Some of the taxation measure provided for include:
Introduction of a new Employment Wage Subsidy Scheme (EWSS) and ending of the Temporary Wage Subsidy Scheme (TWSS)
A new Employment Wage Subsidy Scheme (EWSS) commences from 1 July 2020 and runs until 31 March 2021. To qualify for the EWSS, the employer must be able to demonstrate that they reasonably anticipate a minimum of 30% reduction in turnover or customer orders in July to December 2020 compared with the same period in 2019. In the case of new businesses, this is based on a projected forward test.
EWSS provides a flat-rate subsidy to qualifying employers, based on the number of qualifying employees on the payroll. For every employee paid between €203 and €1,462 gross per week, the level of subsidy is €203. For every employee paid between €151.50 and €202.99 gross per week, the subsidy is €151.50. No subsidy is paid for employees paid less than €151.50 or more than €1,462 gross per week, or for proprietary directors. A 0.5% rate of employer’s PRSI will apply for employments that are eligible for the subsidy.
The EWSS will replace the Temporary Wage Subsidy (TWSS) from September 2020. The TWSS will end on 31 August 2020. No new applications from employers will be accepted from 31 July 2020. Both schemes will run in parallel from 1 July until the TWSS concludes at the end of August. This will provide additional flexibility to employers with new hires and seasonal workers who were not previously eligible for TWSS and who may now qualify for EWSS. However, where an employee is already within TWSS, he or she must remain in that scheme until the end of August.
We await further guidance on how to apply for the EWSS Scheme and its operation.
Debt Warehousing of certain PAYE (Employer) and VAT debts
“Debt Warehousing” is an arrangement whereby VAT and PAYE (Employer) liabilities accrued during the period of restricted trading caused by COVID-19 will be “parked” on an interest free basis for a period of 12 months, subject to certain conditions. Liabilities accrued up to the end of the first bi-monthly VAT period after a business has resumed trading may be eligible for warehousing. After the end of the 12-month period, warehoused debt may be discharged or entered into a phased payment arrangement at a reduced interest rate of 3% per annum.
The key condition of eligibility is that a business continues to keep its tax returns up to date. The scheme will be available to businesses whose tax affairs are dealt with by Revenue’s Business and Personal Divisions. Other taxpayers may qualify for inclusion if they satisfy Revenue that they are unable to pay these liabilities at present, due to the impact of COVID-19 on their business.
There will be three periods in the scheme:
Period 1 – Covid-19 restricted trading phase: The relevant tax debts built up while the business is unable to trade or was subject to restricted trading, and debts for an additional two months after the business re-commences ‘normal’ trading, will be ‘ring-fenced’. There will be no collection of any of the debt in question during this period and no interest will apply, but the debt will have to have been quantified by the business through the filing of all the relevant returns for the restricted trading phase. If a best estimate return of liability has been made for any period, the correct return will have to be filed before the end of Period 1 to ensure that the debt benefits from the warehousing. Period 1 may vary from sector to sector and business to business, depending on when Government restrictions are relaxed in line with the roadmap for re-opening society and business as announced on 1 May 2020.
Period 2 – Zero interest phase: This will last for 12 months after the end of Period 1. During this period no interest will be charged on the debt built up in Period 1. Businesses must pay current tax liabilities as they arise.
Period 3 – Reduced interest phase: This will last from the end of Period 2 until the Covid-19 related debts built up in Period 1 are paid. A reduced interest rate of 3% per annum will be charged on the debt from Period 1. This compares to a rate of 10% per annum normally or otherwise due on overdue VAT and PAYE (Employer) liabilities.
Tax clearance will not be affected by a business availing of tax debt ‘warehousing’ under this arrangement.
Refunds and repayments of tax which arise will be paid, notwithstanding that the business owes VAT and PAYE (Employer) liabilities built up in Period 1. (The business can choose to offset the repayment against the Covid-19 liabilities if it wishes.)
Full details of the arrangements for debt warehousing will be published in legislation in due course.
Reduced interest rate for outstanding “preCOVID-19” debts (subject to payment agreement with Revenue)
A reduced interest rate of 3% per annum will apply to taxes owing to Revenue which are the subject of a phased payment agreement between the taxpayer and the Collector General. This relates to agreements that are already in place and also to new agreements made on or before 30 September 2020. The reduced rate will apply to existing agreements from 1 August 2020 and in other cases from the date an agreement is reached. Standard interest rates will apply up to and including 31 July 2020 or until a payment agreement is reached. This interest rate is available across all tax types.
Taxpayers need to agree the new repayment terms with Revenue by 30 September 2020.
Corporation Tax – Accelerated loss relief
A temporary acceleration of carry-back loss relief is provided for previously profitable companies, that incur trading losses in accounting periods affected by the COVID19 pandemic.
Currently, companies are allowed to carry back trading losses incurred in an accounting period against the profits of a preceding accounting period. A claim for carry-back relief can normally only be made after the end of the accounting period in which the loss is incurred and following the filing of a tax return for that period.
Companies that incur losses in a “specified accounting period”, i.e. a period that includes some part or all of the period from 1 March 2020 to 31 December 2020, will be able to make an interim claim to carry-back up to 50% of estimated trading losses. This can be done as early as 4 months after the beginning of that period.
A company will be able to revise its interim claim as the specified accounting period progresses (and up to 5 months after that period ends). This includes increasing its claim where the company estimates that its loss will be greater than previously expected.
- To be eligible to make an interim claim, a company must:
- Have filed a tax return for the preceding accounting period,
- Be generally tax compliant, and
- Make a declaration that it has incurred a loss, or reasonably expects to do so, in the specified accounting period.
Income Tax – Losses/Capital allowances
Temporary income tax measures are introduced for self-employed individuals whose trade or profession was profitable in 2019 but who incur losses in 2020 as a result of the COVID-19 pandemic. These are:
1. Carry-back of losses and capital allowances: Taxpayers may make a claim to have their 2020 losses (and certain unused capital allowances) carried-back and deducted from income tax paid on their profits for the tax year 2019.
2. Interim claims for carry-back of losses and capital allowances: Subject to meeting certain conditions, taxpayers may also make an interim claim to have an estimated amount of their 2020 losses (and certain capital allowances) carried-back and deducted from income tax paid on their profits for the tax year 2019.
3. Income averaging for farmers: An option will be given to farmers to step out of income averaging for the tax year 2020, notwithstanding that the farmer may also have stepped out of income averaging in one of the four preceding tax years.
Claims and interim claims for 1 and 2 above will be made by amending the Form 11 tax return for 2019. A €25,000 limit will apply on the total amount of losses and capital allowances that may be carried-back.
Stay and Spend tax credit to support the hospitality sector
A new tax credit is being introduced from the 2020 year of assessment, in relation to certain qualifying expenditure on accommodation, food and non-alcoholic drink.
Individuals will be entitled to a tax credit equal to 20% of qualifying expenditure incurred from 1 October 2020 to 30 April 2021, subject to certain limits and conditions.
Individual taxpayers can make a claim for the credit if they spend at least €25 on qualifying services with a qualifying provider. They must submit proof of that expenditure with their claim. The maximum tax credit available to an individual is €125. For a jointly assessed couple, the maximum credit available will be €250.
In order to qualify for the scheme, service providers must provide qualifying services, be VAT-registered, hold a current tax clearance certificate, and register with Revenue.
Value-Added Tax (VAT)
A 6-month reduction in the standard rate of VAT from 23% to 21% will apply, effective from the beginning of September 2020.
The July Jobs Stimulus information leaflet is available on Revenue’s website: