Human Capital, Case Law
EY, Dublin Mark Scully, Tax Associate, Eversheds
Disclaimer: The Irish Tax Institute
can accept no responsibility 77 Domicile: Impact of UK Case of Justin McGettigan, Consultant and
for the accuracy of contributed Perdoni v Curati Head of Tax, Eversheds
articles or statements appearing Margaret Coleman, Senior Manager, 119 New Regime for Directors under the
in this publication, and any views Tax Services, EY Companies Act 2014
or opinions expressed are not 80 DC v DR: Provision from Estate of Cohabitee Jillian O’Sullivan, Parnter, Tax and Legal
necessarily subscribed to by the Gráinne Duggan, Barrister‑at‑Law Services, Grant Thornton
Institute. Amanda-Jayne Comyn, Associate Director,
85 Capital Acquisitions Tax, recent clarifications
No responsibility for loss or distress
Tax and Legal Services, Grant Thornton
occasioned to any person acting or and a look back over the past 20 years
refraining from acting as a result Kieran Coughlan, Principal, Coughlan 123 The New Rates Trap
of the material in this publication Accounting & Taxation Services Limited Des Rooney, Senior Associate,
can be accepted by the authors, 89 Impact of 2015 VAT Changes and Future Mason Hayes & Curran
contributors or publisher. Developments Catherine Donnelly, Barrister‑at‑Law
Following publication of an article Emma O’Dea, Senior Manager, VAT, PwC
or other feature, it may happen
that additional information or a
Irish Tax Institute News
correction will later be published
so the reader is advised to refer to 127 News and Moves
subsequent issues.
4 Digest 2015 Number 3 Digest 5
Digest
Julie Burke
Editor
Legislation & Policy Monitor » The case of X AB v Skatteverket C-686/13 dealt with a request
for a preliminary ruling on the interpretation of Articles 49 and
» Mary Healy details the Acts passed and Revenue eBriefs
63 of the Treaty on the Functioning of the European Union,
issued, as well as selected Bills presented and Statutory
concerning freedom of establishment and free movement
Instruments made, in the period May to July 2015, providing
of capital respectively.
a comprehensive overview of key developments and policy
news.
Compliance Deadlines
Direct Tax Cases: Decisions from the UK and » David Fennell details key tax-filing deadlines for October
the CJEU to December 2015.
Conor Kennedy
International Update
» The case of Anthony Hardy v HMRC [2015] UKFTT 250 (TC)
Joan O’Connor and James Smyth
concerned an appeal against the disallowance by HMRC
» The OECD released a package of measures for the implemen-
of a claim for capital losses in respect of deposits paid on
tation of a new country-by-country reporting plan developed
the purchase of real property that were forfeited on the
under the OECD/G20 BEPS project.
rescission of contracts.
» The Australian Federal Budget was announced on 15 May
» The case of Nicholas John Aspinall and others v HMRC [2015]
2015. It includes multinational anti-avoidance legislation
UKFTT 162 (TC), although dealing with VAT, also addressed
similar to the “avoided PE” leg of the UK’s diverted-profits-tax
the thorny issue of legitimate expectation.
rules. This will take the form of amendments to the Australian
» In Mr A v HMRC [2015] UKFTT 189 (TC) it was considered
general anti-avoidance rule, which already overrides double
whether a payment of £600,000 made by a former employer
taxation agreements.
constituted a settlement in respect of a racial discrimination
» China has released Circulars 62 and 63, which contain tax
dispute or earnings derived from an employment.
incentives designed to stimulate technological innovation
» Lobler v HMRC [2015] UKUT 152 (TCC) concerned an appeal
and apply retroactively from 1 January 2015.
against a decision of the FTT in which that tribunal, “with
» On 17 June 2015 the European Commission issued a commu-
heavy hearts”, determined that it was unable to interfere
nication on “A Fair and Efficient Corporate Tax System in the
with the amendment made by HMRC to the appellant’s tax
European Union: 5 Key Areas for Action”. One of the action
return under legislation that treated prescribed sums arising
points is a relaunch of the common consolidated corporate
in relation to policies of life assurance as being liable to
tax base (CCCTB).
income tax.
