The ringing in of a new year brings with it hope, given the vaccination roll out programme, that it will be a year which should see at some stage the return to some degree of normality for many businesses. Unfortunately, the outset of the year has seen the return of increased and necessary public health measures to restrict movement and suppress the latest wave of Covid-19 infections. It remains the subject of ongoing development and review as to how long such measures will need to remain in place.
For many businesses who had envisaged some degree of activity in early 2021, the announcement of further restrictions gave reason to consider the impact once again on the business and its employees. It is therefore timely for most businesses to consider again the various Government incentives which remain available to support businesses through this period.
We have outlined below a summary of the key measures to be considered in this regard, noting any primary changes / considerations which businesses should be familiar with. In addition, we have noted recent developments on a number of Benefit-in-Kind (‘BIK’) provisions which may be of interest to some employers.
1. Employment Wage Subsidy Scheme (‘EWSS’)
The EWSS continue to provide employers with support for the period up to the end of March 2021. The period of the scheme is of course subject to consideration as to whether it may be extended in light of the any ongoing restrictions which may apply over the coming months, and there are no immediate indications yet as to any proposed changes in this regard.
The EWSS continues to offer support by providing a subsidy to the employer for each employee at a fixed weekly rate of either €151.50, €203, €250, €300 or €350 depending on the gross level of the employee’s income. It is worth noting that the level of subsidy is linked to the overall gross pay of the employee in the period, hence any genuine reductions in gross pay which are necessary in light of the impact on business would not necessarily restrict an employer from claiming relief other that potentially to reduce the level of subsidy to be claimed. The application process for EWSS is completed via the eRegistrations screen in your Revenue Online Service (‘ROS’) account.
The key change in terms of evaluating eligibility for the scheme is that the base criteria has changed for all pay dates to be processed in 2021 when compared to criteria which applied up to the end of 2020 . It is now necessary to compare the employer’s projected level of turnover for the period 1 January to 30 June 2021 to the actual results for the period 1 January to 30 June 2019 in assessing the 30% decline in either the turnover of their business or in customer orders. There are alternative provisions for any employers where the business may not have existed prior to 1 May 2019.
This shift is a fundamental change and does require a reassessment of the company’s position looking ahead to the first six months of this year, which of itself can pose some difficulties for many businesses given the uncertainty as to how long the restrictions may continue to apply. The key is preparing the necessary projections having due consideration to the relevant factors, ensure any assumptions applied are reasonable, and document the review exercise undertaken at the time to support eligibility.
The process of an end of month review remains in place, with the requirement to exit the scheme if it is foreseen that the eligibility criteria may no longer be satisfied. It is important to note that the assessment of eligibility is always based on the overall 6 months period in 2021 (being a combination of actual and projected result) compared to the same 6 month period in 2019, as opposed to assessing eligibility on a month by month basis e.g. it is not sufficient based on the known impact of the current restrictions resulting in closure to the end of January 2021 to claim EWSS on basis that the result for the month of January will clearly be 30% down on the results for January 2019 – assessment must be made based on the outlook for the full six month period to the end of June 2021 compared to the same 6 month period in 2019.
There is a very useful table set out in Revenue’s guidance which provides a snapshot of the reviews to be undertaken in respect of 2021 pay dates, details of which are reproduced below:
|Date Review is|
to be Considered
|31 December 2020||Projections for January to June 2021||Actual results for January to June 2019|
|31 January 2021||Actual results for January 2021 and Projected results for February to June 2021||Actual results for January to June 2019|
|28 February 2021||Actual results for January and February 2021 and Projected results for March to June 2021||Actual results for January to June 2019|
Businesses should also consider if there may be scope for a claim to be made in respect of certain Business Divisions within the company if it is the case that the impact of the restrictions will not result in the 30% reduction being met at an overall company level. In this regard, it is important that any such Business Divisions are clearly and separately defined in terms of their management structure within the company, and such structures having been in place before the onset of the pandemic.
The complete copy of latest version of Revenue’s formal guidance on the scheme is available here.
2. Covid Restrictions Support Scheme (‘CRSS’)
Similar to the EWSS, the CRSS is currently scheduled to remain in place until 31 March 2021 also. Whereas the EWSS is targeted at supporting businesses with their employment costs, the CRSS is designed as an additional support in respect of other business costs in acknowledgement of those businesses who have been specifically impacted by the various restrictions imposed under public health regulations. The application process for CRSS is completed via the eRegistrations screen in your Revenue Online Service (‘ROS’) account.
The primary consideration in order to avail of support under this scheme is that access to the business premises must be prohibited or restricted as a direct result of the pandemic restrictions, and as a result the turnover of the business must be no more than 25% of the average weekly turnover for 2019 reflecting the same period of time as bears to the restricted period. The question of the level of prohibition and restricted access has been the source of much debate and question during the initial months of the scheme. In light of the recent additional restrictions, Revenue have published further updated guidance as of 11 January 2021, details of which are included here. This includes details of some key clarifications and guidance as follows:
- There must be a fixed place of business where the general public as the customers would need to attend in order to acquire goods and/or services. By way of an example, a business that sells via a website only for delivery to customers would not have a qualifying business premises under CRSS, even though the business may have warehousing and office facilities to carry on the business.
