Key measures in the Government’s July stimulus plan include the introduction of an Employment Wage Support Scheme, changes to the Covid-19 Pandemic Unemployment Payment, and a range of tax and funding initiatives to support businesses and the self-employed.

On 23 July 2020, the Government announced a stimulus plan to protect jobs and help businesses recover from the impact of the Covid-19 pandemic. The plan contains both new initiatives and changes to previously announced supports. Set out below is a summary of the most relevant measures for businesses and the self-employed.

Employment Wage Subsidy Scheme (EWSS)

An Employment Wage Subsidy Scheme comes into effect on 1 September 2020. This replaces the Temporary Wage Subsidy Scheme (TWSS) which closes at the end of August. The new scheme provides a flat-rate subsidy based on the numbers of paid and eligible employees on your payroll. The level of subsidy per employee is:

To avail of the EWSS, your turnover from 1 July to 31 December 2020 must be down 30% when compared to the same period last year. You must check this each month and if you no longer meet the criteria, you must deregister from the scheme on the first day of the following month. Further information on the full criteria and details of how to apply are available on the Revenue website. Unless changes are announced, the EWSS will run until the end of March 2021.

It is important to note that companies that only have proprietary directors, and no other employees can claim the EWSS. However, the proprietary director must have been paid wages that have been reported to Revenue on the payroll of the eligible employer at any stage between 1 July 2019 to 30 June 2020. A proprietary director is a director that owns 15% or more of the company in which he or she is a director. Connected persons to these directors will qualify provided they have been in employment with the company during July 2019 to June 2020. Revenue are currently reviewing this and we will update as the guidance changes.

Covid-19 Pandemic Unemployment Payment (PUP)

The Covid-19 Pandemic Unemployment Payment is being extended to April 2021 however it will close to new entrants from 17 September 2020. This payment was introduced to support employees and the self-employed aged between 18 and 66 who lost their job or whose trading income ceased on or after 13 March due to the Covid-19 pandemic. The payment rate is calculated based on previous earnings. A reduced rate comes into effect from 17 September (see table below), with a further rate adjustment on 1 February 2021.

From 1 April, 2021, anyone receiving a Pandemic Unemployment Payment will need to apply for either Jobseeker’s Benefit or Jobseeker’s Allowance or Jobseeker’s Benefit for the Self-Employed.

Pandemic Unemployment Payment Rate from 17 September 2020

Tax Changes in the July Stimulus Plan

The stimulus plan contains a number of changes affecting Income Tax, Corporation Tax and VAT. These changes were enacted in the Financial Provisions (Covid-19) (No. 2) Act 2020 which President Michael D Higgins signed into law on 1 August 2020. They include:

• Accelerated Corporation Tax Loss Relief: This Corporation Tax measure aims to support the cash-flow of previously profitable companies who are experiencing losses due to the pandemic. Up to now, companies who wanted to offset current year trading losses against previous year profits had to wait until they filed the current year’s tax return. Now, under changes announced in the stimulus plan, companies can submit an interim claim for losses. This means that repayments of corporation tax which would previously have been due over the next 18 months can be accelerated. The maximum amount of your expected current year loss that can qualify for early carry-back is 50%.

• Income Tax loss relief for the self-employed: Up to now, partnerships and individuals with trading losses had to carry them forward and offset them against future profits. The stimulus plan contains a temporary measure allowing self-employed individuals to carry back 2020 losses and certain unused capital allowances and deduct them from their 2019 profits. Interim claims can also be submitted based on an estimate of the amount of relief due. There is a €25,000 limit on the total amount that can be carried back.

• Farm Income Averaging Step Out: The Act allows farmers to step out of income averaging for the 2020 tax year even if they have already stepped out in one of the four preceding tax years.

• Help for businesses dealing with tax debt: Legislation now allows for the deferral of unpaid VAT and PAYE (Employers) debts arising from the Covid-19 crisis for a period of 12 months after a business resumes trading with a lower interest rate (around 3% per annum) on the repayment of warehoused debts after that date. PAYE (Employer) liabilities include income tax, USC, employer’s PRSI and LPT collected by the employer which are due to be remitted by employers under the PAYE system.

• Temporary reduction of standard VAT rate: The standard rate of VAT is being cut from 23% to 21% for the period 1 September 2020 to 28 February 2021. Businesses will need to update their systems now so as to be ready for this change. Revenue information on the procedures that VAT-registered traders should follow are available here.

When availing of the EWSS or the tax incentives mentioned above, it is important to ensure you comply with the terms and conditions and keep all relevant documentation to support your claim as Revenue may inspect this at a later date. For more information, please contact our tax team.

