Irish Tax Measures for 2021 in Response to COVID-19 - Better ...
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Irish Tax Measures for 2021 in Response to COVID-19
williamfry.com/newsandinsights/publications-article/2021/01/29/irish-tax-measures-for-2021-in-response-to-covid-
19
Business Supports
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.
1/7Revenue Interventions
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
2/7reasonably 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.
3/7From 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.
Taxation
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.
4/7It 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.
5/7Help 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.
Film Relief
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.
6/7Revenue 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.
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