- Any mobile premises or premises not permanently fixed in place (e.g. taxis, trucks, vans, market stalls, etc) are not regarded as qualifying business premises under CRSS.
- The fact that a business may carry on some minor aspect of the trade outdoors (e.g. outdoor seating connected to a cafe) will not preclude the business from considering relief under CRSS. However, if you are a business which is in the main conducted in an outdoor setting which does not require a business premises (e.g. commercial visitor parks, golf courses, pitch and putt courses, etc), the business should not be considered as eligible for the CRSS.
- It remains important to bear in mind that there are considerations which can be applied to certain businesses which may operate in various qualifying sectors which are impacted by the restrictions. In this regard, Appendix 3 to Revenue’s formal guidance offers a detailed overview of the various businesses which are impacted at each level of restriction, as well as the details as to the Essential and Non-Essential retailers under Government guidelines. It is noted that an Essential retailer who can retain their business premises as open to the public during restrictions (e.g. grocery store, launderette, etc .) do not ordinarily qualify for the scheme notwithstanding business may be impacted due to reduced foot fall and general restrictions on the movement of people.
The level of support continues to remain as when the scheme was first introduced i.e. broadly speaking giving rise to a weekly entitlement calculated at 10% of the business average weekly turnover for 2019, up to €20,000 per week. If it is the case that the average weekly turnover for 2019 which exceeded €20,000, it is possible to increase the claim amount by a further 5% of the average weekly turnover which exceeded the €20,000 limit. However, the weekly entitlement is subject to an overall cap of €5,000 per week.
It is worth noting that Revenue have confirmed as part of their recent guidance that should a business have to close again having previously restarted in the run up to Christmas, it will be possible for the business to claim the benefit of the restart week for a second time and indeed any each subsequent period of restrictions which may apply.
3. Operation of Benefit-in-Kind (‘BIK’) on company cars provided to employees for private use
There was a Revenue concession in place during 2020 in relation to BIK on company cars which applies during the pandemic. This was to cater for and acknowledge that there would be cases whereby business travel would be significantly reduced due to public health restrictions and guidelines. The position was that, where an employee had the use of a company vehicle with limited private use and there was a reduction in their business mileage, the amount of BIK due could be calculated by reference to the business mileage travelled in January 2020.
This concession was due to be withdrawn as of 31 December 2020. However, as a result of the restrictions announced to the end of January 2021, the concession has now been extended. Therefore, the business mileage travelled in January 2020 can continue to the benchmark is assessing the rate of BIK to be applied.
It is not clear how long this concession will continue to apply and it is likely it will be dependent of course on the extent of the restrictions being extended further. It is worth noting of course that, where an employee continues to undertake business travel as usual, the normal BIK rules will apply.
4. Tax liabilities arising for employees in respect of receipt of TWSS payments – BIK considerations
As many employers will be familiar with, the previous Temporary Wage Support Scheme (‘TWSS’) which ran until the end of August 2020 provided support at the time to employers to sustain an employee’s net pay position during the initial stages of the pandemic. The supports paid under this scheme were passed directly by the employer to the employee, and were not subject to the operation of PAYE at source.
As a result, the TWSS payments received by employee are now subject to Income Tax and USC to be assessed on the employee following the end of the 2020 tax year. Revenue undertook an exercise last week to issue employees with a Preliminary End of Year statements outlining the tax payable (if any) for employees and options with regard to settlement of same.
Revenue have acknowledged that some employers may wish to assist employees with the payment of these 2020 tax liabilities. In this regard, Revenue have confirmed a concession whereby they will not seek the application of BIK in respect of any such payments which are made by employers to employees solely in the context of settling their 2020 tax liabilities. Revenue has confirmed that the BIK exemption is available even to cases where the employee only partially discharges the liability and hence it is not required that the employer pay the employee’s tax liability in full. It can be arranged as either providing the employee with the necessary funds to pay directly themselves or the employer can amend the last payroll submission for 2020 to include additional Income Tax and USC to be returned on the employee’s behalf. In order to avail of such concession, the payment must be made/returned before the end of June 2021.
It should be noted that, as a consequence of the concession from BIK, the employer will not be in a position to claim an Income Tax or Corporation Tax deduction in respect of such payments as part of their tax computation and return.
We trust the details above to be of benefit and further insight in terms of considering the supports available in the context of the ongoing restrictions.
To discuss the above in further detail, please contact our team on (01) 6440100 / (090) 6480600:
- Patrick Fannon, Senior Tax Manager
- Mairead O'Grady, Tax Partner