Revenue provides further information on tax measures outlined in July Jobs Stimulus

The tax measures announced as part of the Government’s July Jobs Stimulus are now signed into law and are set out in the Financial Provisions (Covid-19) (No. 2) Act 2020.

Today (6/8/2020), Revenue has provided detailed information on a range of tax measures contained in the Act including:

• Measures to assist businesses in dealing with tax debts
  • Debt Warehousing of certain PAYE (Employer) and VAT debts.
  • Reduced interest rate for outstanding debt that does not qualify for warehousing.
• Temporary acceleration of Corporation Tax loss relief.
• Temporary Income Tax relief for self-employed individuals carrying on a trade or profession.
• Reduction in the standard rate of VAT from 23% to 21%.
• Introduction of the new Employment Wage Subsidy Scheme (EWSS).

Information is also provided for businesses on the importance of having a Tax Clearance Certificate in order to avail of some of these substantial supports.  

The July Jobs Stimulus package provides a range of measures to help businesses impacted by Covid-19 to re-open and get people back to work in line with the Government Roadmap for Re-opening Society and Business.

Commenting on the range of tax measures contained in the stimulus package which were recently signed into law in the Financial Provisions (Covid-19) (No. 2) Act 2020, Revenue Commissioner, Michael Gladney, said:

“We recognise that this is a really difficult trading environment for many businesses. The Act gives legal effect to the debt warehousing arrangements that we were operating administratively for the past number of months. It also accelerates loss relief for companies, brings in a new measure to allow loss relief for sole traders and introduces the new Employment Wage Subsidy Scheme.”

“We in Revenue have a long track record of working with viable businesses who have temporary cash flow difficulties and in the current environment this has been brought to a whole new level whereby we took the initiative and suspended all debt enforcement activity and developed the debt warehousing provisions.”

“In this context the only requirement that we ask of businesses is that they continue to file accurate and timely tax returns. The warehousing of Covid-19 related tax debts and agreeing a phased payment arrangement for non-Covid-19 related tax debts at the new 3% reduced rate of interest will allow businesses qualify for tax clearance. Having tax clearance is necessary to meet the eligibility criteria for some of the essential supports available to businesses including the new Employment Wage Subsidy Scheme. If business take these practical steps it will enable them to focus on re-opening and rebuilding their trade.”

Measures to assist businesses in dealing with tax debts

1. Debt Warehousing of certain PAYE (Employer) and VAT debts

On 2 May 2020, the Government announced a ‘Debt Warehousing’ scheme for PAYE (Employer) and VAT tax debts associated with the Covid-19 crisis. Pending the enactment of the necessary legislation Revenue operated the scheme on an administrative basis. The legal basis for the scheme is now set out in the Financial Provisions (Covid-19) (No. 2) Act 2020.

To date, approximately 70,000 businesses are availing of the scheme with €1.9bn in debt currently warehoused (€1,039m of PAYE Employer debt and €898m of VAT debt).

Under the warehousing arrangement PAYE (Employer) and VAT debts incurred by businesses during the period of restricted trading caused by Covid-19 can be ‘parked’ on an interest free basis for a period of 12 months following the resumption of trading. After the end of the 12-month interest free period, the warehoused debt may be paid in full without incurring an interest charge or can be paid through a phased payment arrangement at a significantly reduced interest rate of 3% per annum. This compares to the standard rate of 10% per annum that would otherwise apply to such debts.

Key conditions of the scheme include:

• the tax debt must be accurately quantified by the business through the filing of all relevant tax returns for the restricted trading phase. If a best estimate return of liability has been made for any period, the correct return must be filed so that the full debt can be included in the warehousing scheme
• the business must continue to file its tax returns on time and pay current liabilities as they arise during the 12-month warehousing period.

The scheme is automatically available to businesses whose tax affairs are dealt with by Revenue’s Business and Personal Divisions. Other businesses, whose tax affairs are dealt with by Revenue’s Large Corporates and Medium Enterprises Divisions, may qualify for inclusion if they satisfy Revenue that they are unable to pay PAYE (Employer) and VAT debts due to the Covid-19 related restrictions. Such businesses should contact the Collector-General’s Division, if they have not already done so, in order to avail of the debt warehousing arrangement. Contact with the Collector-General’s Division can be made through Revenue’s MyEnquiries service, which is available on a 24/7 basis via ROS, or by telephone to 01-7383663 (available Monday to Friday 9.30am to 1.30pm).

Businesses availing of debt warehousing will qualify for a Tax Clearance Certificate if they otherwise meet the normal qualifying conditions. 

