This is an unprecedented time in our history. The COVID-19 pandemic has created a medical emergency which is naturally the primary focus and all of us at Sheil Kinnear hope that you and your families are keeping safe and well.

The pandemic is also however giving rise to serious difficulties for Irish business and, although we are all working remotely for the safety of our staff and their families, we assure you that all in Sheil Kinnear are available to advise and assist you in these difficult times.

Measures are being introduced by government, banks and other agencies daily to respond to the challenges resulting from this current crisis and we will endeavour to keep you up to date in relation to these.

Last Tuesday, the government announced an updated suite of social and economic measures to combat the spread of COVID-19 (Coronavirus) and to support those affected by it.

We summarise some of the measures available as updated on 24th March last: –

Employers & Employees

The government’s general information page for employers and employees is here

Employees of businesses that need to reduce hours or number of days worked can avail of the Department of Employment Affairs and Social Protection Short-time Work Support. For additional information click here.

Temporary COVID-19 Wage Subsidy Scheme

This scheme allows employers to pay their employees during the current pandemic. Employers will be refunded up to 70% of an employee’s weekly wages – up to €410 for those earning up to €38,000 per annum (gross) and up to €350 per week for those earning between €38,000 and €76,000 gross. Employees earning more than €76,000 per annum are not eligible for the scheme.

Employers must self-declare to Revenue that they have experienced significant negative economic disruption due to COVID-19, with a minimum of 25% decline in turnover, and demonstrate an inability to pay normal wages and other outgoings, in accordance with guidance to be issued by Revenue.

Please note that employers availing of this scheme will be listed on the Revenue website.

Revenue have been very positive in their media presentations in relation to this scheme and have stated that having cash on deposit should not prevent a company from claiming. However, any company that is going to claim this benefit should build a file to demonstrate clearly how Covid 19 has impacted their business and why they are justified in making the claim.

In the initial stage of the scheme up to 20 April, Revenue will pay €410 per week for each employee but this will be recouped as the scheme moves on to the second phase. Employers are expected to keep account of this over payment!!!

Also, as it is currently presented, the subsidy will be taxed in the hands of the employee at a year-end review – this will likely prove very controversial. For additional information click here.

COVID-19 Pandemic Unemployment Payment

Applies to both Employees and the Self-employed –The COVID-19 Pandemic Unemployment Payment is a new support payment for the self-employed who have lost business and for employees who have lost employment as a result of the pandemic.

This support pays a flat rate of €350 per week and will be in place for twelve weeks (introduced initially as €203 per week for a six-week period).

For additional information click here.

COVID-19 Illness Benefit

Employees that have contracted the COVID-19 virus, or who are required medically to self-isolate, can claim an illness benefit €350 per week (increased from €305 announced initially). It will be paid for up to twelve weeks for those required to self-isolate, or for the duration of the person’s absence from work if they have been diagnosed with COVID-19. For additional information click here.

Revenue

Revenue has provided the following updated advice which will further assist businesses that are experiencing trading difficulties caused by the impacts of COVID-19.

Information for SMEs

Tax Returns

Businesses experiencing temporary cash flow difficulties should continue to send in tax returns on time.

Application of Interest

The application of interest on late payments is suspended for January/February VAT and both February and March PAYE (Employers) liabilities.

Debt Enforcement

All debt enforcement activity is suspended until further notice. Tax Clearance: current tax clearance status will remain in place for all businesses over the coming months.

Tax Clearance

Current tax clearance status will remain in place for all businesses over the coming months.

Information for Subcontractors

RCT (Relevant Contract Tax)

The RCT rate review scheduled to take place in March 2020 is suspended. This process assesses the current compliance position of each subcontractor in the eRCT system and determines their correct RCT deduction rate, i.e. 0%, 20% or 35%. As this process may result in a subcontractor’s RCT rate increasing due to changes in their compliance position, the review is suspended.


Subcontractors and agents are reminded that RCT rate reviews can be self-managed n ROS. Subcontractors can check if their rate should be lower and can then ‘self-review’ to get that lower deduction rate.

Information on importing goods

Customs

Critical pharmaceutical products and medicines will be given a Customs ‘green routing’ to facilitate uninterrupted importation and supply.

Revenue Contact

Businesses, other than SMEs, who are experiencing temporary cash flow or trading difficulties should contact the Collector-General’s office on (01) 7383663. Alternatively, these businesses can engage directly with their branch contacts in Revenue’s Large Corporates Division or Medium Enterprises Division.

Local Property Tax

Home owners that elected to avail of the single debit local property tax payment, due to be taken on 21st March, can now expect to see the money leaving their accounts on 21st May.

