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Changes to Employee Wage Subsidy Scheme

Changes to the Employee Wage Subsidy Scheme

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As we are all aware, the Employee Wage Subsidy Scheme (EWSS) has been an integral part of protecting Irish businesses during the Covid-19 pandemic emergency. The scheme has seen many changes and taken on new forms over the course of the past year, having been set up on an emergency basis but requiring updates and extensions as the pandemic continues. The latest extension to the EWSS states that The Finance (Covid-19 Miscellaneous Provisions) Act 2021 has allowed for the scheme to be extended through to December 31st, 2021.

With this extension come two major changes to how the scheme will operate going forward. As our country slowly continues the reopening process, these changes will be important to ensure that the scheme is allocated appropriately.

The two new key changes to the EWSS are as follows:

Change to Assessment Period.

The assessment period for eligibility to this scheme has now changed. It is now a requirement to show that your business will incur a 30% reduction in turnover* or orders for the 2021 calendar year as a direct result of Covid-19.
This can be assessed by:

Comparison to the 2019 calendar year if the business was in operation for the full year.
Comparison to the date of commencement to December 31st, 2019, if business commenced between January 1st and October 31st, 2019.
Comparison to projections for the 2021 calendar year, based on the assumption that the Covid-19 emergency had not occurred, if business commenced on or after November 1st, 2019.

*It is important to note that childcare businesses remain exempt from the 30% calculation criteria.

Mandatory Monthly Reviews to be Submitted Online.

A new key criterion to maintaining eligibility for the EWSS is the undertaking of monthly performance reviews for your business to ensure that your business continues to meet the eligibility criteria for this scheme.

A new form (EWSS Eligibility Review Form) has been created for this purpose, which must be submitted online on a monthly basis.

This form must be submitted by August 15th for June’s reviews and following on from this, will be expected by the 15th of each month.

We hope that this information has been useful for you and as always, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help. Please do not hesitate to contact us.

For more information visit Revenue.ie

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Revenue's Debt Warehousing Scheme

Revenue’s Debt Warehousing Scheme

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Revenue recently reminded businesses that were to resume trading, once lockdown ended, that their Debt Warehousing Scheme was still in operation. The process of debt warehousing essentially allows businesses to “park” their debts for a period of time in order to support cash flow when the company resumes trading. This will have been an invaluable asset to many companies, who may otherwise have struggled to reopen their doors following the Covid-19 lockdowns, however, this has naturally not come without drawbacks.

One issue for businesses to be aware of this scheme is if the company were availing of Debt Warehousing for PAYE employer liabilities, any directors or employees with a material interest in the company cannot claim for taxes deducted if these have been warehoused and not paid over to Revenue. This may mean that individuals could find themselves personally liable for PAYE deducted but not paid. While this is unlikely to become a major stumbling block, this is one issue that has not been widely spoken about but you very much need to be aware of it.

The system was put in place to ensure that cash flow would remain available to businesses at a time of need, with some 86,000 businesses availing of the scheme. The scheme has provided approximately €2.3 billion of cash flow to businesses and is now being extended to the end of 2021, with no interest during 2022 and a rate of 3% applying thereafter.

Revenue has assured businesses that payment terms will be flexible at the end of the term. This will also be determined by the company’s capacity to pay these arrears at the same time as paying their current liabilities. Collector General Joe Howley has stated that:

“This initiative gives viable businesses the opportunity to survive the economic shock of the pandemic and to hopefully thrive as the economy recovers. We will be in contact with each business that is availing with the Debt Warehousing Scheme to explain how the arrangements will operate for their business. The flexibility around debt that is warehoused will allow businesses additional time to get back on their feet after re-opening”.

It is important to remember that even businesses availing of this scheme must file all tax returns as soon as they are due.

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We hope that this information has been useful for you and as always, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help. Please do not hesitate to contact us.

current world economic outlook

As we open up, what is the Economic Outlook?

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There are a great many ways in which the Covid-19 emergency has affected the world we now live in. Our day-to-day lives have been irrevocably changed and everything from our daily habits to how we view and manage our mental wellbeing will likely be different going forward. Something which has been a concern for both business owners and employees is the notion of what state the economy will be in following this emergency, on both an Irish and a global scale. Today we will be taking some time to focus on the current world economic outlook following the recent World Economic Outlook press briefing this month and to share some of the current findings with all of our clients and friends.