2015 Number 3 Digest 5
» The European Commission has issued injunctions ordering output VAT when they were sold on as second-hand cars to
Estonia and Poland to deliver information on their tax rulings VAT on any margin achieved at that point.
as part of the Commission’s State Aid enquiry into national
VAT Cases & VAT News
tax ruling practices.
» Gabrielle Dillon gives us the latest VAT news and reviews
» On 27 May 2015 the EU and Switzerland signed an agreement
the following VAT cases:
on the automatic exchange of financial accounts information.
» The CJEU judgment in the case of Lisboagás GDL – Sociedade
» Final details of Italy’s amendments to its country blacklist for
Distribuidora de Gás Natural de Lisboa SA v Autoridade
cost deduction and the application of the controlled foreign
Tributária e Aduaneira C-256/14 was delivered on 11 June
companies regime have been published.
2015. The main point at issue was whether the taxable
» Among the measures announced in the UK Summer Budget
amount should include municipal land taxes.
2015 is that, from 6 April 2017, non-UK-domiciled individuals
» The CJEU handed down its decision in NLB Leasing d.o.o. v
who have been UK resident for 15 of the previous 20 tax
Republika Slovenija C-209/14 on 2 July 2015. The point at
years will be deemed to be UK domiciled for all tax purposes.
issue was whether in a sale-and-leaseback arrangement there
This change means that individuals will become deemed
was a reduction of the taxable amount where it was argued
domiciled for inheritance tax purposes one year earlier than
that the lessee had not fulfilled its obligations.
would otherwise have been the case and also ensures that
such individuals will be treated as UK domiciled for all other » The decision of the CJEU in the case of Belgian State v
tax purposes. Nathalie De Fruytier C-334/14 was published on 2 July
2015. The case dealt with the exemption from VAT provided
» The US Treasury has reissued its list of countries requiring
for hospital and medical care and whether that exemption
cooperation with an international boycott: Iraq, Kuwait,
extended to the transportation of human organs and samples
Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab
of human origin (for the purposes of medical analysis or
Emirates and the Republic of Yemen.
medical or therapeutic care).
» On 15 July 2015 Ukraine ratified the income and capital tax
» In the case of Cabinet Medical Veterinar Dr. Tomoiagă Andrei v
treaty with Ireland, signed on 19 April 2013.
Direcția Generală Regională a Finanțelor Publice Cluj Napoca
» The UK First-tier Tribunal has dismissed the taxpayer’s appeal
prin Administrația Județeană a Finanțelor Publice Maramureș
in Next Brand Ltd v HMRC [2015] UKFTT 175 (TC) against
C-144/14 the CJEU considered whether the principles of
HMRC’s refusal of its claim to double taxation relief for
legal certainty and legitimate expectation precluded the
underlying tax of almost £46m. Next Brand Ltd had argued
Romanian tax authority from determining that veterinary
that the dividend was the means by which profits earned
services were VATable.
by its subsidiaries in the Far East were brought to the UK.
» The CJEU case of Radu Florin Salomie, Nicolae Vasile Oltean v
» The UK Court of Appeal released its decision in Littlewoods
Direcția Generală a Finanțelor Publice Cluj C-183/14 concerned
Limited v HMRC [2015] EWCA Civ 515, the lead case on
the VAT treatment of sales of property in Romania after its
whether compound interest should be paid on VAT repay-
accession to the EU.
ments by HMRC.
» The UK Supreme Court delivered its judgment in HMRC v
Pendragon plc [2015] UKSC 37, about what it described as
“an elaborate scheme” that was intended to secure input VAT
recovery when demonstrator cars were bought but to limit
6 Digest 2015 Number 3 Digest 7
Feature Articles
52 Key Tips for 2014 Form 11 Filings treated as a cohabitee pursuant to s194 of the Cohabitants
Olga Miller and Sinead Scanlan outline the key changes to Act 2010, as considered in the case of DC v DR, the first
the Form 11 for 2014 and provide helpful filing tips. reported judgment on the application of the section.
