We will look at some Revenue focus areas for 2023. The information for this came from a recent joint Revenue and Institute of Tax webinar.
This is an opportunity for Revenue to get its message across. “Lads we are going to be looking at these areas, in particular, so don’t say we haven’t warned you”. It is also useful for us tax advisors and we can talk to our clients and get the message out there. The areas are
- Share schemes and compliance by employees
- Rental Income
- Postponed Accounting for Vat
- Employee Wage Subsidy Scheme reviews
- Other areas
- Summary
Share Schemes
The various share schemes can be confusing for employees and some employers too. There is an obligation on the employer to report share awards to employees in a tax year. At the meeting, Revenue mentioned that some employers completed the wrong form. The usual reporting date for employers is the 31st of March after the tax year.
The main issue is for the employee and for them to know what they must do. For example, an employee that gets free and discounted shares will be subject to taxes at source. The value will go through payroll like normal pay and be subject to PAYE, USC, and PRSI.
RSUs
Restricted Stock Units [RSUs] are similar in that the value of the shares goes through payroll. There are subtle differences for the employer. There is employer’s PRSI on some schemes and not on others. When the share value goes through payroll, the employee, in most cases, has no further action to take.
Restricted Shares
Restricted Shares can be a tax-efficient way to award shares to your employees. A restriction applies on the disposal of those shares. Say the employee can’t sell the share for 4 years then the amount liable to tax reduces by 40%. If the employee dies or the company is sold before the 4 years, there is a recalculation of tax. In the event of a company sale, there would also be CGT implications
Share Options
Where an employee gets an unapproved share option the employee must pay Income Tax, USC, and PRSI. The employee has 30 days to pay this from the date of exercise using a form RTSO1. That employee becomes a chargeable person and must file an Income Tax return form 11 for the year.
Revenue has all the information on the share awards granted to employees. They will have this by the 31st of March 2022 for the 2021 tax year. As an employee that got shares, you need to see if you have further reporting and tax payment obligations. If you do and do nothing, expect a letter from Revenue.
Rental Income
The rental income sector is always a focus for Revenue. We spoke about this before in “Is Revenue Watching You?”. The answer is yes and not being compliant in this area is foolish. There is nearly full compliance with Local Property Tax so Revenue know what you own. They know this because you tell them and pay your LPT on the residential properties you have.
From the 4th of April 2022, Landlords must register their tenancies with the RTB every year. Revenue would also have access to the commercial leases register. On top of that, they have access to third-party information from Estate agents and other bodies.
From a Revenue perspective, they are more interested in the taxpayer who is not engaging. They know you are getting income and you haven’t returned it. If you haven’t returned it over a few years, then they look for Tax returns for up to 4 years at a minimum. Non-resident landlords will also be in the firing line here.
Other areas of concern here could be a claim to deductions that you are not entitled to. One example would be an incorrect deduction for mortgage interest. Where you haven’t registered the tenancy with the RTB then you can’t get a deduction for the interest
Postponed Accounting for Vat
This was an unusual one for me, but it came up a few times at the meeting. It involves the completion of Vat returns and the postponed accounting box on the return. The box is PA1 which you will see on the Vat return.
For customers registered for Vat, they must enter the customs value of imported goods. Imported goods would be from outside the EU, including mainland UK, but not Northern Ireland.
Postponed accounting for Vat is an advantage to the taxpayer. If the system wasn’t in place the importer would have to pay Vat at the point of entry. They would then claim this Vat back in their return. The time difference between paying and claiming back would be a cashflow disadvantage.
Revenue have the information from the customs forms. Now it’s up to the taxpayer to complete the Vat return. A new bookkeeping client of ours got a letter recently on this issue. They were looking for us to resubmit the Vat returns. The previous bookkeeper didn’t complete the PA1 box with the customs value of imports. The kind Revenue official gave us the numbers which made our job easy.
The vat element of the import must go into the sales box T1 of the Vat return. The same vat element goes into box T2 for purchases so there is no Vat cost. Getting this right will prevent a call or letter from Revenue. Revenue confirmed they will look at non-filers and incorrect filers. Code for everyone not doing it right!
Employee Wage Subsidy Scheme [EWSS]
The deadline to review a business’s entitlement for the EWSS was the 30th of September. That was also the deadline to self-correct any invalid claims.
Revenue Business and Medium Enterprise Divisions confirmed this is a focus area. They currently have about 1200 cases under review. They expect to continue this work into Q1 2023.
Other areas
The business division of Revenue deal with cases that have PAYE, VAT, RCT, and Customs and Excise registrations. The Revenue lady gave a long list of areas that interest them which includes
- Debt warehousing
- Vat compliance and Vat fraud
- Payroll compliance
- RCT compliance
- Legacy cases
- Mineral Oils
- Appeals cases
- Custom & Excise compliance and control
- Sectoral projects
We looked at debt warehousing last week, what you must do and some options to consider. To ensure you have no compliance issues with payroll, Vat, and RCT your bookkeeping needs to be spot on. If this is an area of weakness, outsourcing your bookkeeping function would be a valuable investment. It would save you time and money and provide you with the confidence to know your numbers are right
Summary
Revenue is now a very large moving beast with the most up-to-date IT systems and talented people. We will know more about the Business Energy Support Scheme next week in the Finance Bill. The new rent tax credit will give them more information about landlords. Coming up in 2023 is a new Residential Zoned Land Tax. A section about this will go live on ROS in the coming weeks. All in all, If you want someone to collect taxes, Revenue have a particular set of skills!
Taking some artistic licence, if we doctor the quote from Taken you will get my drift.
If you pay your taxes now, that’ll be the end of it. I will not look for you. I will not pursue you. But if you don’t, I will look for you, I will find you, and I will kill you.
