Two key assumptions underpin Budget 2021, namely that there will be no bilateral trade deal between the EU and the UK and that Covid-19 will continue to be with us next year. Out of the total package of almost €18 billion announced by Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform, Michael McGrath, more than €17 billion relates to expenditure, and just €270 million to taxation measures. Summarised below are the highlights.

INCOME TAX, PRSI and USC

  • There are no broad changes to income tax credits or bands.
  • The ceiling of the second USC rate band will increase from €20,484 to €20,687.
  • The weekly income threshold for the higher rate of employer’s PRSI will increase from €394 to €398 to ensure that there is no incentive to reduce working hours for a full-time minimum wage worker.
  • For the self-employed, the Earned Income Credit will increase by €150 to €1,650.
  • The Dependent Relative Tax Credit will increase from €70 to €245.

MEASURES TO SUPPORT BUSINESSES AND THE SELF-EMPLOYED

  • Extension of the tax warehousing scheme to include repayments of Temporary Wage Subsidy Scheme funds owed by employers and preliminary tax obligations for the adversely affected self-employed. Debt warehousing provisions are being extended to include the 2019 balance and 2020 preliminary tax to allow such taxpayers to defer payment for a period of a year with no interest applying; 3 per cent will apply thereafter and will attract no surcharge.
  • VAT rate reduction for the hospitality and tourism sector from 13.5% to 9% effective from 1st of November 2020. This reduced rate will be in place until December 2021.
  • Commercial rates waiver for the final quarter of this year.
  • Extension of the Employment Wage Subsidy Scheme through 2021, should it be required.
  • A new Covid Restrictions Support Scheme (CRSS) will offer a targeted, timely and temporary sector-specific support to businesses forced to close or trade at significantly reduced levels as a result of restrictions imposed on them in response to Covid-19. The scheme, which will be effective from Budget Day (13 October 2020) until 31 March 2021, will generally operate when Level 3 or higher is in place and will cease when restrictions are lifted. Payments will be calculated on the basis of 10 per cent of the first €1 million in turnover and 5 per cent thereafter, based on average VAT exclusive turnover for 2019. It will be subject to a maximum weekly payment of €5,000. The scheme will operate on a self-assessment basis and qualification will require a business to demonstrate that their turnover has been severely impacted, i.e. reduced to 20% or less of the corresponding period of 2019.
  • Knowledge Development Box relief will be extended for a further 2 years until end December 2022.
  • The accelerated capital allowances scheme for energy efficient equipment is being extended for a further three years. In addition, the energy efficiency criteria for the scheme will be re-assessed to ensure the categories of equipment availing of the scheme remain appropriate and reflect the most up-to-date efficiency standards.
  • The Capital Gains Tax Entrepreneur Relief ordinary share holding requirement is being amended so that an individual who has owned at least 5 percent of the shares for a continuous period of any three years will now qualify for this relief. Previously, a person had to own at least 5 percent for a continuous period of 3 years in the 5 years immediately prior to the disposal.

REMOTE WORKING

An Inter-Departmental Group has been set up to develop a strategy for remote working and remote service delivery. Measures already in place to support working from home include:

  • In cases where the employer makes payments towards the expenses of working from home, up to €3.20 per day may be paid to employees without a Benefit-In-Kind arising.
  • Where the employer does not make a contribution, the worker may claim a tax deduction for utility expenses such as heat and light – and, new for 2020, the Revenue Commissioners have now confirmed that this may include the cost of broadband. Details will be set out in the Revenue guidance.
  • Claims may also be made for any other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of their employment.

MEASURES TO SUPPORT FARMERS

  • Increase in the Farmers Flat Rate Addition from 5.4% to 5.6% from 1 January 2021.
  • Extension of Farm Consolidation (Stamp Duty) relief to 31 December 2022.
  • Extension of Consanguinity (Stamp Duty) Relief in its present format until 31 December 2023.

CAPITAL EXPENDITURE

€500 million was provided as part of the July Stimulus Plan to accelerate capital works and to generate jobs and economic activity. Together with an additional €600 million for core capital investment in 2021, the State will deliver over €10 billion in Exchequer resources for critical projects including major road projects and investment in Dublin Port and Rosslare Europort.

