Specialist
Businesses and communities are dealing with many COVID-19 related issues that are causing severe business disruption. The Irish government has been swift to introduce new measures to mitigate the effects of COVID-19 on business.
No doubt further measures will be introduced in due course. Revenue has acknowledged that "tax payment difficulties are an inevitable impact of the COVID-19 pandemic" and has advised taxpayers to pay tax liabilities "if at all possible".
SME Supports
On 13 March 2020, the Irish Revenue Commissioners (Revenue) outlined some key advice and actions taken to help SME businesses experiencing cashflow and trading difficulties arising from the impact of COVID-19. According to Revenue, an SME is a business with turnover of less than EUR3m that is not dealt with by either Revenue's Large Cases Division or Medium Enterprises Division. The following measures were announced for SMEs:
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the application of interest on late tax payments is suspended for the January/February 2020 and March/April 2020 VAT periods and for the February 2020, March 2020 and April 2020 PAYE (employers) periods;
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businesses experiencing temporary cash flow difficulties should continue to file tax returns on time (even where payment is not immediately possible); and
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all Revenue debt enforcement activity is suspended until further notice.
Revenue's advice for businesses other than SMEs experiencing temporary cash flow or trading difficulties is to contact the Collector-General's office on +353 1 7383663 or engage directly with their branch contacts in Large Corporates Division or Medium Enterprises Division.
Additional Supports
On 2 May 2020 the Government announced a suite of measures to further support small, medium and larger businesses that are negatively impacted by COVID-19. These measures include:
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€10,000 "restart grant" for micro and small businesses based on a rates waiver/rebate from 2019 (estimated that this will cost €250m in total);
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€2bn Pandemic Stabilisation and Recovery Fund established, within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises;
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€2bn COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates;
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"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 will require new legislation to be introduced before it can take effect);
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a commitment to local authorities to make up the rates shortfall, so that local authorities can continue to provide full services to the public;
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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, and
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Government also welcomed the Banking and Payments Federation of Ireland announcement of an extension of payment breaks for businesses and households to 6 months for those requiring assistance which is being provided to bank and non-bank customers impacted by COVID-19.
Tax Repayments/Refunds
Revenue has indicated that it will continue to prioritise the approval and processing of tax repayments and refunds (primarily VAT repayments, PSWT refunds and excess R&D tax credits) to taxpayers. Where verification checks are necessary, Revenue will conduct these through their MyEnquiries service or by telephone.
Where any instalments of excess R&D tax credits are due to be paid in 2020, a request can be made to bring forward the payment date. The company's corporation tax return for the accounting period ending in 2019 must be submitted at the time of the request.
Revenue Interventions
Revenue has suspended tax audit and other compliance intervention activity on taxpayers' premises until further notice. Where possible, Revenue will engage with businesses to finalise open interventions through MyEnquiries or by telephone.
Relevant Contracts Tax Rates and Tax Clearance Status
The RCT rate review that was scheduled to take place in March 2020 was suspended as the process may have resulted in a subcontractor's RCT rate increasing due to changes in their tax compliance position.
Current tax clearance status will remain in place for all businesses over the coming months.
Filing Tax Returns
Revenue have 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.
Recognising 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, 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. 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.
Deferral of Stamp Duty on Credit Cards
The Minister for Finance announced on 18 March 2020 that he was deferring the annual collection of stamp duty on credit cards (i.e. EUR30 per credit card account) from 1 April 2020 to 1 July 2020. The collection date will be changed automatically by financial institutions.
Deferral of Payment of LPT
For property owners who opted to pay their LPT for 2020 by annual debit instruction or single debit authority payment, the payment date will automatically change from 21 March 2020 to 21 July 2020.
