Take a look at our section by section analysis of the July Jobs Stimulus package.
Employment Wage Support Scheme to succeed the TWSS (Section 2)
A new Employment Wage Support Scheme (EWSS) has been included in the Government’s July Jobs Stimulus Package. The EWSS will run in parallel to the Temporary Wage Subsidy Scheme (TWSS) from 31 July. The EWSS is set to succeed the TWSS from 1 September and continue to the end of March 2021. While the concepts behind the two schemes align, there are a number of differences between them.
The EWSS will require employers to reassess their eligibility for wage support. Employers who can demonstrate to the satisfaction of Revenue that turnover or customer orders are estimated to have fallen by 30 per cent for the period July to December 2020, compared to the same period last year, will be eligible for the EWSS. While eligibility for the TWSS has been assessed on a 25 per cent reduction in quarter two turnover or customer orders.
Under the EWSS employers will receive a flat-rate subsidy of up to €203 or €151.50 per employee, per week, depending on the employee’s gross weekly pay. A subsidy will not be available for employee’s whose gross weekly earnings are less than €151.50 or greater than €1,462. The TWSS provides for a maximum subsidy amount of €410 depending on an employee’s ARNWP.
Under the EWSS a subsidy will be available for new and seasonal employees, in addition to existing employees. The EWSS is also open to newly commenced businesses. The eligibility criteria for new businesses will be assessed against projected turnover or customer orders had there been no COVID-19 disruption. The EWSS is available to employer’s registered under Section 58C of the Child Care Act 1991.
The EWSS is expected to support 350,000 jobs at an estimated cost of €1.9 billion. Over €2 billion has been paid out through the TWSS as of mid-July. An estimated 415,000 employees continue to be supported by the TWSS.
Chartered Accountants Ireland will host a wage subsidy scheme webinar with Revenue on 26 August. The webinar will be open for registration through the webinar webpage shortly.
Special warehousing and interest provisions (Section 3, 4 and 5)
Debt warehousing legislation is set out in the Bill to support the scheme announced in May. The measures deal with VAT and PAYE debt incurred by businesses, who, due to Covid-19 related restrictions, are unable to pay their liabilities and who have filed all required PAYE, VAT and employment contributions returns. No interest will be charged on PAYE and VAT debts for the initial “Covid-19 restricted trading period” (period 1) or twelve months thereafter (period 2, the “zero-interest period”). Period 2 may be extended by Ministerial Order up to 31 December 2022. Interest will be charged at a reduced rate of 3 per cent per annum in Period 3 until the debt is paid in full.
Reduced interest on overdue tax (Section 6)
A new Section 1080A TCA 1997 provides for a reduced interest rate of approximately 3 per cent per annum to apply from 1 August 2020 to taxes declared under agreements reached with Revenue by 30 September 2020. This measure does not apply where legal proceedings to recover the tax debt has been initiated by Revenue or where the sheriff or country register has initiated proceedings to recover the tax debt.
Stay and Spend tax credit (Section 7)
The Stay and Spend tax credit is an income tax credit, equal to the lesser of 20 per cent of the expenditure on accommodation, food, and non-alcoholic drink and €125 or €250 in the case of a jointly assessed couple. This is the maximum tax credit that may be claimed cumulatively over 2020 and 2021. The period during which qualifying expenditure may be incurred runs from 1 October 2020 to 30 April 2021, although the Minister for Finance may extend the qualifying period up to 31 December 2021. The tax credit may be set against a claimant’s USC liability if he/she can’t fully absorb the tax credit against income tax. The service provider must register with Revenue by electronic means and the claimant must claim the credit by electronic means also.
Enhanced tax relief under the Help to Buy Scheme (Section 8)
Tax relief under the Help to Buy Scheme is enhanced to the lesser of (i) €30,000 (up from €20,000) or (ii) 10 per cent (up from 5 per cent) of the purchase price of the new home or of the completion value of a self-build or (iii) income tax and DIRT paid by the claimant over four years. This enhanced relief is only available from 23 July 2020 to 31 December 2020. From 1 January 2021, the Help to Buy Scheme reverts to the pre 23 July 2020 position.
Enhanced Cycle To Work Scheme (Section 9)
The limit on allowable expenditure under the Cycle to Work Scheme as per Section 118 (5G) TCA 1997 increases from €1,000 to €1,500 for ‘ebikes’ and related safety equipment and to €1,250 for other bicycles and related safety equipment. The scheme currently allows the purchase of a new bicycle once in any 5 years and this will be amended to once in any 4 years.
Loss relief for self-employed (Section 10)
Self-employed individuals carrying on a trade or profession who were profitable in 2019 but, because of the COVID-19 pandemic, incur losses in 2020 can claim to have losses of up to €25,000 carried back for offset against their 2019 profits. The relief can also be claimed on an interim basis during 2020. Farmers who incur a loss in 2020 may opt to step out of income averaging for the tax year 2020.
Accelerated loss relief for companies (Section 11)
A temporary acceleration of corporation tax losses is available to profitable companies which have become lossmaking during the COVID-19 period. Such companies may project trading losses for the current accounting period and make an early claim to carry-back up to 50 per cent of those losses for offset against taxable profits of the preceding accounting period. Companies must be tax compliant and must have incurred or expect to incur a trading loss in an accounting period which includes some or all of the period from 1 March 2020 to 31 December 2020. A company will be able to revise its interim claim as the current accounting period progresses, including increasing the claim where the company estimates that its loss is greater than previously expected.