Local Authority Rates

Local authority and the Government have agreed that rates should be deferred to those immediately affected by the pandemic. See details at the link below. We expect there to be movement on this in the coming weeks also as there is likely to be strong resistance to payment of rates for any time when businesses have been asked to close. For additional information click here.

Banking & Other Financial Supports

All banks have announced that they will offer flexibility to their customers, and they may be able to provide payment holidays or emergency working capital facilities where required.

In addition, the following government facilities have been recommended as supports for working capital constraints:

Credit Guarantee Scheme

This scheme supports loans from €10,000 up to €1m for periods up to 7 years. The Scheme is operated on behalf of the Department by the Strategic Banking Corporation of Ireland (SBCI) and applications can be made to participating lenders:

AIB

Bank of Ireland

Ulster Bank

Strategic Banking Corporation Ireland (“SBCI”) Working Capital

The €200m SBCI COVID-19 Working Capital Scheme for eligible businesses will be available within the next week. Maximum loan size will be €1.5 million (first €500,000 unsecured) and the maximum interest rate will be 4%. The SCBI is currently working towards bringing this scheme to market as soon as possible. The SBCI website will be updated on a regular basis to update on scheme launch.

Enterprise Ireland Business Support Loans

A €200m Package for Enterprise Supports including a Rescue and Restructuring Scheme is available through Enterprise Ireland for vulnerable but viable firms that need to restructure or transform their business. Details of this support is being finalised and further updates will be available very soon.

Enterprise Ireland Finance in Focus Grant

Grants of €7,200 will be available to Enterprise Ireland and Údarás na Gaeltachta clients that want to access consultancy support to undertake immediate finance reviews. Application forms are available on the Enterprise Ireland website.

Microfinance Ireland

Microenterprises (turnover less than €2m) can access COVID-19 loans of up to €50,000 from MicroFinance Ireland. Loans are available at an interest rates  between 6.8% and 7.8% and businesses can apply through their website or Local Enterprise Office.

Contact

Please continue to contact us as you would normally, either by telephone or email. Our landline number is operating as normal.  We are here to assist you in any way possible as we all try to negotiate these uncertain times.

We hope that this crisis will pass soon and that the recovery will be swift. Stay safe and well.

Succession planning is not just a matter of securing the future of your business. It’s also about protecting your personal financial security, explains David O’Connor.

Business owners tend to delay planning for what will happen when the time comes to exit the business. Unfortunately, this can be an expensive mistake because failing to develop a succession plan may result in lost opportunities and higher tax bills with an adverse impact on the business and on the owner’s personal financial situation.

Succession planning is not just a matter of identifying and developing a person or team to take over your business. It is also about developing a plan that will provide you with adequate retirement income.

Your plan should include a strategy to cope with unexpected events which might cause you to exit  sooner than you otherwise intended.

Examples of such events include:

  • Accidents or illness,
  • Changes in family circumstances,
  • Unexpected offer to purchase the business,
  • Loss of key customers or markets,
  • New competitors.

Deciding on an exit strategy

Your exit strategy will depend on many different factors. For an SME, it could involve planning for a future management buyout. For a family business, it might be identifying and developing a suitable successor from within the family or bringing in someone from outside to take over in due course. For a sole trader, it might involve partnership or incorporation. For farm businesses, it could be setting up a succession partnership. Some owners may choose to sell up or even wind up the business.

Whatever the circumstances, timing and tax, need to be carefully considered as different strategies can have very different financial outcomes.

To take Capital Gains Tax as an example, depending on your circumstances, you may be able to avail of Retirement Relief or Entrepreneur Relief which could significantly reduce, or even eliminate, your CGT exposure subject to meeting certain conditions when disposing of your business.

Finance Act 2017

Where your succession plan involves a management buyout or selling shares in the business, it is important to check whether your plans will be affected by new measures introduced in Finance Act 2017. The changes aim to counter tax avoidance where certain companies sought to extract value from a company as capital rather than income, in order to avail of the lower CGT rates. The new measures restrict the amount of a consideration which may be treated as a ‘new consideration’ when derived from share capital or securities of a close company, and provide that a payment to a member of a close company, on a disposal of shares or securities in the company, will be treated as a distribution, in circumstances where the consideration for the acquisition of the shares or securities is funded, or to be funded, directly or indirectly out of the assets of the company.

Reviewing your Succession Plan

Succession planning is not a once-off activity. Circumstances change and plans need to be updated accordingly. A key focus should be to optimise your business now so as to maximise your future financial security. For more information and to find out how Sheil Kinnear can help, please contact a member of our team.