56 Tax Compliance for Offshore 85 CAT Agricultural Relief: Background
Investments and Recent Changes
Ted McGrath discusses the “offshore fund” rules and how Kieran Coughlan reviews the recent changes to agricultural
individual investors should determine the correct category relief for capital acquisitions tax purposes and the clarifica-
into which non-Irish investment funds fall, to ensure that they tions issued by Revenue.
are dealt with correctly in their tax return.
89 Impact of 2015 VAT Changes and Future
63 Section 481 Film Corporation Tax Developments
Credit Emma O’Dea considers the impact of the new VAT rules on
John Gleeson and Roisin Henehan consider the new film e-services supplied to non-taxable persons in the EU, which
relief legislation and the related Revenue Guidance Note. changed the place of supply from the location of the supplier
to the location of the consumer.
67 Investing for Section 189 TCA 1997
93 VAT and RCT Interaction in Construction
Deirdre Lyons advises on the structuring of certain types of
investments, including the proceeds of personal injury awards Operations
to which s189 TCA 1997 applies. Ted Holohan and Alan Kilmartin analyse the complex
interaction between VAT and RCT in relation to construction
71 UK Developments in the Remittance
operations, where difficulties of interpretation are exposing
Basis of Taxation businesses to significant compliance risks.
Audrey Lydon and Pat O’Brien consider the recent changes
98 Taxation of Foreign Investors in China
to the UK remittance basis of taxation and compare the UK
regime to that which currently applies in Ireland. and India
Pat Convery and Anne-Marie Sharkey detail recent taxation
77 Domicile: Impact of UK Case of Perdoni
developments in China and India as they affect foreign invest-
v Curati ment in those jurisdictions.
Margaret Coleman discusses the impact of the decision in
103 UK Summer Budget 2015
Perdoni v Curati regarding the acquisition of a domicile of
choice. Peter Legge and Francis Shields provide a summary of the
UK Summer Budget 2015 and comment on the potential
80 DC v DR: Provision from Estate of impacts for Irish tax practitioners with clients in the UK.
Cohabitee

Gráinne Duggan analyses the key features that will be taken
into account in determining whether an individual will be
2015 Number 3 Digest 7
107 CCCTB: The Sequel 119 New Regime for Directors under the
Tom Maguire provides a detailed analysis of the history of Companies Act 2014
the European Commission’s common consolidated corporate Jillian O’Sullivan and Amanda-Jayne Comyn detail the new
tax base (CCCTB) proposal and its potential relaunch in 2016. statutory obligations of directors under the Companies Act
2014, which became effective on 1 June 2015.
114 Litigating Tax Deeds: Lessons from
Recent Case Law 123 The New Rates Trap
Mark Scully and Justin McGettigan highlight some important Des Rooney and Catherine Donnelly consider the amend-
lessons that legal and tax practitioners should bear in mind ments to the law of rates under the Local Government Reform
before advising their clients on the litigation of tax deeds. Act 2014, highlighting the new risks for property owners.
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8 Interview with New Irish Tax Institute President, Mary Honohan 2015 Number 3 Interview with New Irish Tax Institute President, Mary Honohan 9
Interview with
New Irish
Tax Institute
President, Mary
Honohan
How did you first become interested in tax?
As can often be the case with big decisions, it was more or less by
chance. I had a place at UCC to study science, but after I sat my Leaving
Certificate I was offered an unexpected summer job in tax with PwC.
I really liked tax, so I stayed and decided to study AITI. My whole
career has been with PwC. Having trained and qualified in Cork, I
then transferred to the Dublin office.