2. Reduced rate of interest for outstanding ‘non-Covid-19’ debts

The July Jobs Stimulus package also provides that the reduced interest rate of 3% per annum will apply for outstanding ‘non-Covid-19’ tax debts, where there is a phased payment arrangement in place between the business or individual and Revenue by 30 September 2020. The 3% rate is available across all tax types and is a significant reduction from the standard interest rates of 8% and 10% per annum that normally apply to late payments of tax.

Almost €90 million in outstanding taxes is currently being paid by way of agreed phased payment arrangements and these will also benefit from the reduced rate of interest from 1 August 2020. Revenue will contact individuals and businesses with existing phased payment arrangements directly to ensure they benefit from the revised rate.

An individual or business with non-Covid tax debts will not qualify for a tax clearance certificate unless they have agreed a phased payment arrangement to pay those debts. As such, Revenue strongly encourages individuals or businesses who have not yet agreed payment arrangements in respect of ‘non-Covid-19’ tax debts with Revenue, and who now wish to avail of the reduced interest rate, to ensure the following steps are completed by 30 September 2020:

• ensure ‘non-Covid-19’ tax debt, across all tax types, is quantified through the filing of all relevant tax returns
• and
• formally agree a phased payment arrangement with Revenue.

Revenue’s Online Phased Payment Facility is available 24/7 and is an easy to use service for individuals or businesses who want to apply to pay tax debt on a phased basis. Once the online application is approved by Revenue, the taxpayer or business has considerable flexibility to self-manage the payment schedule in line with business needs. Alternatively, contact can be made with the Collector-General’s Division on 01-7383663 Monday to Friday from 9.30am to 1.30pm to agree a mutually suitable payment arrangement.

Normal interest rates on late payment of taxes of 8% and 10% per annum will continue to apply to outstanding ‘non-Covid-19’ debts that are not included in a phased payment arrangement with Revenue by 30 September 2020. The reduced interest rate will also not apply to unpaid taxes where Court proceedings for the recovery of that debt have been initiated or where judgments have already issued.

Any individual or business that has additional tax liabilities that have not been
declared to Revenue in the appropriate tax return, due to error or omission,
will not be entitled to benefit from the debt warehousing scheme or the 3%
reduced interest rate in relation to those additional liabilities unless they are declared now. Information in relation to making a self-correction and unprompted qualifying disclosure are set out in Chapter 3 of the Code of Practice for Revenue Audit and other Compliance Interventions.

Information booklet on the warehousing of tax debts associated with Covid-19 and the reduced interest rate on other tax debts.

Temporary acceleration of corporation tax loss relief

Accelerated corporation tax loss relief can be claimed by previously profitable companies, that incur trading losses in accounting periods affected by the Covid-19 pandemic.

A claim to carry-back trading losses against taxable profits of a preceding accounting period can normally only be made after the end of the accounting period in which the loss is incurred and following the filing of a tax return for that period. However, companies that incur, or reasonably expect to incur, losses in a ‘specified accounting period’, i.e. a period that includes part of or the entire period from 1 March 2020 to 31 December 2020, will be able to make an interim claim to carry-back up to 50% of estimated trading losses. This can be done as early as 4 months after the beginning of that period and will give rise to either a repayment of corporation tax paid in the preceding accounting period or a reduction in the amount of tax payable for that period.

A company will be able to revise its interim claim as the specified accounting period progresses and up to 5 months after that period ends. This includes increasing its claim where the company estimates that its trading loss will be greater than previously expected.

To be eligible to make an interim claim, a company must:

• have filed a tax return for the preceding accounting period,
• be compliant with all obligations under tax legislation in relation to the payment of taxes and the filing of returns (companies that avail of debt warehousing and/or agree a phased payment for outstanding debt that does not qualify for warehousing will be treated as having complied with payment obligations relating to tax covered by those arrangements)
• and
• make a declaration that it has incurred a trading loss, or reasonably expects to do so, in the specified accounting period.

Further guidance on accelerated corporation tax loss relief.

Temporary income tax relief for self-employed individuals carrying on a trade or profession

Self-employed individuals whose trade or profession was profitable in 2019 but who incur losses in 2020 can claim to have those losses, and certain unused capital allowances, carried back and deducted from their profits for the tax year 2019. 

Individuals may make this claim for income tax relief by amending their Form 11 tax return for 2019. A €25,000 limit applies on the total amount of losses and capital allowances that an individual may carry back, and an additional limit applies where the individual is subject to the High-Income Earner Restriction.

An individual who incurs, or who reasonably expects to incur, a loss during 2020, can accelerate the timing of the income tax relief by making an interim claim based on an estimate of the amount of the relief that will be available to him or her. An individual will be able to revise his or her interim claim as the year progresses, including increasing the claim where it is estimated that the loss will be greater than previously expected.

