The Temporary COVID-19 Wage Subsidy Scheme was aimed at encouraging employers to keep employees in employment. It is not strictly a tax measure but it is operated by the Revenue. Under the Scheme eligible employees whose employers have been adversely affected by COVID-19, could receive up to 70% of their wages from the State.
The employers who avail of the Scheme are encouraged to use their best efforts to top up their employees’ wages above the subsidy received under the Scheme. In order to qualify for the Scheme, an employer must be able to demonstrate and declare in writing that its business is experiencing significant negative economic disruption due to COVID-19, and that the negative disruption is leading to a minimum of 25% decline in actual or predicted turnover, an inability to pay normal wages and outgoings and, to other circumstances as set out in published Revenue guidelines on the Scheme. The Scheme is expected to last 12 weeks from 26 March 2020.
An SME in this context is defined as a business with an annual turnover of less than EUR 3m and that is not dealt with by either of Revenue’s Large Cases or Medium Cases Divisions. This is a much narrower definition when compared with the definition of “SMEs” found elsewhere in Irish and EU law (being an enterprise with less than 250 employees and either an annual turnover of less than EUR 50m or an annual balance sheet of less than EUR 43m)
Finance Act 2020 provides for the Covid Restrictions Support Scheme (“CRSS”), which is a targeted support for businesses significantly impacted by restrictions introduced by the Government under public health regulations to combat the effects of the Covid-19 pandemic.
CRSS provides support for businesses that are forced to temporarily close or to operate at significantly reduced levels because of Covid restrictions that either prohibit, or significantly restrict, customers of the business from accessing the premises in which the business is carried on.
Generally, this refers to Covid restrictions at Level 3, 4 or 5 of the Government’s Plan for Living with Covid-19 but certain businesses may qualify for the support where lower levels of restrictions are in operation.
The scheme is available to affected self-employed individuals and companies who carry on a trade or trading activities, the profits from which are chargeable to tax under Case I of Schedule D, from a business premises located wholly within a geographical region for which Covid restrictions are in operation. It is also available to persons who carry on a trade in partnership.
To qualify under the scheme, a business must be able to demonstrate that, because of the Covid restrictions, the turnover of the business in the period for which the restrictions are in operation, and for which a claim is made, will be no more than 25% of an amount equal to the average weekly turnover of the business in 2019 (or average weekly turnover in 2020 in the case of a new business) multiplied by the number of weeks in the period for which a claim is made.
Qualifying taxpayers were able to make a claim for an amount equal to 10% of their average weekly turnover in 2019 up to €20,000 and 5% thereafter, subject to a maximum weekly payment of €5,000, for each week that their business is affected by the Covid restrictions. For businesses established between 26 December 2019 and 12 October 2020, the claim will be based on their actual weekly average turnover in the period between the date of commencement and 12 October 2020 (subject to the weekly cap of €5,000). Payments made under the scheme will be treated as an advance credit for trading expenses.
To make a claim under the scheme, a number of other conditions must be satisfied including that the person has an up to date tax clearance certificate and complied with their Value-Added Tax obligations. The person must register to claim on the ‘Revenue Online Service’ and make a declaration that they satisfy the conditions to make a claim under this section. Where Covid restrictions for a geographical region are extended beyond the date on which they were due to expire, a new claim is required for each extension period.
Provision is made for the publication of the name of claimants of CRSS on Revenue’s website. The scheme operated from 13 October 2020 to 31 March 2021 and there is provision for the Minister for Finance to vary aspects of the scheme by Ministerial Order.
Zero VAT Rating
Finance Act 2020 provides for the temporary zero rating of personal protection equipment, thermometers, hand sanitiser, oxygen, medical ventilators and specialist respiratory equipment including respirators for intensive and sub-intensive care and other oxygen therapy apparatus including oxygen tents, supplied to the Health Service Executive and other health facilities for use in the delivery of Covid-19 related health care services. It also provides that the Minister is required to extend this period if the European Commission makes a decision to extend it.
Finance Act 2020 provides for the inclusion of certain proprietary directors within the Employment Wage Subsidy Scheme from 1 September 2020. It makes provision for warehousing of excess Temporary Wage Subsidy Scheme (TWSS) payments received by an employer which must be refunded to Revenue.
Amounts to be refunded to Revenue are referred to as ‘relevant tax’. This scheme will operate on a similar basis to the existing warehousing schemes for PAYE (Employer) and VAT liabilities.
Warehousing of excess TWSS payments will only apply to employers who as a consequence of Covid-19 are unable to pay their relevant tax and who have filed all relevant PAYE and TWSS returns.
All “small and medium enterprises” (SMEs) whose tax affairs are dealt with in Revenue’s Business Division or Personal Division will qualify automatically. Other employers must notify Revenue that they have formed the opinion that they are unable to repay their relevant tax.
Employers will be required to continue to file returns and comply with their other tax obligations (such as paying liabilities in a timely fashion) to avail of a reduced interest rate of 3% per annum on repayment of relevant tax in Period 3.
If an employer fails to meet the conditions for debt warehousing, the benefit of the 0% (during Period 2) and 3% (during Period 3) interest rates will no longer apply and interest at a rate of c. 8% per annum will be reimposed.
Revenue will not issue demands for warehoused debt while the employer complies with the provisions of the section and employers who have “warehoused” debt will obtain tax clearance, provided their other tax obligations have been met.
Finance Act 2020 provides for warehousing of “Covid-19 income tax”, which relates to income tax payable through self-assessment and includes the balance of income tax due for 2019 (IT 2019) and preliminary tax for 2020 (PT 2020). These amounts are due for payment on 31 October 2020 or, if the taxpayer is paying and filing electronically via Revenue’s Online Service (ROS), on such later date as is announced by the Collector-General (10 December 2020 for this year).
A taxpayer may avail of warehousing if, as a result of Covid-19 restrictions, her/his income for 2020 is at least 25 per cent lower than her/his income for 2019; or, if the taxpayer did not have income subject to self-assessment in 2019, if s/he is unable to pay her/his “Covid-19 income tax” because of the adverse impact of Covid-19 restrictions.
No interest will be charged on Covid-19 income tax from the filing date (period 1) or for twelve months thereafter (period 2, the “zero-interest period”). After that (in period 3) interest will be charged at the reduced rate of 3 per cent per annum until the debt is paid in full.
If an individual’s income for 2021 is at least 25% lower than her/his income for 2019; or, if the taxpayer did not have income subject to self-assessment in 2019, if s/he is unable to pay her/his balance of income tax for 2020 (IT 2020) and preliminary tax for 2021 (PT 2021), Period 1 may be extended until the pay and file date for 2021.
Taxpayers who warehouse Covid-19 income tax will be required to comply with requirements in relation to filing returns and paying other liabilities in full and on time. Otherwise the normal 8 per cent per annum interest will apply.
Individuals whose taxes are warehoused will still be able to obtain tax clearance certificates if they comply with their other tax obligations.
Enforcement action by the Collector-General of warehoused debt will be suspended for the three periods of the warehousing scheme provided the business complies with all the provisions of this scheme but enforcement action will recommence if the provisions are breached.