Businesses and communities are dealing with many COVID-19 related issues that are causing severe business disruption. The Irish government has been swift to introduce new measures to mitigate the effects of COVID-19 on business. No doubt, further measures will be introduced in due course. Revenue has acknowledged that “tax payment difficulties are an inevitable impact of the COVID-19 pandemic” and has advised taxpayers to file tax returns and pay tax liabilities “if at all possible”.
On 2 May 2020 the Irish government announced a suite of measures to support small, medium and larger businesses negatively impacted by COVID-19. These measures included:
- “Warehousing” of tax liabilities for a period of twelve months after recommencement of trading, during which time there will be no debt enforcement action taken by Revenue (this measure has been legislated for by the Financial Provisions (COVID-19) (No.2) Act 2020). It was announced in Budget 2021 (13 October 2020) that this support will be expanded to include repayments of subsidies under the Temporary Wage Subsidy Scheme (TWSS). This expanded support also includes self-employed taxpayers that have difficulty meeting their 2019 income tax balance of tax and 2020 preliminary income tax payment obligations. Revenue confirmed on 13 January 2021 that the scheme remains available to businesses affected by the latest Level 5 COVID-19 restrictions. Around 70,000 businesses have availed of this scheme, delaying payment of €1.9bn in tax.
- A commitment to local authorities to make up the rates shortfall, so that local authorities can continue to provide full services to the public.
- The waiving of commercial rates for a three-month period beginning on 27 March 2020 for businesses that have been forced to close due to public health requirements. This incentive had previously been expanded until 31 December 2020. The relief will also apply for the first 3 months of 2021, for those businesses affected by Level 5 COVID-19 restrictions.
Reduction in the Rates of VAT
From 9 April 2020, a zero rate of VAT has applied to personal protection equipment, thermometers, hand sanitiser and respiratory equipment. This temporary measure is due to expire on 30 April 2021.
Revenue will apply a zero rate of VAT to the supply of COVID-19 vaccines, testing kits and services linked to both. This measure applies from 12 December 2020 until the enactment of the Finance Bill 2021 (likely to be some time in December 2021).
As part of the July stimulus package, introduced on 23 July 2020, the government announced a temporary reduction in the standard rate of VAT from 23% to 21% for the period from 1 September 2020 to 28 February 2021.
Budget 2021 introduced a temporary reduction of VAT for the tourism and hospitality sector from 13.5% to 9% effective from 1 November 2020 to 31 December 2021.
Revenue has suspended tax audits and other compliance intervention activities on taxpayers’ premises until further notice. Where possible, Revenue will engage with businesses to finalise open interventions through MyEnquiries on ROS.ie or by telephone.
Filing Tax Returns
Revenue has reiterated that taxpayers (individuals and businesses) should continue to file their tax returns even if payment of the resulting liabilities, in whole or in part, is not possible. Where, due to COVID-19, key personnel that compute tax returns are unavailable, Revenue advise that the relevant return is submitted on a “best estimate” basis. Subsequent amendments can be completed on a “self-correction” basis. They have also indicated that the application of the corporation tax surcharge (for late filing of corporation tax returns) for accounting periods ending June 2019 onwards (i.e. due by 23 March 2020 onwards) is suspended until further notice and there will be no restriction of reliefs (such as loss relief and group relief) due to the late filing.
Close Company Surcharge
Legislation provides for an additional corporation tax charge of 15% or 20% on certain undistributed income of close companies. This surcharge does not apply if such income is distributed within 18 months of the end of the accounting period in which it arose.
On 13 May 2020 Revenue announced that if a distribution is not made within the 18-month period “in response to COVID-19 circumstances affecting the company” Revenue will, on application, extend the 18-month period for distributions by a further 9 months. This is in recognition of the fact that the COVID-19 crisis may require many companies to retain cash to support their business, and that such companies may decide not to make distributions at this time. Revenue hopes that this additional time will enable the company to be better informed about the impact of the current circumstances before making a distribution.
This measure will apply for accounting periods ending from 30 September 2018 onwards for which distributions to avoid the surcharge would be due by 31 March 2020 onwards. Revenue recommends that companies keep a contemporaneous record of the circumstances in which the application to delay making a distribution was made.
Residence Rules – Force Majeure Circumstances
Whether an individual is considered tax resident in Ireland in a particular tax year depends on the number of days (or part of a day) spent in Ireland in that tax year (or preceding tax year).
Revenue’s existing position is that in circumstances where an individual is prevented from leaving Ireland on their intended day of departure due to “extraordinary natural occurrences” or an exceptional third party failure or action, none of which could reasonably have been foreseen and avoided, the individual will not be regarded as being present in Ireland for tax residence purposes for the day after the intended day of departure, provided the individual is unavoidably present in Ireland on that day due only to force majeure circumstances.
