Change to EWSS turnover test in Finance Bill 2020

Dec 14, 2020

The Finance Bill as passed by the Dáil contains an amendment to the turnover test for the Employment Wage Subsidy Scheme (EWSS).  Section 63(3)(d) of the Bill amends Section 28B of the Emergency Measures in the Public Interest (Covid-19) Act 2020 to provide that from 1 January 2021, an employer must demonstrate that their business is expected to experience a 30 percent reduction in turnover or orders between 1 January 2021 and 30 June 2021 when compared to 1 January 2019 and 30 June 2019.  Provision is made for businesses which commenced trade in the first half of 2019. 

Current legislation and guidance states that the comparison period for establishing a 30 percent reduction in turnover or orders for December 2020, January 2021 and February 2021 is the period 1 July 2019 to 31 December 2019. 

As EWSS operates on a pay date basis, the new eligibility test (comparing January - June 2021 turnover to January – June 2019 turnover) proposed in the Bill applies to all wages paid on or after 1 January 2021.  The current eligibility test (comparing July-December 2020 turnover to July-December 2019 turnover) applies to all wage pay dates to 31 December 2020.

Under the terms of the EWSS, a business is obliged to self-review at the end of every month to ensure continued eligibility, therefore the review at the end of December should be based on the January to June 2021 projections under the new rules.  

The Employment Wage Subsidy Scheme is currently set to continue until 31st March 2021.  On Budget Day Minister Donohoe said that a similar scheme will be needed until the end of 2021 to provide businesses with greater levels of certainty.  However, its not clear if the rule changes to the eligibility tests in the Bill signals the extension of the EWSS beyond 31 March 2021 as there has been no corresponding announcement by the Government.   

Chartered Accountants Ireland has contacted Revenue seeking further clarification on this matter.  We have highlighted the difficulties businesses and their accountants will have in adhering to this rule change in such a short timeframe particularly as many are busy with Christmas trade and getting back on their feet after lockdown.  We outlined that many businesses have made commercial decisions based on the understanding that they had the security of the EWSS for the next three months which they now must reassess again to ensure they meet the conditions.  If they don’t, then they may have to make staff redundant.