Some €340 million of voted expenditure will be spent on Brexit supports in 2021. This includes an additional allocation for compliance expenditure in 2021 to finalise work at ports and airports and provides for around an additional 500 staff bringing the total provision for approximately 1,500 staff for operationalising checks ahead of 1 January 2021.

RECOVERY FUND

The Budget also provides for a flexible €3.4 billion Recovery Fund  to stimulate increased domestic demand and employment. This will focus on three main areas — infrastructure development, re-skilling and retraining, and supporting investment and jobs.

HOUSING

The additional Help to Buy scheme measures announced in the July Stimulus Plan are being extended to the end of 2021.

MOTOR TAX

A third Motor Tax table is being introduced for cars registered from the 1 January 2021. Currently, nearly half a million cars are in the pre-2008 engine sized based regime and approximately 1.6 million cars in the post 2008 CO2-based regime. Rates will remain unchanged for all cars in the engine sized regime and all but the most pollutant cars in the post-2008 regime.

CARBON TAX

Carbon tax will be increased by €7.50 from €26 to €33.50 per tonne/CO2. This increase will be applied to auto fuels from midnight on Budget Day and all other fuels from 1 May 2021. This will result in an increase of approximately 2.5c per litre of diesel and 2c per litre of petrol.

OLD RELIABLES

The price of a pack of 20 cigarettes is going up by 50c with pro-rata increase on other tobacco products.

OTHER MEASURES

The Budget reaffirms the Government’s commitment to the 12.5% corporation tax rate and contains a number of measures in support of the green agenda including support for retrofitting housing, funding for peatlands restoration and investment in the transport system. Other measures include a financial resolution that will see intangible assets acquired from 14 October 2020 fall fully within the scope of balancing charge rules while a technical amendment to the anti-tax avoidance compliant Exit Tax rules will clarify the operation of interest on instalment payments.

While it is disappointing that there was no reduction in Ireland’s Capital Gains Tax rate which remains one of the highest in Europe, overall Budget 2021 contains welcome support for businesses and the self-employed as they face into a difficult year ahead. As always, measures announced in the Budget may change as the Finance Bill makes its way through the Oireachtas. In the meantime, if you would like to discuss how Budget 2021 affects your business, please contact a member of our team.

Key measures in the Government’s July stimulus plan include the introduction of an Employment Wage Support Scheme, changes to the Covid-19 Pandemic Unemployment Payment, and a range of tax and funding initiatives to support businesses and the self-employed.

On 23 July 2020, the Government announced a stimulus plan to protect jobs and help businesses recover from the impact of the Covid-19 pandemic. The plan contains both new initiatives and changes to previously announced supports. Set out below is a summary of the most relevant measures for businesses and the self-employed.

Employment Wage Subsidy Scheme (EWSS)

An Employment Wage Subsidy Scheme comes into effect on 1 September 2020. This replaces the Temporary Wage Subsidy Scheme (TWSS) which closes at the end of August. The new scheme provides a flat-rate subsidy based on the numbers of paid and eligible employees on your payroll. The level of subsidy per employee is:

Employee Gross Weekly Wages Subsidy Payable
Less than € 151.50 Nil
From € 151.50 to € 202.99 € 151.50
From € 203 to € 1,462 € 203
More than € 1,462 Nil

To avail of the EWSS, your turnover from 1 July to 31 December 2020 must be down 30% when compared to the same period last year. You must check this each month and if you no longer meet the criteria, you must deregister from the scheme on the first day of the following month. Further information on the full criteria and details of how to apply are available on the Revenue website. Unless changes are announced, the EWSS will run until the end of March 2021.

It is important to note that companies that only have proprietary directors, and no other employees can claim the EWSS. However, the proprietary director must have been paid wages that have been reported to Revenue on the payroll of the eligible employer at any stage between 1 July 2019 to 30 June 2020. A proprietary director is a director that owns 15% or more of the company in which he or she is a director. Connected persons to these directors will qualify provided they have been in employment with the company during July 2019 to June 2020. Revenue are currently reviewing this and we will update as the guidance changes.