To be eligible to make an interim claim, an individual must:

• have filed the Form 11 for 2019,
• be compliant with all obligations under tax legislation in relation to the payment of taxes and the filing of returns (individuals that avail of debt warehousing and/or agree a phased payment for outstanding debt that does not qualify for warehousing will be treated as having complied with payment obligations relating to tax covered by those arrangements)
• and
• make a declaration that he or she has incurred a loss, or reasonably expects to do so, in 2020.

Additionally, these measures provide an option to farmers to step out of income averaging for the tax year 2020, notwithstanding that the farmer may also have stepped out of income averaging in one of the four preceding tax years. This means a farmer can elect to pay tax based on the actual profits for 2020, rather than on averaged profits. A farmer may wish to do this if the actual profits for the year are lower than the average profits which would otherwise be assessed to tax. Where a farmer makes such an election, tax due on the average profits that would have been taxed in 2020 is deferred.

Further guidance on:

• the temporary accelerated loss relief for self-employed individuals
• the income averaging measure for farmers.

Reduction on the Standard Rate of VAT

From 1 September 2020, a 6-month reduction in the standard rate of VAT from 23% to 21% will apply.

In general, goods and services supplied before 1 September 2020 are liable to VAT at the rate in place at the time of supply, namely 23%. A trader supplying goods and services to private individuals should always apply the VAT rate in place at the time of supply. However, where goods and services are supplied in August 2020 by a trader who is obliged to issue a VAT invoice, and that trader issues the invoice after 31 August 2020, the rate in place in September applies, namely 21%.

Any VAT credit note or debit note relating to a supply of goods or services, which contains a VAT adjustment, should show VAT at the rate in place at the time the original invoice was issued. For example, if goods are supplied in August 2020 and a credit note is issued in September 2020 (due perhaps to an adjustment in the price of the goods or services), the rate of VAT on that credit note is 23%. This is because the goods or services were supplied when the rate of VAT was 23%.

Further detailed information regarding the procedures to be followed by VAT registered traders when increases or reductions in VAT rates take place .

Employment Wage Subsidy Scheme (EWSS)

The Employment Wage Subsidy Scheme (EWSS) will replace the Temporary Wage Subsidy Scheme (TWSS) from 1 of September 2020.

The EWSS provides a flat-rate subsidy to qualifying employers based on the numbers of paid and eligible employees on the employer’s payroll. To qualify for the scheme, an employer must be able to demonstrate that:

• their business will experience a 30% reduction in turnover or orders between 1 July and 31 December 2020
• and
• this disruption is caused by Covid-19.

Additionally, and unlike TWSS, the employer must have a tax clearance certificate to be eligible to join the EWSS and remain tax clear to continue receiving the EWSS benefits. This means employers must be compliant with all obligations under tax legislation in relation to the filing of returns and payment of taxes. However, where an employer is availing of debt warehousing and/or agrees a phased payment for outstanding debt that does not qualify for warehousing, that employer will be regarded as being compliant and will therefore qualify for a tax clearance certificate.

The scheme will be administered by Revenue on a 'self-assessment' basis and employers are required to undertake a review on the last day of every month to ensure they continue to meet the above eligibility criteria. Employers who, following a monthly review, find they no longer qualify should deregister for EWSS with immediate effect i.e. from the first of the following month.

The level of subsidy the employer will receive per paid employee is set out in the table below and a 0.5% rate of employers PRSI will apply for employments that are eligible for the subsidy.

Employers will be required to deduct and remit income tax, USC and employee PRSI on all payments made under the EWSS.

In line with international practice a list of employers availing of EWSS will be published in January 2021 and April 2021 to www.revenue.ie.

Claiming EWSS for new hires and seasonal workers

Eligible employers may backdate a claim to 1 July 2020 for EWSS payments in respect of new hires and seasonal workers, subject to limited exceptions. Payments in respect of July and August are expected to be made by Revenue in mid-September, with payments for subsequent periods being made monthly in arrears thereafter. Further guidance and information for employers on how to make applications for new hires and seasonal workers will be available next week.

Tax Clearance Certificate

A Tax Clearance Certificate is confirmation from Revenue that the tax affairs of the relevant business are in order and is required to access some of the tax measures outlined in the July Jobs Stimulus package, including the Employment Wage Subsidy Scheme and the Stay and Spend Initiative.

When an individual or business applies for tax clearance, Revenue reviews the tax affairs of that individual or business and the tax affairs of any connected persons to the individual or business. A connected person can be a property, entity or person. Further information on tax clearance.

Tax clearance certification can be applied for via Revenue’s electronic tax clearance system (eTC), which is available via ROS for business customers. Tax clearance certification is available in situations where outstanding (Covid-19 related) tax debts are warehoused or where non-Covid-19 debts are included in a phased payment arrangement.

[Ends 06/08/2020]