A Brief Profile
PwC is a multi-disciplinary firm with market-leading tax, advisory and
audit practices. It has one of the largest tax practices in Ireland, with
Name: Mary Honohan
deep expertise in all areas of tax. It’s a great place to train and develop
From: Cork, born in Limerick a career. We have the largest Foreign Direct Investment practice in the
country. I am a Tax Partner on that team. My clients are some of the
Title: Tax Partner, PwC
largest household-name multinationals. I really enjoy working with
Specialist tax Large corporates and structuring them and the teams at PwC on the varied and challenging opportunities
areas: they present us with.
What led you to becoming a Council member?
Priorities for Innovation in education; improved tax policy
My first post-qualification involvement with the ITI was when I joined
Presidency: for entrepreneurs; effective tax administration
Council in 2005. I did so because I was interested in the education
for the tax profession and taxpayers; and a
of our tax students and wanted to get involved in making sure it
review of the strategy and brand identity for the
stayed relevant and modern. Over time I became involved in other
Institute as we approach our 50th anniversary
areas as well, including the Institute’s role in helping to shape tax
Interests: Reading, tennis, cycling and travel policies that are relevant for a small, open economy such as ours
is. Becoming President is a great honour and the culmination of my
years on Council, really.
Being a Council member of the Institute has been an interesting and
rewarding part of my career. The camaraderie around the Council table
is one of the best aspects of it. I would encourage members to consider
putting themselves forward because it’s rewarding, professionally
and personally. Hundreds of additional members voted in our 2015
2015 Number 3 Interview with New Irish Tax Institute President, Mary Honohan 9
elections – ever-increasing interest in the composition of our Council, the implications for taxpayers in Ireland and elsewhere. There is
which is a really positive sign for a membership organisation. an increasing focus on tax policy globally, and our students need
to be alert to its impact and importance. The investment in the
What are your priorities for the next
CTA programme is continuous. We are always seeking out the next
12 months?
developments in legislation and practice and planning the changes
I have been giving a lot of thought to how I can best serve the Institute
in the curriculum to reflect the new tax environment.
and our members in the year ahead. I want to bring real focus to a
number of important areas: innovation in education; improved tax Technology played a key role in the changes
policy for entrepreneurs; effective tax administration for the tax too, did it not?
profession and taxpayers; and a review of the strategy and brand Yes. We have adopted blended learning through technology, allowing
identity for the Institute as we approach our 50th Anniversary in 2017. students to take advantage of both online and lecture theatre offerings
I want to use my Presidency effectively to deliver results in those areas. to meet their specific requirements. Our learning management system,
Blackboard Learn, is a world-class system that allows students to
Education has always been hugely important
access every single element of their learning needs, from online
to you. What do you see as the Institute’s key
lectures to manuals, case studies and student TaxFind. This is the
achievements in education in recent years?
tool that ensures our students are immersed in the world of tax and
Education was the reason we were established almost 50 years ago,
the tax education experience from the day they start with us to the
and it remains at the heart of what we do today. As Chairperson of
day they graduate.
the Education Committee, I worked closely with members of that
Committee and the executive Education Team to transform our You are committed to continuing the
Chartered Tax Adviser (CTA) programme, and I believe the end result investment in CTA reform. What next?
is something to be proud of. Our next question is: are there any aspects of our professional
education programmes that must be addressed to ensure we are in
The reform of the CTA qualification was meticulously researched,
line with international best practice?
planned and integrated into the programme, with changes to content,
delivery and materials, as well as the exam and assessment process. Educational bodies are changing how they teach, and students are
For example, assessments are case-study based and are modelled changing how they learn. Harvard’s academics are experimenting
on the most complex set of Irish and international tax scenarios with new, innovative styles of teaching, in response to a generation
so that students are thoroughly tested in real-world challenges. of students who have learned through computer screens, websites
Our CTA programme is built on rigorous Educational bodies are and visual media. There are so many ways for
understanding and knowledge of tax but also students to access information and knowledge
changing how they teach,
embraces the many other essential skills of the – and they extend far beyond the classroom.
