We were hoping we wouldn’t have to start the year with an update on the CRSS (Covid Restrictions Support Scheme) and EWSS (Wage Subsidy Scheme) on the basis that fewer and fewer businesses would be claiming it. Unfortunately that is not the case and what we are seeing are companies going back on the schemes and actually forgetting how they work in practice. The start of 2021 has been bleak for businesses and the country as a whole. The sight of the vaccine though needs to keep us going and we are hoping that the 3rd wave is in fact the last wave and we can eventually move on with normal living. Luke O’Neill made the comment suggesting that if you thought the outlook was bleak now imagine what it would look like if there was no vaccine in sight! So let’s try and stay positive (and stick together) for another couple of months and by spring time we should all be seeing the light.
Main Schemes Available
The two most important schemes available to employers and businesses across the county is the CRSS and EWSS. This note aims to give you a flavour of those schemes for people who need reminding and lets you know of any updates associated with them. We have also included an update on Revenue warehousing of tax liabilities.
Employment Wage Subsidy Scheme – EWSS
Below is a synopsis of the scheme but for those in the know the main recent changes are as follows:
•The increased rates that were due to expire on 31 January are extended to 31 March
•In order to qualify you must project that your January to June income for 2021 will be 30% down on the same period in 2019.
The scheme works by giving an employer a flat rate subsidy based on the number of employees on the payroll and their gross weekly wage that’s being paid to them. The current rates are as follows:
|Employee Gross Wage
|Less than €151.50
|From €151.50 to €202.99
|From €203 to €299.99
|From €300 to €399.99
|From €400 to €1,462
More than €1,462
•Employers PRSI will be 0.5% on the wages paid to each eligible employee
•The subsidy will be paid to the employer around 2 business days after the payroll submission. This is a lot quicker than previously where payment was made 14 days after the payroll month.
In the main its quite simple. If your business expects to experience a 30% reduction in turnover or customer orders between 1 January 2021 and 30 June 2021 compared to the same period in 2019 then you qualify. The 6 month period is looked at as whole rather than month by month. Revenue state that you need review the position each month to see if the 6 month projections still merits your inclusion in the scheme.
If you believe that you may qualify for the scheme based on a projected 30% decline in turnover or customer orders then apply for it. On a month to month basis review your projections. If at any given period you realise that you will not be 30% down over the 6 months then come off the scheme – but only come off the scheme when you are 100% positive that you will not meet the 30% reduction in turnover.
For businesses who have not been on the scheme since the original incarnation of it back in March 2020 we can confirm that employer cash reserves are ignored for the purposes of qualifying for this scheme. Thankfully, we do not need to be concerned about whether employees were on the payroll in February of 2020 or what their average gross or net salary was for the first 8 weeks (or was it 9!) of the year……so in laymans terms the EWSS is an awful lot more straight forward than the original TWSS version.
Other Points to note
•A tax clearance certificate is required in order to register
•Proprietary Directors (company owners) will qualify as long as they previously were on the payroll at any period between July 2019 and June 2020
•Family members will also qualify for the scheme as long as they were on the payroll for any period between July 2019 and June 2020
•Registration is relatively straight forward. You just apply on ROS via MyEnquiries. Note though that applications cannot be backdated and registrations will only be processed if the company has a tax clearance certificate.
•The EWSS is taxable in the hands of the employer but is not to be included in the projections for turnover. However any grant aid or state funding will need to be included as turnover when looking at your projections.
TWSS/PUP update on additional tax liabilities
The timing may not be appropriate but we are expecting Revenue to issue notices (this week) to all employees who availed of the PUP and TWSS (original EWSS) to outline what tax is payable and how they can go about paying this. Expect to hear more in the media about this in the coming week.
Employers can make these payments on behalf of staff without incurring a BIK charge. Some employers will be able to afford this but many, some of whom are currently closed, will not.
One could argue that now is not the time to send these “bills” out to employees, many of whom are finding themselves out of a job again. The counter argument is that the tax is due and the country needs to start clawing it back somehow.
Lets see how this plays out.
Covid Restrictions Support Scheme – CRSS
In brief this was a support mechanism announced at Budget time in October which supported businesses (by giving cash payments) who have suffered significant Covid 19 restrictions. The scheme is in addition to the Employer Wage Subsidy Scheme. It is available for all businesses who have suffered customer restrictions due to the country moving to level 3, 4 or 5 of the Plan for Living with Covid 19. The relief will operate as a weekly cash payment to the business.
Businesses who trade from a permanent location and who are restricted from allowing customers on to their premises will be entitled to the CRSS payment for the duration of this lockdown as long as their income is down 75% compared to the average 2019 income for the same number of weeks. The maximum weekly payment is €5,000. The payment is worked out by calculating your average weekly payment over the full 2019 year and you are allowed to claim 10% of the first €20,000 average weekly 2019 payment and 5% of anything above that – subject to a weekly maximum of €5,000 cash payment.
If your 2019 turnover was €2m then the average weekly turnover for 2019 was €38k. You can claim 10% of the first €20,000 (so €2k) and 5% of the remaining €18k (so €900). Therefore the total due to the business per week would be €2,900. This is payable in cash up to the 31st of January and should be extended if the current lockdown is extended.
Double Week payment
For businesses who were subject to restrictions from 31 December 2020, such as non-essential retail shops, they will be entitled to a double payment for the week beginning 28 December and the week beginning 4 January 2021. For businesses subject to restrictions from 24 December they will be entitled to a double week payment for 3 weeks starting from 21 December.
Note that the maximum a business can claim in any one week is €5,000. Therefore if a business is already claiming the €5,000 then no further claim can be made. If a business has a claim in for €4,000 then their claim for a double week will increase to €5,000. For businesses with a claim for €2,500 or less then their claim will be doubled for each “double week”.
You do not need to send a separate claim for this “double week”. Revenue will automatically adjust the claim when a business makes the normal claim for these weeks.
Prior to the recent lockdown the government allowed an extra week claim for those businesses who were going to open in December. This was before the most recent lockdown was even thought of. Revenue will still allow this restart claim if businesses were open for 1 week before the most recent restrictions were implemented. For instance if a restaurant opened on 1 December and didn’t close until 24 December then they will be entitled to the restart week and will also be entitled to the double weeks as outlined above. The restart week needs to be claimed separately through ROS. As with the double week payments, a business is still limited to a maximum of €5,000 in any one week.
A business has 8 weeks in order to make a claim for a period. The 8 weeks starts at the beginning of the claim period. For instance a restaurants most recent claim period began on 24 December so they have 8 weeks to make the claim. Revenue are being very strict on this so keep an eye out for it.
Warehousing of Tax liabilities - 2020/2021
This is where Revenue allowed for the deferral of VAT and PAYE for the period where the business was restricted from trading. The taxes have been deferred for 12 months from 2 months after the restrictions are lifted. If restrictions were originally lifted in June 2020 then the liabilities are due in September 2021 with no interest or penalties charged. If businesses do not have the cash to pay these liabilities at this point then they can enter into an instalment arrangement with Revenue with a competitive 3% interest rate. Note for every period where a business enters into restrictions then they can warehouse the taxes for this period. For instance if the restaurant closes on December 24th 2020 then they can warehouse the PAYE and VAT up to at least 31 March 2021 (on the assumption that the restrictions end on 31 January 2021). This means the tax liabilities would not be due until March 2022.
At this point we must stress that Quintas are here to help with any businesses who need us. We have been working closely with our clients and connections throughout 2020 and we will be here to get you through the next few months and beyond.
Tax Partner - Quintas