Covid-19 Pandemic Unemployment Payment (PUP)

The Covid-19 Pandemic Unemployment Payment is being extended to April 2021 however it will close to new entrants from 17 September 2020. This payment was introduced to support employees and the self-employed aged between 18 and 66 who lost their job or whose trading income ceased on or after 13 March due to the Covid-19 pandemic. The payment rate is calculated based on previous earnings. A reduced rate comes into effect from 17 September (see table below), with a further rate adjustment on 1 February 2021.

From 1 April, 2021, anyone receiving a Pandemic Unemployment Payment will need to apply for either Jobseeker’s Benefit or Jobseeker’s Allowance or Jobseeker’s Benefit for the Self-Employed.

Pandemic Unemployment Payment Rate from 17 September 2020
People who previously earned Rate per week
less than €200 per week €203
between €200 and €300 per week €250
over €300 per week €300

 

Tax Changes in the July Stimulus Plan

The stimulus plan contains a number of changes affecting Income Tax, Corporation Tax and VAT. These changes were enacted in the Financial Provisions (Covid-19) (No. 2) Act 2020 which President Michael D Higgins signed into law on 1 August 2020. They include:

  • Accelerated Corporation Tax Loss Relief: This Corporation Tax measure aims to support the cash-flow of previously profitable companies who are experiencing losses due to the pandemic. Up to now, companies who wanted to offset current year trading losses against previous year profits had to wait until they filed the current year’s tax return. Now, under changes announced in the stimulus plan, companies can submit an interim claim for losses. This means that repayments of corporation tax which would previously have been due over the next 18 months can be accelerated. The maximum amount of your expected current year loss that can qualify for early carry-back is 50%.
  • Income Tax loss relief for the self-employed: Up to now, partnerships and individuals with trading losses had to carry them forward and offset them against future profits. The stimulus plan contains a temporary measure allowing self-employed individuals to carry back 2020 losses and certain unused capital allowances and deduct them from their 2019 profits. Interim claims can also be submitted based on an estimate of the amount of relief due. There is a €25,000 limit on the total amount that can be carried back.
  • Farm Income Averaging Step Out: The Act allows farmers to step out of income averaging for the 2020 tax year even if they have already stepped out in one of the four preceding tax years.
  • Help for businesses dealing with tax debt: Legislation now allows for the deferral of unpaid VAT and PAYE (Employers) debts arising from the Covid-19 crisis for a period of 12 months after a business resumes trading with a lower interest rate (around 3% per annum) on the repayment of warehoused debts after that date. PAYE (Employer) liabilities include income tax, USC, employer’s PRSI and LPT collected by the employer which are due to be remitted by employers under the PAYE system.
  • Temporary reduction of standard VAT rate: The standard rate of VAT is being cut from 23% to 21% for the period 1 September 2020 to 28 February 2021. Businesses will need to update their systems now so as to be ready for this change. Revenue information on the procedures that VAT-registered traders should follow are available here.

When availing of the EWSS or the tax incentives mentioned above, it is important to ensure you comply with the terms and conditions and keep all relevant documentation to support your claim as Revenue may inspect this at a later date. For more information, please contact our tax team.

Other Measures to Support Business Recovery

The July stimulus plan also contains a number of other changes and new initiatives to support businesses experiencing Covid-19 related difficulties. These include:

  • Extension of commercial rates waiver: This waiver, which takes the form of a credit in lieu of rates, is being extended until September 2020. Apart from a few limited exceptions, it applies to all ratepayers for the period 27 March to 27 September 2020.
  • Enhancements to the Restart Grant for Enterprises: This grant is designed to help businesses reopen their premises and get back to work. Under changes announced in the stimulus plan, the payment level is being increased up to a maximum of €25,000 and some businesses not previously eligible will now be able to apply. To qualify, your business must be commercial and in the local authority rates system (apart from non-rateable B&Bs who can apply to Fáilte Ireland). You must have suffered a 25% loss of expected turnover between 1 April and 30 June 2020. You must have fewer than 250 employees and your turnover must be below €25m and you must declare your intention to re-employ staff in receipt of the Temporary Wage Subsidy Scheme. For more information and details of how to apply, contact your local authority.
  • Expansion of Future Growth Loan Scheme: A further €500m of long-term loans is being provided to help SMEs expand, diversify or improve productivity. This scheme enables eligible businesses with up to 499 employees to invest for the longer-term at competitive rates.
  • Covid-19 Credit Guarantee Scheme:  This scheme will facilitate loans for up to six years at a discounted rate with the State acting as guarantor for 80% of each individual loan. To qualify, eligible businesses must be able to show a fall of at least 15% of actual or projected turnover or profit due to the impact of Covid-19. As with other credit guarantee schemes, the Covid-19 CGS will be operated by the Strategic Banking Corporation of Ireland.
  • Apprenticeship Incentivisation Scheme: Under this new scheme, apprenticeship employers are eligible for a €3,000 payment for each new apprentice who is registered between the period 1 March and 31 December 2020. The first €2,000 per apprentice is payable at the point of registration and a further €1,000 is payable in Quarter 3 2021 for each eligible apprentice retained on their apprenticeship. Further information and details of how to apply are available on apprenticeship.ie.
  • Grant for self-employed: There is a €1,000 grant available for self employed people that were previously on the PUP. A qualifying business cannot be eligible for any other re-start grants.
  • Cycle To Work Scheme: Allowable expenditure under this scheme is being increased from €1,000 to €1,500 in respect of ‘ebikes’ and €1,250 in respect of bicycles. The scheme previously allowed the purchase of a new bicycle every 5 years. This is being reduced to 4 years.
  • Recruitment subsidy: The JobsPlus incentive is being enhanced to encourage new hires from the Live Register. The subsidy will be payable to employers when they recruit people who are getting the Pandemic Unemployment Payment, with special provision for the early recruitment of people aged under 30 (previously this provision was limited to people aged under 25).

There is a broad suite of other supports that businesses may be able to avail of. These include additional resources for MicroFinance Ireland and the Local Enterprise Offices, extra Enterprise Support Grants for self-employed people receiving the Covid-19 Pandemic Unemployment Payment, incentives for companies engaging in green energy research, additional funding for the online trading voucher scheme, investment in Brexit training and infrastructure, and support for the Covid-19 Life Sciences industry.

General measures

In addition to the supports for business and the self-employed outlined above, the stimulus plan contains a number of provisions that may benefit some individual taxpayers. These include an enhancement of the Help-to-Buy scheme for the remainder of 2020 which will increase support for first time buyers to the lesser of €30,000 (up from €20,000) or 10 percent (up from 5 percent) of the purchase price of a new home/self-build property.

There is also a ‘Stay and Spend’ incentive to support the domestic tourism industry. This is in the form of a tax credit for individual taxpayers who spend a minimum of €25 on qualifying expenditure between 1 October 2020 to 30 April 2021 and submit the receipt to Revenue using a mobile app. There is a cap of €625 on the receipts that can be submitted. Revenue will provide an income tax credit of €125 per taxpayer, or up to €250 for a jointly assessed couple.

October Budget

Covid-19 is still very much with us and many businesses across the economy will continue to experience difficulties in the months ahead. With Brexit also on the horizon, it is vital that policy makers continue to focus on providing support to help viable businesses survive.

Measures that Sheil Kinnear would like to see included in the forthcoming October Budget include reintroduction of the 9% VAT rate for the hospitality sector where businesses have been particularly badly hit by the public health restrictions arising out of the Covid-19 crisis. We would also like to see more support for indigenous SMEs and smaller businesses including tax reforms to reflect modern work practices, enhanced capital tax reliefs to support entrepreneurship and postponed VAT accounting to assist Irish traders importing goods post-Brexit.

We hope that you find this summary of the measures contained in the July stimulus plan helpful. Note that future developments may impact the measures discussed and further changes or new measures may be announced in the October Budget. If you need more information or would to discuss how your business can avail of the measures discussed, please get in touch.

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.