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UPDATE - July Stimulus Package - Key Tax Measures

Further to our update on Friday on the July Stimulus, some further detail on the Employment Wage Subsidy Scheme (EWSS) is now available, along with the details on how interim tax refund claims in respect of losses incurred during the Covid-19 period can be made. This is now published below:

Employment Wage Subsidy Scheme

The primary qualifying criteria for the Employment Wage Subsidy Scheme (EWSS) is that the Employer must be able to demonstrate that in the majority of cases they are operating at no more than 70% in either the turnover of the Employer’s business, or the customer orders received by the Employer, by reference to the period from July to December 2020 compared with the same period in 2019. It is important that Employers now reassess their position to establish if they will qualify under the new arrangements.

It is also further noted that Qualifying employees for the purposes of the EWSS do not include Proprietary Directors and certain connected persons within the business.

The EWSS and the existing Temporary Wage Subsidy Scheme (TWSS) will run parallel until 31st August to allow certain categories of workers previously excluded from the TWSS, eg. Seasonal workers and New Hires (previously excluded from the TWSS), to benefit from the EWSS.

Corporate Loss Relief

New relieving measures have been introduced to provide for a temporary acceleration of corporation tax loss relief for tax compliant companies. The aim of the new provisions is to deliver rapid cash flow support to previously profitable companies which have become loss-making during the COVID-19 period.

Under the new measures:

  • Companies can project trading losses for the current accounting period and make an early claim to carry-back those losses for offset against taxable profits of the preceding accounting period, thereby expediting a refund of some or all of the corporation tax paid for the preceding period. 
  • Companies will be allowed to lodge a claim to carry-back the losses once at least four months of the current accounting period have elapsed and up to five months after the end of the accounting period, before final accounts have been prepared and filed. Under standard self-assessment rules, this carry-back of such losses would not take place until up to nine months after the end of the loss-making accounting period. 
  • In order to qualify for accelerated loss relief, the company 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. 
  • The maximum amount of the estimated loss which qualifies for early carry-back is 50% of the total projected loss for the accounting period. 
  • The remaining loss, when properly quantified in final accounts prepared after the relevant year-end, will qualify for carry-back in due course under the standard self-assessment rules. 
  • 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 will be greater than previously expected.

Income Tax Loss Relief

A new once-off income tax relief for self-employed individuals carrying on a trade or profession has been introduced, aimed at businesses who were profitable in 2019 but, as a result of the Covid-19 pandemic, incur losses in 2020.

These provisions will allow such individuals to claim to have those losses (and certain unused capital allowances) up to a maximum amount of €25,000 carried back and deducted from their profits for the tax year 2019. This will reduce the amount of income tax payable in respect of those profits.

The provisions will also allow for claims for the relief to be made on an interim basis to give a cash flow boost to those taxpayers during 2020.

Finally, the provisions give an option to farmers who incur a loss in 2020 to step out of income averaging for the tax year 2020, notwithstanding that the farmer may already have stepped out of income averaging in one of the four preceding tax years.

Contact Us

Do discuss how your business can avail of measures introduced in the July Stimulus Package, contact:

Jackie Masterson, Taxation Partner, E: jmasterson@rbk.ie

Mairead O'Grady, Taxation Partner, E: mogrady@rbk.ie

Jackie Masterson

Taxation Partner

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