tax professional. The introduction of continuous and students are changing
If we are to be best-in-class, we too must examine
assessment meant that not only do students
how they learn. our teaching and learning methodologies. While
engage much earlier with complex tax issues,
face-to-face education will continue to be the
they also complete a number of professional-
bedrock of the Institute’s education programmes, the mix of teaching
skills assignments. Harnessing these key research, communication
and assessment methodologies may evolve.
and project-management skills is vital in the development of the
tax professional. Our CTA qualification must be the “outstanding We will be conducting a complete review of our education programmes,
performer” in tax education in Ireland. looking at the best international standards and best international
teaching and assessment practices. It is some time since we worked
We have also introduced Irish and international tax policy into the
with the University of New South Wales Australia, a respected
curriculum, another important step to ensure that our students
academic institution in tax and teaching. Now is the time to revisit that.
have an appreciation of the role of policy, how it’s formulated and
10 Interview with New Irish Tax Institute President, Mary Honohan 2015 Number 3 Interview with New Irish Tax Institute President, Mary Honohan 11
You mentioned the tax environment for Here in Ireland it is time to up our game and, with the right policies,
entrepreneurs. Why is this a priority for you? turn entrepreneurial spirit into entrepreneurial action.
I think the Institute has a vital role to play in developing, shaping and
The Institute carried out a major survey of
influencing future tax policy to support our entrepreneurs, investors
members on tax administration earlier this
and job creators. We will be focusing on this to a large extent over
year. What are the next steps for this project?
the coming months. Over the last year we have rightly contributed
Tax administration issues are a priority for members, and so it
hugely to the BEPS project, as regards the international agenda, and
is our job to continue making the case where the system would
we will see how this plays out over the coming weeks and months.
benefit from improvements. We have over 5,000 CTA members.
The next phase of policy representations
A very significant percentage are looking
will have more of a domestic focus in the
at various tax administration issues every
run-up to Budget 2016.
day. The insights of these members on the
There is universal agreement that we difficulties they and their clients encounter
need to grow our entrepreneurs and SMEs are really valuable and contribute to the
– the growth-creators of the future. Our smooth running of the tax administration
policies need to reflect the ambitions of system.
our entrepreneurs and young start-ups –
The right tax policies must be underpinned
they need to be competitive and attractive.
by a good tax administration system. We
We need to have tax policies that help respect that the Revenue system must
entrepreneurs to: raise capital to start and be fair, but it must also be balanced and
grow the business; build the best team of efficient. It must serve the needs of the
talent to drive the business forward; and State, but it must also serve the rights of
be valued and rewarded for their success. the taxpayer.
There is a pro-entrepreneurial groundswell We must not lose sight of the importance
in Ireland at the moment. We need to of tax administration – interaction with
nurture that. Revenue is such a critical aspect of every
business operating in Ireland. With increased competition from other
We made a detailed submission to the Department of Finance this
jurisdictions, in particular the UK, “ease of doing business” is one of
summer – that’s the beginning. We will continue to work with our
the factors that will be taken into account when foreign investors,
members, with members of the Oireachtas and with key stakeholders
SMEs and entrepreneurs decide on location.
who share an interest in this issue. We will be pressing home the
case with policy-makers and legislators in advance of the Budget While Ireland does score well in terms of the “ease of doing business”,
and also in advance of the general election. ranking sixth in terms of paying taxes in 2015, there is always
room for improvement, and our recent tax administration survey
The National Policy Statement on Entrepreneurship tells us that
highlighted this.
“[t]he tax environment for entrepreneurs and investors in Ireland
has become more challenging”, particularly when compared with The results of our member survey highlight important areas where
the UK. In its own words: “[i]t is critical that Ireland should remain improvement is needed. Registrations, refunds, Revenue Technical
competitive as a location for both home-grown and internationally Services and access by telephone are certainly creating issues.
mobile entrepreneurs”. The Institute has shared the findings with Revenue at the highest
level and will continue to work to resolve these issues and press
In a recent Citi study in the UK, 6% of high-growth companies were
the case for change.
credited with creating 50% of the UK’s job growth between 2002
and 2008 – a staggering figure by any standards.