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Vat & Payroll Ireland Updates

Insight 5 August 2022

Vat & Payroll Ireland Updates

Introduction

Our VAT team in Ireland is incorporated into our service offering to provide a one-stop-shop for serving regulated funds and Section 110 Vehicles. Our VAT service offering includes completion and submission of periodic VAT filings, calculation of cross border reverse charge services, calculation and submission of annual recovery rate adjustments and completion and submission of annual return of trading details (RTDS). We also offer the completion and submission of FATCA/CRS returns and VAT registration requirements. Below are some of the most recent relevant VAT updates applicable to our clients:

Most Section 110 entities and funds have been reviewing their annual VAT recovery position in quarter two with a view to including the annual recovery rate adjustment in the May-June 2022 and July-August 2022 VAT returns. The recovery rate calculated is the percentage of VAT incurred an entity can recover from Revenue. The review is carried out annually to ensure the correct recovery was applied throughout the year. The preferred method generally used is calculated as Non-EU Assets divided by total assets held at year end.

This will be the first time after the UK’s departure from the EU with Brexit where all UK domiciled assets will be deemed Non-EU Assets for the purposes of the recovery rate adjustment calculation. Prior to Brexit, assets located in the UK were deemed EU Assets. Based on the above recovery rate formula, this will potentially result in a significant benefit to companies who hold UK domiciled assets with an increase in the recovery of VAT.

A new code of practice for revenue compliance interventions (the “Code”) has been published by Revenue which outlines a revised framework of compliance interventions. The new Code has taken effect from 1 May 2022 and applies to all compliance interventions from that date. Previously, Revenue would issue aspect queries/verification checks on an ad-hoc basis to ensure VAT Compliance. These would generally involve querying certain VAT returns submitted with Revenue requesting sight of all supporting invoices/documentation to support a particular VAT claim. From 1 May 2022, the issuance of “Aspect Queries” has ceased and is replaced by the new Code.

The Code has introduced graduated interventions which are Level 1, 2, and 3.

  • Level 1 is an intervention to support compliance e.g., self-reviews, profile interviews, bulk-issue non-filer reminders. The taxpayer retains the right to an unprompted disclosure. This is similar to aspect queries, whereby the taxpayer can correct any error and pay any additional liability required without further enquiry or challenge from Revenue.
  • Level 2 is a risk review audit. This is an intervention to challenge non-compliance and the taxpayer retains the right to a prompted disclosure. The Revenue will carry out a risk review and/or a desk/field audit on a particular tax period or tax year. This is similar to the previous practice whereby Revenue may not have been satisfied with the aspect query response received and a desk/field audit on the company is completed.
  • Level 3 is an investigation and at this point a qualifying disclosure is no longer available to the taxpayer. Level 3 focuses on tackling high risk practices and cases displaying risks of suspected fraud and tax evasion.

Further details can be found in Revenue E-Brief No 31/22.

From 1 May 2022 to 31 October 2022, the VAT rate applicable on the supply of gas and electricity will reduce to the second reduced VAT rate of 9% from 13.5%. This temporary measure has been agreed by the Irish Government as part of an ongoing plan to tackle the rising cost of living in Ireland. It is important to note any credit notes issued on or after 1 May in respect of supplies of gas and electricity made to VAT registered customers prior to this date must show the VAT rate in force at the time the original invoice was issued.

Sanne’s Payroll Team offers a complete service to Irish Funds and SPVs in respect of director PAYE Irish payroll requirements and obligations. Below are some of the most recent updates in Irish payroll:

1. New living wage

It was announced in June 2022 that the Irish Government will gradually introduce a new living wage to replace the current minimum wage, with the gradual phase in beginning from 2023. The living wage is to be calculated at an hourly rate of pay to be the minimum amount a worker requires in relation to the basic cost of living. It is proposed that the calculation will be 60% of the median wage for a given year; if introduced today, that would be €12.17 per hour. The current minimum wage for individuals over 20 is €10.50 per hour. The minimum wage will remain in place until the new living wage is fully phased in in 2026 and it will increase year on year until then.

2. Statutory sick pay

Previously, employees had no legal right to be paid while on sick leave from work and it was at the discretion of the employer to implement a sick leave policy and remunerate the employee for sick leave. The Sick Pay Bill 2021 was passed by the Oireachtas in July 2022. The Statutory Sick Pay scheme will introduce mandatory paid sick leave for up to 3 sick days per year in 2022/2023, 5 days in 2024, 7 days in 2025 and 10 days in 2026. The proposed legislation indicates that employers will be required to pay 70% of an employee’s wage and a daily threshold of €110 will apply.

3. Parental leave

From July 2022, parental leave will increase from 5 weeks to 7 weeks for children born or adopted after 1 July 2022 for each parent that qualifies. This will entitle each parent to 7 weeks’ leave during the first 2 years of a child’s life, or in the case of adoption, within 2 years of the placement of the child with the family. If a qualifying parent has enough PRSI contributions, they will receive a weekly benefit of €250 per week from the Department of Social Protection (DSP). While the employer is not required to pay the employee while on parental leave, some employers will likely pay or will top up their pay during this leave.

How Sanne can help

Whether you require VAT or director payroll services as part of an overall service offering or VAT/payroll services solely, Sanne can help you. Our team have a proven track record in assisting clients through new taxation and compliance requirements. Our clients also benefit from the premium client service that Sanne offers across all service lines. Please reach out to Graeme, Mark and Paul directly to find out how Sanne can assist you or your business.

To discuss how Sanne can assist you or your business, reach out to Graeme and Mark directly.

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Graeme Rate Head of Sanne, Ireland - Ireland
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Mark Kinsella Director - Ireland
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