Real Time Foreign Tax Credit for Restricted Stock Unit Cases
The 31 March 2020 filing deadline has been suspended for cases where real time foreign tax credits were provided through the payroll. The 2019 income tax return for affected employees will revert to the standard income tax filing deadline (i.e. 31 October 2020 or 12 November 2020 for ROS filings, as appropriate) for that return. Revenue advised that the employer notification to Revenue in relation to such cases should be made as soon as possible, but no later than the applicable extended income tax filing date.
Share Schemes Filing Obligations
The filing deadline for all 2019 share scheme returns is extended from 31 March 2020 to 30 June 2020.
Special Assignee Relief Program (SARP)
The 90-day employer filing obligation is extended for a further 60 days. Revenue believes that this extension should provide sufficient time for employers to file the required return.
Trans-Border Worker Relief
If employees are required to work from home in Ireland, due to COVID-19, such days spent working at home in Ireland will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.
PAYE Dispensation Applications
Due to the current restrictions on travel, Revenue will not "strictly" enforce the 30-day notification requirement for PAYE dispensations applicable to short term business travellers from countries with which Ireland has a double taxation treaty who are going to spend in excess of 60 work days in Ireland in a tax year.
Foreign Employment - Operation of PAYE
Revenue will not seek to enforce Irish payroll obligations for foreign employers in "genuine" cases where an employee was working abroad for a foreign entity prior to COVID-19 but relocates temporarily to Ireland during the COVID-19 period and performs duties for his or her foreign employer while in Ireland.
PAYE Exclusion Order – Irish Contract of Employment
The tax position of employees working abroad for a foreign employer under an Irish contract of employment, where a PAYE exclusion order is in place, will not be adversely impacted if the employee works for more than 30 days in Ireland due to COVID-19.
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 reasonably 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.
E-Working and Tax
Revenue has updated its "e-Working and Tax" manual. Details can be accessed at E-Working and Tax
Corporation Tax and Presence in Ireland or Outside Ireland Resulting from Covid 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.
Pharmaceutical Products, Medical and Personal Protection Equipment
As a temporary concession, Revenue will allow the application of the zero rate of VAT to the supply to the Health Service Executive, hospitals and other health care settings of personal protection and specified medical equipment for use in the treatment of patients with COVID-19.
Goods imported from outside the EU which are used to combat the effects of COVID-19 will be relieved from customs duty and import VAT from 30 January 2020 to 31 July 2020.
Critical pharmaceutical products and medicines will be given a Customs "green routing" to facilitate uninterrupted importation and supply.
Charities VAT Compensation Scheme
The Charities VAT Compensation Scheme was introduced to reduce the VAT burden on charities and partially compensate for VAT paid in the day to day running of the charity. In response to the impact of COVID-19, the closing date for submission of claims under the VAT Compensation Scheme has been extended this year, from 30 June 2020 to 31 August 2020. This is a temporary measure and applies to claims submitted in respect of eligible VAT paid by charities in 2019.
Relief from Excise Duty for the Manufacture of Hand Sanitiser Products
Alcohol products tax will not apply to alcohol used in the production of a range of medicinal and other products such as hand santisers.
Social Protection Measures
COVID-19 Temporary Wage Subsidy Scheme
The Irish government announced new measures on 24 March 2020 and 15 April 2020 to provide financial support to Irish workers affected by the COVID-19 crisis. The scheme applies to all employers from all sectors (other than the public service and non-commercial semi-state sector) whose business activities are being adversely impacted by the COVID-19 pandemic. In addition, employers must retain their employees on the payroll and must be able to demonstrate a minimum of a 25% decline in expected turnover / customer orders for quarter 2, 2020 (when compared with prior comparable periods) and be unable to pay normal wages and normal outgoings fully. Application for the scheme is based on self-assessment principles and a qualifying employer must declare that it is significantly negatively impacted by the COVID-19 crisis. Employers should retain their evidence/basis for entering the wage subsidy scheme as verification checks may be carried out by Revenue in the future. Revenue has indicated in published guidelines that an employer that has been hit by a significant decline in business but has strong cash reserves, that are not required to fund debt, will still qualify for the wage subsidy scheme but the government would expect the employer to continue to pay a "significant proportion" of the employees' wages.