Revenue has clarified that where a departure from Ireland is prevented due to COVID-19, Revenue will consider this force majeure for the purposes of establishing an individual’s tax residence position.
On 21 December 2020 Revenue confirmed that this concession will not apply in the tax year 2020 to individuals who entered Ireland on or after 6 May 2020. They indicated that it is mandatory that individuals must have left Ireland as soon as they reasonably could. This must have happened by 1 June 2020, unless the individual had actually contracted COVID-19 and was not able to leave.
Corporation Tax and Presence in Ireland or Outside Ireland Resulting from COVID-19 Related Travel Restrictions
Where an individual is present in Ireland (or in another jurisdiction and would otherwise have been present in Ireland) and that presence is shown to result from travel restrictions related to COVID-19, Revenue will be prepared to disregard such presence in Ireland, for corporation tax purposes, for the company where the individual is an employee, director, service provider or agent. Revenue stresses that the individual and the company should maintain a record of the facts and circumstances of the “bona fide” relevant presence in Ireland, or outside Ireland, for production to Revenue if evidence of such presence is requested.
E-Working and Tax
Revenue has updated its “e-Working and Tax” manual. Details can be accessed here.
As part of Budget 2021, it was announced that e-workers will be able to claim income tax relief for the cost of broadband in their homes. Revenue will accept a claim of 30% of the cost of broadband for the days worked from home. An income tax return must be filed to avail of the relief.
Pandemic Unemployment Payment
The Pandemic Unemployment Payment (PUP) was introduced for those made unemployed by the COVID-19 pandemic and was initially paid at a flat rate of €350 per week. The PUP was extended to 1 April 2021 by the July stimulus package announced by the government on 23 July 2020. The amounts payable under the PUP were set to reduce over several stages. From 29 June 2020, two rates of payment applied based on the amount earned by the individual from their previous employment. From 17 September 2020 until 15 October 2020 there were three PUP rates.
On 15 September 2020 the scheme was extended to allow for new entrants until the end of 2020. Furthermore, Budget 2021 expanded the scope of PUP so that self-employed workers are now able to earn a gross amount of €480 a month before losing their PUP.
From 16 October 2020
On 19 October 2020, it was announced that from 16 October 2020 until 31 January 2021, there will be four PUP rates:
- €203 per week for those who earned less than €200 a week.
- €250 per week for those who earned between €200 and €299.99 a week.
- €300 per week for those who earned between €300 and €399.99 a week.
- A maximum payment of €350 per week for those who earned €400 or more a week.
From 1 February 2021
From 1 February 2021, PUP will consist of two rates. Those earning between €200 and €300 before the pandemic will receive €203 (the current rate of jobseeker’s benefit). Those earning over €300 per week prior to the pandemic will receive €250.
From 1 April 2021
The PUP will be closed from 1 April 2021 and remaining recipients must apply for jobseeker’s benefit.
From January 2021 those in receipt of the PUP will be able to check their Preliminary End of Year Statement. This will show the amount of PUP received and give a preliminary calculation of any income tax or USC owing. Any liability can be paid to Revenue online, or alternatively the recipient can have their tax credits reduced over a four-year period beginning January 2022.
Social Protection Measures
Employment Wage Subsidy Scheme
As part of the July stimulus package (see below), the government introduced the new Employment Wage Subsidy Scheme (EWSS). The TWSS ended on 31 August 2020 and was replaced by the EWSS. The EWSS is a payroll subsidy scheme that applies from 1 September 2020 to 31 March 2021. Based on statements made by the Minister for Finance on 13 October 2020, it is likely a similar scheme will be introduced from 31 March 2021.
To qualify for the EWSS, an employer must establish they are operating at no more than 70% turnover/customer orders, for the period 1 July to 31 December 2020 for 2020 pay dates, and between 1 January to 30 June 2021 for 2021 pay dates, compared to the same period last year. The EWSS initial pay rates were €203 or €151.50 gross per week depending on the gross pay of qualifying employees. Proprietary directors and certain connected persons are not considered qualifying employees.
It was announced on 19 October 2020 that the subsidy rates would increase for pay dates on or after 20 October 2020. The EWSS now has pay rates of €203, €250, €300 and €350 depending on the gross pay of qualifying employees. These rates are now comparable to the PUP. Where gross weekly pay is greater than €1,462 or less than €151.50 no subsidy will apply. These rates will apply up to 31 January 2021, after which they will revert to the previous rates of €203 or €151.50.
In 2020, the EWSS paid out €1.42 bn to 39,800 employers in respect of 443,100 employees.
July Stimulus Measures
On 23 July 2020, the government announced the July stimulus package, which introduced many measures to aid economic recovery following the COVID-19 pandemic. The package contained €1bn in tax measures, €500m in capital expenditure and €4bn in new current spending. The following measures were introduced by the July stimulus package:
- Stay and Spend incentive
A tax credit was brought in to encourage tourism within Ireland. This tax credit was introduced to help the accommodation and food sector, the purpose of which is to encourage taxpayers to support domestic providers of accommodation and food during the off-season.
