Highlights

Budgetary Measures

The Minister announced a total budgetary package of over €17.75bn. More than €17bn relates to expenditure and €270m in taxation measures. The package is unprecedented in both size and scale in Irish history. €8.5bn has been allocated for public services to address the challenges of COVID-19 including €2.1bn in contingency funding. €3.8bn will be spent on supporting existing services across a range of departments, in particular, the Department of Health. Net expenditure on core capital programmes is to increase by €1.6bn in 2021.  €3.4bn will establish a Recovery Fund to stimulate demand and employment.

Recovery Fund

In response to the pandemic and the looming potential hard Brexit, the government has announced a €3.4bn recovery fund to stimulate the economy and employment in the aftermath of the two crises.  The fund will be accompanied by €1.6bn expenditure on capital programmes. The €1.5bn Rainy Day Fund that was established last year will be utilised to help finance the budget for next year, 2021 and a resolution will be brought to government to bring it to effect.

Climate Change

Last week, the draft text of the Climate Action and Low Carbon Development (Amendment) Bill 2020 was published. It set out the roadmap for how Ireland will reach its target of becoming carbon neutral by 2050. In line with the Programme for government commitment, carbon tax will be increased by €7.50 from €26 to €33.50 per tonne/Co2.  It will apply to auto fuels from tonight and to all other fuels from 1 May 2021. 

The 12.5% Corporation Tax Rate

The government's commitment to 12.5% corporation tax rate was reaffirmed.

Digital Gaming Sector 

A new credit will be developed for the digital gaming sector during 2021 to support qualifying activity from 2022.  It is anticipated that this credit will support the current established film and animation sectors in Ireland.

Knowledge Development Box

The Knowledge Development Box has been extended by 2 years to 31 December 2022. The Knowledge Development Box is a corporation tax relief on profits earned by an Irish company on patented inventions and copyrighted software to the extent it relates to research and development.

Capital Allowances for Intangible Assets

All new intangible property acquired on and after 14 October 2020 will be fully within the balancing charge provisions on disposal. This amendment is to ensure that the Irish corporation tax regime is in line with international best practice for similar reliefs.

VAT

The standard rate of VAT has been decreased from 23% to 21% for the period from 1 September 2020 to 28 February 2021. An additional temporary reduction in VAT rates to 9% from the current 13.5%  for tourism and hospitality-related services and goods will apply from 1 November 2020 until 31 December 2021.

COVID Restrictions Support Scheme (CRSS)

This new scheme, which is in line with the government's Plan for Living with COVID-19, is aimed at businesses that have either been prohibited from operating or have only been able to trade at significantly reduced levels as a result of restrictions (generally level 3 or higher) imposed on them in response to COVID-19.

A business that qualifies for the scheme may apply for a maximum weekly cash payment of €5,000.  It is expected that the first payments should be received by mid-November 2020.

It is proposed to run CRSS from 13 October 2020 until 31 March 2021 and it will be brought into effect by Finance Bill 2020.

Expansion of Warehousing of Tax Liabilities

Minister Donohoe announced an extension of the debt warehousing provisions in respect of self-employed taxpayers. Under the provisions, payment of the 2019 income tax balance and 2020 preliminary tax liabilities can be deferred for a year with no interest applying; a 3% interest charge will apply thereafter. No surcharge will apply.

Accelerated Capital Allowances for Energy Efficient Equipment

Following a review in accordance with guidelines for best practice for the evaluation of tax expenditures, this capital allowances scheme is being extended by 3 years, to 31 December 2023.

Entrepreneur Relief

This relief provides for a reduced 10% rate of CGT on certain disposals of "chargeable business assets" which, subject to certain qualifying conditions, may include ordinary shares. Previously, an individual was required to own a minimum 5% shareholding for a continuous period of three years in the five years immediately before the disposal. The changes announced in Budget 2021 amend this requirement so that an individual who has owned a 5% shareholding for a continuous period of any three years may qualify for the relief. 

Residential Development (Stamp Duty) Refund Scheme 

This scheme provides for the refunding of a portion of the stamp duty paid on the acquisition of non-residential land, where that land is subsequently developed for residential purposes, this scheme is due to expire for new applications on 31 December 2021, but this deadline is now being extended to 31 December 2022.  In addition, the 24 months currently allowed between commencement and completion of construction is being extended to 30 months.


For further information on Budget 2021, please contact Brian Duffy or your usual William Fry Tax contact.