COVID-19 - Update

Temporary Wage Subsidy Scheme

Revenue have confirmed that the temporary wage subsidy scheme will remain in place until the end of August. The Government has indicated that it may be extended for certain sectors, although it will be “fine-tuned”. However, there has clearly been a change in Revenue’s approach towards those taxpayers claiming TWSS over the last few weeks. The Revenue have now established a compliance programme that is expected to run for several months under which they will be contacting all taxpayers that have availed of the wage subsidy.

Letters started to issue to taxpayers last week giving the taxpayer 5 days to respond to Revenue queries, which is an extremely tight timeframe, especially as many businesses are just starting to reopen in very challenging circumstances. All taxpayers that have availed of the TWSS should expect to receive a letter from the Revenue. In anticipation of the Revenue letter, those employers that have availed of the scheme should put their supporting documentation together so that they can quickly respond to Revenue. It is also very important that taxpayers availing of the TWSS review their continued eligibility for the scheme. In particular it is worth noting that whilst the scheme is scheduled to run until the end of August, the Government has accelerated the plan for exiting the “lockdown” with much more businesses opening over the last two weeks than may have originally been anticipated. These businesses need to carefully consider whether they are still entitled to the TWSS.

Additional Measures to Support Businesses - Interest Suspension & Debt Warehousing Scheme

On Friday 8th May, Revenue provided updated information on the suspension of interest on late payment of taxes and further detail on the tax debt warehousing arrangement.

i. Interest Suspension

The charging of interest on late payments is suspended automatically for SMEs with annual turnover of less than €3m (i.e. businesses which are managed by Revenue’s Business Division) for:

  • May and June PAYE liabilities and 
  • May/June VAT liabilities.

Businesses managed by the Large Corporates Division (LCD) and the Medium Enterprises Division (MED) can request a suspension of interest relating to the above liabilities if they are experiencing temporary cash flow or trading difficulties. Requests should be made via My Enquiries to the Collector-General’s office or via the business’s usual LCD or MED contacts.

ii. Tax Debt Warehousing 

On 2 May last, the Government announced that it will legislate to provide for the deferral of Value Added Tax (VAT) and PAYE (Employer) tax debts arising during the Covid-19 crisis. Revenue will operate the scheme on an administrative basis pending the enactment of the necessary legislation.

VAT and PAYE (Employer) tax debts will be ring fenced to allow for a payment deferral while a business is unable to trade or was subject to restricted trading due to the COVID-19 related health restrictions. Further, tax debts arising two months after the business resumes normal trading will also be ring-fenced.

Period 1 – Covid-19 restricted trading phase:

This period covers VAT & PAYE tax debts built up while the business is unable to trade or was subject to restricted trading due to COVID-19 and a further two months after the business re-commences normal trading. As outlined above, there will be no collection of the relevant tax debts during this period.

In order to avail of the scheme, the tax debt will have to be quantified by the business through the filing of all relevant returns for the restricted trading phase. If a best estimate return of liability has been made for any period, the correct return will have to be filed to ensure the debt benefits from the warehousing.

Period 1 may vary for businesses and sectors depending on when the relevant Government restrictions are relaxed in line with the roadmap for re-opening society and business.

Period 2 – Zero interest phase:

The outstanding VAT and PAYE tax debts will be warehoused for a 12 month period following the resumption of “normal” trading. During this period Revenue will not seek to collect the debt and no interest will be charged. However, please note that businesses are required to pay current tax liabilities as they arise.

Period 3 – Reduced interest phase:

At the end of the “warehoused” 12 month period a reduced interest rate of 3% per annum will be charged on the tax debt incurred from Period 1. This represents a reduction from a current rate of c.10% per annum on overdue VAT and PAYE (Employer) liabilities

Residence Rules

Existing guidance states that where an individual is prevented from leaving the State on his or her 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 the State for tax residence purposes for the day after the intended day of departure provided the individual is unavoidably present in the State on that day due only to ‘force majeure’ circumstances. Where a departure from the State is prevented due to COVID-19, Revenue will consider this ‘force majeure’ for the purpose of establishing an individual's tax residence position.

Temporary Measures in relation to the close company surcharge

The close company surcharge applies to investment income of close companies and income of close service companies that is not distributed with 18 months of the end of the accounting period in which the income arose. In cases where a distribution is not made within this timeframe due to COVID- 19 Revenue will, on application, extend the 18 month period for distributions by a further 9 months.

Late Filing of Tax Returns

The application of a surcharge for the late submission of the corporation tax return CT1 for periods ending June 2019 (i.e. due by 23 March 2020 onwards) has been suspended until further notice. This also applies to the late submission of iXBRL financial statements for accounting periods ending March 2019 onwards.

Revenue have also confirmed that where such a CT1 is filed late due to COVID-19, the CT1 may be completed without restriction of reliefs, such as loss relief and group relief that would otherwise apply.

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Ronan McGivern

Taxation Partner

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Related Downloads

Tax Issue - Summer 2020 137.61 KB

Whilst Covid-19 has occupied the minds of most businesses for the last three months, the world of taxation does not stop. In this issue we provide an overview of the recent High Court case involving Perigo, which has raised some very interesting questions in relation to concepts of legitimate expectative in Irish tax law. We also review a number of interesting recent determinations of the Tax Appeals Commissioners. We look at updated Revenue guidance notes in relation to short term business visitors undertaking employment duties in Ireland. Finally we provide a summary of some international tax developments that Irish corporates need to be aware of including the changes in Ireland’s transfer pricing regime with effect from accounting periods beginning on or after 1 January 2020 and DAC 6 reporting obligations.