Revenue will provide an income tax credit of €125 per taxpayer, or up to €250 for a jointly assessed married couple. The taxpayer may submit receipts up to a cap of €625 in total. A taxpayer must spend a minimum of €25 on qualifying expenditure and submit the receipt to Revenue using a mobile app.
This incentive is confined to expenditure in the period from 1 October 2020 to 30 April 2021.
- Corporate Tax Loss Relief
The stimulus plan provided additional liquidity supports for businesses through enhanced corporate tax loss relief. Repayments of corporation tax that would otherwise become due over the next 18 months may be accelerated. This should provide a cash-flow support to previously profitable companies experiencing losses due to the COVID-19 pandemic.
The maximum amount of the expected current year loss which will qualify for early carry-back will be 50%. The balance will qualify for carry-back under the normal rules in due course.
In 2020, 184 companies claimed this relief in respect of €58 m paid in corporate tax.
- Help to Buy Scheme
On 13 October 2020, it was announced during the Budget 2021 speech that the enhanced Help to Buy Scheme will be extended from 31 December 2020 to 31 December 2021. This enhanced support has been effective since 23 July 2020 and will apply to applicants who sign a contract for the purchase of a new house or who have yet to make the first draw down of the mortgage in the case of a self-build.
The scheme aims to stimulate demand from first time buyers for new houses, to encourage house completions and to assist first time buyers accumulate a deposit for a new home. Support available to first time buyers will increase to the lesser of
- €30,000 (up from €20,000); or
- the amount of income tax and DIRT paid for the 4 previous years; or10 per cent (up from 5 per cent) of the purchase price of the new home or self-build property.
- Conditions that need to be met to avail of this scheme include:Joint buyers must both be first time buyers.
- Joint buyers must both be first time buyers.
- The property must be the first-time buyer’s home as the scheme does not include investment properties.
- A mortgage of at least 70% of the price of the property must be taken out.
- Properties must cost €500,000 or less.
- The property must be resided in for 5 years.
Those claiming the relief must be fully tax compliant for the previous 4 years.
- Cycle to Work Scheme
The stimulus plan changed the Cycle to Work Scheme to increase the allowable expenditure. For ‘ebikes’, expenditure (including related safety equipment) will be increased from €1,000 to €1,500. Expenditure on other bicycles and related safety equipment will be increased to €1,250. The current scheme allows for purchase of a new bicycle every 5 years, the stimulus plan will reduce this to 4 years. All other parameters of the scheme will remain the same.
Recognising that the film industry has been particularly hard hit by COVID-19, the section 481 TCA 1997 film tax credit has been extended by a year, at the rate of 5%, until 31 December 2021. The rate will reduce to 3% in 2022 and then to 2% in 2023, which will be the final year of the scheme.
Benefits in Kind
Revenue have stated that employers can perform COVID-19 testing on employees in the workplace, appoint a third party to carry out such testing, or provide a test kit for self-administration. No benefit-in-kind charge will arise from these activities.
Benefit-in-kind charges will not apply during COVID-19, where an employer pays for the taxi transportation of an employee to or from the workplace due to health concerns.
Revenue have stated that providing an employee with temporary accommodation in order to mitigate the risk of transmission will not cause a benefit-in-kind charge.
COVID Restrictions Support Scheme
Budget 2021 introduced the Covid Restrictions Support Scheme (CRSS). The CRSS is aimed at businesses that have had to reduce or cancel their operations as a result of COVID-19 restrictions. Applications can be made to Revenue for a cash payment, representing an advance credit for trading expenses, that are deductible for income and/or corporation tax purposes (ACTE) for the period of the impacting restrictions.
The payments are calculated on the basis of 10% of the first €1m in turnover and 5% thereafter, based on average turnover for 2019. The maximum weekly payment is €5,000.
Businesses can claim an additional week of the ACTE, termed a “restart week”, where trading recommences after COVID-19 restrictions have been lifted. A restart week payment can be claimed more than once, after each period of COVID-19 restrictions and subsequent reopening of the business.
The CRSS will generally apply at Level 3 COVID-19 restrictions or higher and is to run from 13 October 2020 to 31 March 2021. Revenue have stated that the CRSS will not be available to any business established after 12 October 2020, as a new business would not have the relevant previous average turnover amounts.
By the end of 2020, around 16,000 businesses had signed up for the CRSS, receiving payments totalling €146m.
How Can We Help You?
Our partners, associates and our support teams are available as usual to support your business. We also have a COVID-19 Hub on our website to help you with all aspects of your business.
Please contact Brian Duffy or your usual William Fry contact if you wish to discuss any tax issue.
Contributed by Jack Feehan