The IMF has said that: “We are now projecting a stronger recovery for the global economy compared with our January forecast, with growth projected to be 6% in 2021 and 4.4% in 2022 after an estimated historic contraction of -3.3% in 2020.”

Which, despite some obvious issues in the coming months, and the uncertainty of these projections, is a positive outlook to look forward to, from 2022 onward. It is projected that some jobs lost in the pandemic will not be retrieved and this is likely to change the landscape of the global workforce going forward.

Chief Economist and Research Director Gina Gopinath has given some additional hope for the global economic outlook following on from the Covid-19 pandemic, stating that “even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible. Thanks to the ingenuity of the scientific community, hundreds and millions of people are being vaccinated and this is expected to power recoveries in many countries later this year.”

The idea of ‘secular stagnation’ is one that is important to bear in mind at the moment as economies have found themselves stalling in the midst of global lockdowns. This is a period of little or no economic growth, which is something we have experienced in recent months. Harvard Professor Lawrence Summers suggested in 2013 that these periods assisted in inflation dropping below 2% in Europe, the UK and the US. It can be argued that previous periods of secular stagnation have paved the way for this current emergency to be financially navigated with a positive slant, and for modern economies to come out of this period in a positive light.

Naturally, once global lockdowns begin to lift, economic activity will begin to massively improve but it remains to be seen how impacted the global economy will be by the previous year of emergency. Now is a time to take a longer-term view of the economy and to look forward to a rapid recovery for both our local and the global economy, with all involved keen to avoid another massive financial crisis. The economic rebound from Covid-19 is expected to be strong, with different countries naturally at different stages of their recovery and the UK expected to largely lead this recovery. These projections are naturally reliant on the virus itself as the economy is likely to follow the lead of the virus in that continued vaccine success will propel economic growth, while a continued pandemic and increased variants would slow the economic recovery significantly.

 

We hope that this information has been useful for you and as always, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help.

Pandemic Unemployment Payment

Pandemic Unemployment Payment (PUP) 

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2020 payments received: 

Payments received in 2020 under the Pandemic Unemployment Payment (PUP) are subject to income tax and universal social charge.

Individuals in receipt of PUP payments must complete an income tax return to receive their final statement of liability which will provide the final over or under payment for the year.

Revenue confirmed in September 2020 that PUP income tax and USC liabilities would become due at the end of 2020 and that the resulting liabilities could be discharged in one of two ways;

–    Pay any underpayment in full via My Account

or

–    Default option of discharging any underpayment arising due to the PUP payments over a four year period commencing in 2022 via a reduction in the annual tax credit entitlement.

As an example – Individual A has a €1,000 income tax underpayment for 2020.

This can be discharged as follows;

(1) Individual A can make payment of the €1,000 via My Account

or

(2) Revenue will reduce the individuals’ tax credits by €250 for the years 2022 to 2025 thereby recouping the underpayment via the PAYE system

2021 PUP payments:

In 2021 PUP payments will be taxes on a real time basis as follows;

The Department of Employment Affairs and Social Protection will notify Revenue on a weekly basis of the amount of PUP paid to each recipient.

Revenue will then collect any tax due by reducing the person’s tax credits and rate band.  To do this Revenue will “annualise” the weekly amount of PUP.

The adjusted tax credits and rate band are then applied on a Week 1 basis and the revisions will be reflected in the Revenue Payroll Notifications issued by Revenue to the person’s employer.

This process in 2021 should ensure there are no underpayments at the end of the year arising from PUP payments.

For more information on Pandemic Unemployment Payment visit revenue.ie

Or contact us

Pandemic Unemployment Payment

Covid Restrictions Support Scheme (CRSS)

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Payments received by employers :

Payments received under the Covid Restrictions Support Scheme (CRSS) are revenue in nature and will be treated as a reduction of otherwise tax-deductible trading expenses for tax purposes.

Similar to the accounting and tax treatment where the restart grant was used to defray revenue related expenditure, where the CRSS receipts are used to defray expenditure which is revenue in nature like utility bills or insurance costs then it will be taken into account when calculating the amounts chargeable to income tax or corporation tax.