The scheme enables employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer and will run for 12 weeks from 26 March 2020. As at 15 April 2020 over 43,000 employers are registered for the scheme and over 26,000 of these have already received a refund. According to Revenue, over 600,000 employees are in receipt of payments under the scheme.
To address certain "anomalies" in the scheme as introduced, the Minister of Finance announced on 15 April 2020 further changes to the scheme which will apply to those earning less than €500 per week (approx. €31,000 per annum) as well as those earning in excess of €586 per week (€38,000 per annum). See details below. These changes will mean that from 4 May 2020, more employees will receive a subsidy of €350 per week, and those with previous net pay below €412 per week will receive a greater level of subsidy.
Some key features of the scheme include:
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it applies to employees who were on the employer's payroll as at 29 February 2020 and for whom a payroll submission has already been made to Revenue in the period from 1 February 2020 to 15 March 2020;
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on 24 April 2020 Revenue announced that certain employers who had not fulfilled their PAYE reporting obligations for February 2020 by 15 March 2020 will be allowed to access the scheme provided (i) the employees were included on the employer's payroll on 29 February 2020, (ii) the February 2020 payroll submission was submitted to Revenue before 1 April 2020, and (iii) payroll submissions for all previous months were submitted to Revenue before 15 March 2020;
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subsidy payments up to the relevant thresholds will be refunded by the Irish government to employers via the payroll process;
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employers will be refunded up to a maximum of €410 per week for each qualifying employee (for employees earning less than or equal to €586 per week net) via the payroll process;
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employers will be refunded up to a maximum of €350 per week for each qualifying employee (for employees earning over €586 per week net and less than or equal to €960 per week net) via the payroll process;
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in April 2020, the scheme will move to a subsidy payment based on 70% of the weekly average take home pay for each employee up to a maximum of €410;
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income tax and USC will not be applied to the subsidy payment through the payroll;
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employee PRSI will not apply to the subsidy or any top up payment by the employer;
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employers PRSI will not apply to the subsidy and employers PRSI will be reduced from 10.5% to 0.5% on any top-up payment, and
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from 26 March 2020, employers or their tax agents can apply to operate the scheme via Revenue’s Online Service (ROS). Further details of the scheme can be found here
From 4 May 2020, the scheme moved into the "Operational Phase" with the following enhanced features:
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for employees with net pay less than €586 per week (€38,000 p.a.) with previous average net pay:
- up to €412 per week (equivalent to almost €24,400 p.a.), the subsidy will be increased from 70% to 85% of their previous net weekly pay, and
- between €412 and €500 per week (equivalent to €24,400 p.a. to €31,000 p.a.), the subsidy will be up to €350 per week*
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where an employer wishes to pay a greater level of top-up – above the outstanding 15% of previous pay - (for employees with net pay less than €412 per week) in order to bring the employee’s pay to €350 per week, then tapering would not be applied to the subsidy*
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for employees with previous net pay in excess of €586 per week (equivalent to €38,000 p.a.), a tiered approach will apply, but the maximum subsidy payable remains €350 per week. The tiered approach takes into account both the amount paid by the employer and the level of reduction in pay borne by that employee to ensure that no employee would be better off under the scheme*
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the scheme is now available to support employees where the average net pre-COVID 19 salary was greater than €76,000 p.a. and their gross post-COVID-19 salary has fallen below €76,000. The tiered arrangement applicable to gross incomes in excess of €38,000 p.a. will apply in such circumstances*
*these measures were announced by the Minister on 15 April 2020 and apply for payroll with a pay date on or after 4 May 2020 and received by Revenue on or after that date (i.e. no back-dating of increased subsidy will apply)
Article supplied by Brian Duffy of William Fry