Following last week's Government announcement of a €7.4 billion Jobs Stimulus plan in the wake of the COVID-19 pandemic, HLB Sheehan Quinn Tax Compliance Partner Eddie Coleman takes a look at how the plan will impact on employers.
Employer Wage Support Measures
The existing Temporary Wage Subsidy Scheme (“TWSS”) is scheduled to end on 31 August 2020. The TWSS is not being extended and will be replaced by a new Employment Wage Subsidy Scheme (“EWSS”) which is being introduced from 31 July 2020. They will run in parallel for the month of August so as to cater for certain employees who were excluded from the TWSS.
The EWSS will run to 31 March 2021 and is available to all Irish businesses. To qualify for the scheme an employer must be able to demonstrate that in the period 1 July 2020 to 31 December 2020 the business will experience a reduction in turnover/orders of 30% or more as compared to the corresponding period in 2019 and that the reduction is as a result of the disruption caused by Covid-19. If an employer avails of the EWSS they are obliged to carry out a review of the business’ continuing eligibility on the last day of each month. If a business no longer meets the qualifying criteria then they must de-register from the scheme with effect from the 1st day of the following month. The EWSS will be administered by the Revenue Commissioners on a self-assessment basis.
The EWSS pays a subsidy to the qualifying employer of €151.50 per-week for each employee with weekly gross pay between €151.50 and €202.99 and, €203.00 per-week for each employee with weekly gross pay between €203.00 and €1,462. For employees earning less than €151.50 gross per-week or earning more than €1,462 gross per-week no subsidy will be payable. The reduced employer PRSI rate of €0.5% will apply to the gross earnings of employee that are eligible under the EWSS.
“The foregoing provisions are going to provide welcome support to Irish businesses through the coming months.”
Income Tax/Corporation Tax
Individuals and companies that carry on trading activities are entitled to claim relief for losses incurred in their trades. New temporary loss relief provisions are to be introduced to allow for “accelerated” loss relief for individuals/companies for losses incurred in 2020.
The standard rate of VAT is to be reduced from 23% to 21% for the six months commencing 1 September 2020.
Warehousing of Tax Debts
The Revenue Commissioners introduced a “tax debt warehousing” arrangement, on an administrative basis, in May of this year. This is to apply to PAYE and VAT debts of a business for a set period which could not be paid as they fell due as a result of the business being unable to trade or whose trade was severely restricted due to the Covid-19 pandemic. Businesses who wish to avail of the scheme must ensure that all tax returns are filed by the relevant due dates (even though the tax due may not be paid) and apply to the Revenue Commissioners to avail of this scheme by 30 September 2020.
The “warehoused” tax debts are to be repaid over a period to be agreed by Revenue which should commence when normal trading has resumed. No interest is charged on the first 12 months of the agreed repayment period with a reduced 3% rate applicable thereafter. The business must file/pay all taxes on time during the repayment period as they fall due. Legislation is being prepared to put this scheme on a legal basis rather than by way of Revenue concessional treatment as was the case.
HLB Sheehan Quinn Tax Compliance Partner Eddie Coleman writes: "The foregoing provisions are going to provide welcome support to Irish businesses through the coming months.
The changes with regard to the EWSS being a subsidy to employers, is also a welcome change. This will mean that wages / salaries will be taxed as normal and there will not be any legacy liability owed by individuals as with the TWSS.
Revenue is currently writing to employers who have availed of the TWSS. Revenue letters look for various items but the most important is a confirmation from the employer to confirm they have met the 25% or more reduction in turnover for Q2. Therefore, employers must ensure that they have maintained the relevant documentation (e.g. Board Minutes, Budget forecasts, etc.) on which the decision to avail of the TWSS was based. Also, employers should have turnover figures available for Q2 of 2020 and comparable figures for Q2 2019 to support the 25% test."