In essence, the payments are taxable income and for accounting purposes, the CRSS receipts will be credited against the expenses incurred thereby leaving the net expense reflected in the accounts which are then allowable as a deduction for income tax or corporation tax purposes.

Therefore the payments received are effectively taxable payments subject to income tax or corporation tax depending on the structure of the entity receiving the payments.

Entities should keep a log of the expenditure which they have discharged from the CRSS receipts which can then be used by the agents to make the appropriate credit entries against the expenditure to arrive at the tax-deductible net figures.

Please do not hesitate to contact us if you have any questions.

Revenue Irish Tax Firm

Temporary Wage Subsidy Scheme (TWSS) 

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Subsidies received by employers:

The TWSS subsidies received by employers from Revenue are revenue receipts by their nature and accordingly will be treated as a reduction in the wages / salaries related expenditure line item for the accounting period concerned.  The subsidies received reduced the expenditure incurred by employers and therefore these subsidies will reduce the amount of wages and salaries allowable as an expense for tax deduction purposes.

Clawback of PAYE from employees :

The Temporary Wage Subsidy Scheme (TWSS) payments by Revenue to employers are treated as part of the employee’s emoluments – ie salary and wages for tax purposes.

The subsidies were not taxed in real-time via the PAYE system however and the amounts received in 2020 by the employees are chargeable to income tax and USC.

The amount of income tax and USC will be reflected on each employee’s preliminary end of year statement for 2020 which is accessible via the PAYE My Account facility for each employee since 15th January 2021.

The employee’s must then complete an income tax return to receive their final statement of liability which will provide the final over or underpayment for the year.

Employees have the option to pay any underpayment in full via My Account or they have the default option of discharging any underpayment arising due to the TWSS subsidies over a four year period commencing in 2022 via a reduction in the annual tax credit entitlement.

As an example – Employee A has a €2,500 income tax underpayment for 2020 This can be discharged as follows;

(1) Employee can make payment of the €2,500 via My Account

or

(2) Revenue will reduce the employees’ tax credits by €625 for the years 2022 to 2025 thereby recouping the underpayment via the PAYE system

Revenue has confirmed that employers may discharge the income tax liabilities of employees without a benefit in kind charge being levied by Revenue. Employers can pay the employee’s liability in one of two ways;

(a) Payment direct to the employee who then must pay the liability

(b) Amend the final payroll submission for 2020 to include additional income tax paid and USC paid that equals the liability shown on the employee’s end of year statement.

The employer will then need to pay the additional amounts that are notified by Revenue in a revised monthly PAYE statement.

For more information visit Revenue.ie or feel free to contact us

Pandemic Unemployment Payment

Restart Grant / Restart Grant Plus

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Payments received by entities:

The Minister for Finance confirmed that Revenue will treat the taxation of these grants differently depending on the purposes for which the grant was used.

Where the grant is used to defray expenditure which is revenue in nature like utility bills or insurance costs then it will be taken into account when calculating the amounts chargeable to income tax or corporation tax.

In essence such grants are taxable income and for accounting purposes the grant receipts will be credited against the expenses incurred thereby leaving the net expense reflected in the accounts which is then allowable as a deduction for income tax or corporation tax purposes.

For example – Insurance premium annual cost paid by company A in the sum of €5,000. Company A uses the proceeds of the grant of €2,500 to part finance the premium payment. A net cost of €2,500 will be reflected in the accounts and allowable as a deduction against profits for tax purposes which reflects the economic reality that the company had a net cash outflow in relation to the premium of €2,500.

Entities should keep a log of the expenditure which they have discharged from the grant receipts which can then be used by the agents to make the appropriate credit entries against the expenditure to arrive at the tax deductible net figures.

Where the grant is used to defray capital expenditure like acquiring plant and machinery for use in the business, then the entity will be entitled to claim capital allowances on the expenditure incurred net of the grant received.

For example – Machine A acquired for €5,000 and proceeds of the grant of €2,500 were used to part finance same.

Capital allowances can be claimed on the net cost of €2,500 at 12.5% per annum.