Other Measures to Support Business Recovery

The July stimulus plan also contains a number of other changes and new initiatives to support businesses experiencing Covid-19 related difficulties. These include:

• Extension of commercial rates waiver: This waiver, which takes the form of a credit in lieu of rates, is being extended until September 2020. Apart from a few limited exceptions, it applies to all ratepayers for the period 27 March to 27 September 2020.

• Enhancements to the Restart Grant for Enterprises: This grant is designed to help businesses reopen their premises and get back to work. Under changes announced in the stimulus plan, the payment level is being increased up to a maximum of €25,000 and some businesses not previously eligible will now be able to apply. To qualify, your business must be commercial and in the local authority rates system (apart from non-rateable B&Bs who can apply to Fáilte Ireland). You must have suffered a 25% loss of expected turnover between 1 April and 30 June 2020. You must have fewer than 250 employees and your turnover must be below €25m and you must declare your intention to re-employ staff in receipt of the Temporary Wage Subsidy Scheme. For more information and details of how to apply, contact your local authority.

• Expansion of Future Growth Loan Scheme: A further €500m of long-term loans is being provided to help SMEs expand, diversify or improve productivity. This scheme enables eligible businesses with up to 499 employees to invest for the longer-term at competitive rates.

• Covid-19 Credit Guarantee Scheme:  This scheme will facilitate loans for up to six years at a discounted rate with the State acting as guarantor for 80% of each individual loan. To qualify, eligible businesses must be able to show a fall of at least 15% of actual or projected turnover or profit due to the impact of Covid-19. As with other credit guarantee schemes, the Covid-19 CGS will be operated by the Strategic Banking Corporation of Ireland.

• Apprenticeship Incentivisation Scheme: Under this new scheme, apprenticeship employers are eligible for a €3,000 payment for each new apprentice who is registered between the period 1 March and 31 December 2020. The first €2,000 per apprentice is payable at the point of registration and a further €1,000 is payable in Quarter 3 2021 for each eligible apprentice retained on their apprenticeship. Further information and details of how to apply are available on apprenticeship.ie.

• Grant for self-employed: There is a €1,000 grant available for self employed people that were previously on the PUP. A qualifying business cannot be eligible for any other re-start grants.

• Cycle To Work Scheme: Allowable expenditure under this scheme is being increased from €1,000 to €1,500 in respect of ‘ebikes’ and €1,250 in respect of bicycles. The scheme previously allowed the purchase of a new bicycle every 5 years. This is being reduced to 4 years.

• Recruitment subsidy: The JobsPlus incentive is being enhanced to encourage new hires from the Live Register. The subsidy will be payable to employers when they recruit people who are getting the Pandemic Unemployment Payment, with special provision for the early recruitment of people aged under 30 (previously this provision was limited to people aged under 25).

There is a broad suite of other supports that businesses may be able to avail of. These include additional resources for MicroFinance Ireland and the Local Enterprise Offices, extra Enterprise Support Grants for self-employed people receiving the Covid-19 Pandemic Unemployment Payment, incentives for companies engaging in green energy research, additional funding for the online trading voucher scheme, investment in Brexit training and infrastructure, and support for the Covid-19 Life Sciences industry.

General measures

In addition to the supports for business and the self-employed outlined above, the stimulus plan contains a number of provisions that may benefit some individual taxpayers. These include an enhancement of the Help-to-Buy scheme for the remainder of 2020 which will increase support for first time buyers to the lesser of €30,000 (up from €20,000) or 10 percent (up from 5 percent) of the purchase price of a new home/self-build property.

There is also a ‘Stay and Spend’ incentive to support the domestic tourism industry. This is in the form of a tax credit for individual taxpayers who spend a minimum of €25 on qualifying expenditure between 1 October 2020 to 30 April 2021 and submit the receipt to Revenue using a mobile app. There is a cap of €625 on the receipts that can be submitted. Revenue will provide an income tax credit of €125 per taxpayer, or up to €250 for a jointly assessed couple.

October Budget

Covid-19 is still very much with us and many businesses across the economy will continue to experience difficulties in the months ahead. With Brexit also on the horizon, it is vital that policy makers continue to focus on providing support to help viable businesses survive.

Measures that Sheil Kinnear would like to see included in the forthcoming October Budget include reintroduction of the 9% VAT rate for the hospitality sector where businesses have been particularly badly hit by the public health restrictions arising out of the Covid-19 crisis. We would also like to see more support for indigenous SMEs and smaller businesses including tax reforms to reflect modern work practices, enhanced capital tax reliefs to support entrepreneurship and postponed VAT accounting to assist Irish traders importing goods post-Brexit.

We hope that you find this summary of the measures contained in the July stimulus plan helpful. Note that future developments may impact the measures discussed and further changes or new measures may be announced in the October Budget. If you need more information or would to discuss how your business can avail of the measures discussed, please get in touch.