Revenue have confirmed the above treatment will apply for both the restart grant and restart grant plus

Revenue's Tax Bill

Revenue’s Tax Bill

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Since the beginning of the Covid-19 emergency, we have spoken many times about the various supports made available to both employers and employees to help weather the storm. Two of the main supports that was put in place by the government are the ongoing Temporary Wage Subsidy Scheme (TWSS) and Pandemic Unemployment Payment (PUP). The scheme has seen a number of changes since its inception last year, but this month saw many recipients left confused and concerned.

Over 630,000 taxpayers who were in receipt of either scheme will have received their preliminary end of year statements and found themselves facing a tax bill from Revenue. Any individual who was in receipt of either scheme must pay particular attention to their end of year statement as it is likely that there may be an underpayment of tax listed. While Revenue have long stated that this will be the case, this has still come as a shock for many recipients.

These bills have arrived because neither the TWSS nor the PUP schemes were taxed at the source through the PAYE system from March to August 2020. As a result, the employee is seen to have underpaid income tax and USC for 2020. Although tax was not paid during this period, recipients will still be deemed to have made their PRSI contributions, so neither scheme should affect social welfare entitlements.

The scheme which replaced the TWSS in September 2020, the Employment Wage Subsidy Scheme (EWSS), is now taxed through the PAYE system, so no further hefty tax bills should be seen as a result of this scheme.

The brighter news for those who find themselves with a somewhat unexpected tax bill following these schemes is that the bill is not required to be immediately paid, nor required to be paid in a lump sum at all if this is not something the employee can manage. Revenue have said that they will collect the full, or remaining bill interest-free by reducing tax credits over the course of a four-year period, beginning in January 2022, so there will be no need for immediate action.

It is recommended that you complete your online tax return via MyAccount to ensure that all information is correct and that your outstanding bill is also correct, this also allows employees to claim any tax credits or reliefs they may be due in order to reduce the overall bill (for example, the remote working credit is one which is often overlooked).

We hope that this information has been useful for you and as always, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help. Please do not hesitate to contact us.

For more information visit revenue.ie

Euro Currency

Employee Wage Subsidy Scheme (EWSS) Update

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The first week’s of 2021 may not have held all the solutions or change from 2020 that many had hoped, with many businesses once again closing after a brief opening for the Christmas period, so we wanted to take the time to remind you that we are here and happy to help with any business questions or queries you have. We will also continue to bring you the information to help your business and financial lives, across, what will be hopefully, a brighter 2021.

As we work our way through another lockdown, we find ourselves once again focusing in on the supports available to keep businesses alive during Level 5 restrictions, with the Employee Wage Subsidy Scheme (EWSS) finding itself swooping in to save the day once more.

However, it is vital to highlight the changes to the EWSS since its inception and it’s important to keep yourself informed of the requirements and guidelines for eligibility, even if you are currently in receipt of the scheme. So it is important that you stay aware of what is required:

The Company must:

  • Have a Tax Clearance Cert for the duration of the scheme.
  • Have turnover projections and demonstrate that the business is expected to experience a 30% reduction in turnover between January 1st and June 30th 2021.
  • Show that this reduction in turnover is directly caused by Covid-19.
  • Show that this reduction is relative to the same period in 2019 if the company was in existence prior to this date.

Revenue’s in-depth guidelines can be viewed by CLICKING HERE

When calculating your projections for 2021, we strongly advise you to keep copies of both the projections and the actual turnover figures as they come in, in case Revenue requires them in the future. As always, it is better to be over than underprepared.

Should you have any concerns or queries about these or any other business and financial issues, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help. Please do not hesitate to contact us.

Brexit - The Urgent Need To Be Prepared

Brexit – The Urgent Need To Be Prepared

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In another lifetime we spoke regularly about the looming threat to Irish business that was Brexit. With the Brexit date of January 1st now fast approaching, Brexit preparations join the long list of issues facing Irish businesses going forward. Irish businesses are currently under more pressure than ever before with the current Covid-19 crisis and with a recent survey by Enterprise Ireland finding that just 42% of businesses feel prepared for Brexit, the time to act and prepare is now.

Taoiseach Micheál Martin has recently stated amidst negotiations that a failure for the EU and Britain to reach an agreement on post-Brexit trade would be “very, very damaging all-round”, and he re-positioned Brexit as an issue economically on par with Covid-19:

“We’ve all had a very significant shock to our economic system because of Covid-19, the last thing we need now across all of our respective economies is a second major shock”.

With this in mind, and despite all other issues currently facing us, we advise early preparation for Brexit, as it is essential to prepare as much as possible. As the relationship between Britain and Ireland is soon to change, there will now be additional hoops for Irish businesses to jump through in order to trade with Britain. This week we will step away from the usual topics associated with Covid-19 and focus on the issue of Brexit and ways in which Irish businesses can be Brexit ready.

EORI Number

As we have recently discussed, one of the most urgent steps that Irish businesses need to take ahead of Brexit is to register for an EORI (Economic Operators Registration and Identification) number. This number is essential for all businesses importing and exporting goods into the European Union. Applications are made through the Revenue Online System (ROS).

Brexit Readiness Checklist

A helpful way of ensuring you have all Brexit bases covered is to check in with your Local Enterprise Office and avail of their ‘Brexit Readiness Checklist’. This may assist you in identifying any areas of weakness that need to be addressed before January 1st and show you the steps that need to be taken to prepare your business for Brexit.

Customs Issues

One of the main changes which will arise on January 1st for Ireland is the new scenario of facing customs issues in trade between Ireland and Britain. As we have long relied on trade routes with Britain, this will be a major stumbling block to be prepared for and will require your product to be priced with this in mind.

The Clear Customs Virtual Training:

One major issue facing Irish trade with Britain going forward will be the issue of customs. As this will be an entirely new stumbling block between Britain and Ireland, it is advised to research and review any areas in which this may be an issue for your business. Many businesses may not deal with customs in house and will need training in this area.

With this area of confusion in mind, Skillnet Ireland has created a new free of charge online training programme (The Clear Customs Virtual Training Programme) to assist businesses in dealing with the increased customs requirements that will arise as a result of Brexit. Advance training will reduce the likelihood of delays and disruptions for customers and business owners.

The programme will be available to all eligible businesses and will be run as part of the “Getting Ireland Brexit Ready” initiative. Visit the Skillnet Ireland website for full information and criteria.

The Ready for Customs Grant:

Enterprise Irelands “Ready for Customs” grant has been set up to provide companies with the financial assistance they may require as a result of Brexit. Once Brexit occurs, companies may incur additional costs in hiring in house customs officials, mobilizing existing staff to other locations for customs related roles. The grant allows for €9,000 to be made available for each full-time employee as well as €4,500 available for each part-time employee. Repayment may be required if it is established that a customs role was not sustained. Applications will be accepted until December 15th via Enterprise Ireland’s online portal. Visit Enterprise Ireland’s website for full details and eligibility criteria.

Deferred Payments:

Deferred payment can be applied for via Revenue and can allow the deferral of the payment of import charges until the month following import. There may be other reliefs available to you, we advise researching via the Revenue site to see what is available.

Communication:

With the issue of customs, open communication will be key. Communicate with your courier’s & logistics carriers so that you have the full picture of your product’s journey going forward. In uncertain times, knowledge is key.

Funding

We have recently discussed the funding opportunities available to Irish SMEs due to the Covid-19 pandemic, and with Covid rightfully taking up so much airtime, it may slip the notice of many that there are still some funding options available to assist in the Brexit transition for Irish businesses.

Brexit Loan Scheme:

The Brexit Loan Scheme is operated by the SCBI (Strategic Bank Corporation of Ireland) and is intended to assist with liquidity issues that may arise as a result of Brexit and makes funds of up to €300 million available to Irish businesses. Applications can be made through the SCBI website.

Ready for Customs Grant:

The Ready for Customs Grant was announced in the July Jobs Stimulus Package. It was announced that Enterprise Ireland would manage a new fund to assist Irish businesses to increase their capacity to manage the new customs processes ahead. Eligible businesses should visit the Enterprise Ireland website for full information.

Brexit Information Hub

In terms of overarching preparedness, it is advised to visit the Government’s new Brexit Information Hub which is intended to help business prepare for Brexit and beyond. This new service is free of charge and provides information, resources and webinars for all businesses.

We hope that this information assists you in some way to get ready for these further business changes. As always, should you have any concerns or queries about these or any other business and financial issues, please don’t hesitate to contact us here at EcovisDCA where we remain open and ready to help.