On March 24th the Government announced a new measure to provide financial support to employers affected by the crises. The scheme runs from March 26th for 12 weeks. It replaces the short lived COVID-19 refund scheme.
The aim of the scheme is to allow employers retain staff, pay them as much as they can and then when the crisis is over be fully ready to embrace the new economic climate, whatever that will look like.
The government issued a press release at around 4pm yesterday and Revenue then followed up with guidance on the scheme at circa 9pm. The short turn around has resulted in the guidance giving more questions than answers. We expect further clarification within the next 24 hours and once we have this, we will issue further updates.
It appears the scheme is broken into two aspects:
From the 26th of March the scheme will refund employers up to a maximum of €410 per week for each qualifying employee. An employee should receive no more than their normal take home pay. It applies to employers who top up employee wages and those who do not. Reimbursement of the funds will be made within 2 workings days of the payroll submission.
In April the scheme will move to a subsidy payment based on 70% of the weekly average take home pay for each employee – up to a maximum subsidy of €410 net per week. Revenue have not given further information on this, only saying that details will be made available in due course
So, for now we are only looking at the first point above for at least the first week of the scheme. Therefore, the following rules should only be considered in respect of this week. We will issue further guidance for how the April scheme will operate once we have clarification from revenue.
Operation of the subsidy scheme for this week
- Income tax and USC will not be applied to the subsidy payment
- Employee PRSI will not apply to the subsidy payment or any top up payment made by the employer
- Employer PRSI will not apply to the subsidy payment and it will be reduced to .5% (from 10.5%) on the top up payment made by the employer
What Employers Qualify
All businesses qualify if they can prove the following
- Be experiencing significant negative economic disruption due to Covid19,
- Be able to demonstrate a minimum of a 25% decline in turnover – no further guidance yet as to what periods revenue will review for the purposes of qualifying for the scheme. For example, is the decline over a full year or over the 12-week period. However, the declaration to be signed (see below under registering for the scheme) states that you need to prove that there is at least a 25% decline in “actual or predicted turnover”.
- Be unable to pay normal wages and normal outgoings fully – no further guidance on this point. We suspect though that if you can’t pay your taxes, your wages and all your outgoings then you qualify
- You must retain the employees on the payroll
- The employees must have been on the payroll as at 29 February and a payroll submission has been made in the period from 1 February 20120 to 15 March 2020
Registering for the scheme
If you have already registered for the COVID-19 refund scheme you do not need to do anymore.
If not you (or your agent) can register on ROS by logging in to MyEnquiries, selecting Covid 19: Temporary Wage Subsidy, reading the declaration and pressing “submit”. Make sure you have your bank details set up on ROS to receive refunds.
The declaration you will be effectively signing reads like this:
“In accordance with the legislation governing the Scheme, I declare to the Revenue Commissioners that the business intends to operate the COVID-19: Temporary Wage Subsidy Scheme and I confirm that the business is experiencing significant negative economic disruption due to Covid-19, and can demonstrate, to the satisfaction of Revenue, that the negative disruption is leading to a minimum of 25% decline in actual or predicted turnover, an inability to pay normal wages and outgoings and, to other circumstances as set out in published Revenue Guidelines.
I accept the conditions of the Subsidy Scheme, that (i) the business will retain its employees on its payroll, (ii) any payments made to the business in excess of 70% of the net weekly pay of each employee will be repaid by the business to Revenue as quickly as possible, or will be offset by Revenue against future payments arising under the Scheme, (iii) any abuse of the scheme that comes to light following a Revenue compliance intervention into the operation of the Subsidy Scheme will be subject to significant penalties.”
Operation of the Scheme
The employer runs the payroll as normal, entering the following details for each relevant employee under the Scheme:
- PRSI Class set to J9.
- A non-taxable amount equal to the employee’s net take home pay or €410 per week whichever is the lesser.
- If an employer is not making any additional payment to the employee, over the subsidy amount, they should include a pay amount of €0.01 in Gross Pay.
- If an employer is making additional wage payments to affected employees, they should include this amount in the Gross Pay.
- It is important that employers do not include the Temporary Wage Subsidy payment in Gross Pay.
- The payroll submission must include pay frequency and period number.
- Income tax, USC, LPT, if applicable, and PRSI are not deducted from the Temporary Wage Subsidy.
- Any income tax or USC refunds that arise as a result of the application of tax credits and rate bands can be repaid by the employer and Revenue will also refund this amount.
- The scheme does not apply to any employee who is making a claim for a duplicate support from the social welfare.
Some questions that currently arise with the new scheme
There are some questions which have not been answered by Revenue’s guidance, specifically in relation to the new “70% scheme” that will operate in April. We expect these to become clearer over the coming days.
Some of the uncertainty is around the following:
- In the press release issued by the government they mention that there are limits on what can be refunded based on what threshold the employee’s salary falls into. There are no limits mentioned in the Revenue guidance but there were thresholds noted in the earlier government press release. Our understanding is that these limits will not come into play straight away, i.e. the €410 or the persons take home pay, whichever is lesser, is available to all, at least for the first week.
- When the 70% subsidy kicks in in April (we don’t know exactly when this will start) it would appear that the maximum of €410 per week will apply to someone on €38,000 per annum. This being 70% of their take home pay. For employees on less than €38,000 the refund will be 70% of their take home pay. For employees on wages of between €38,000 and €76,000 the refund will be capped at a net amount of €350. This information is not on Revenues guidance and therefore has potential to change.
- There is debate currently as to whether the employer will need to pay the remaining 30% of the salary. The guidance is unclear on this.
- It would seem that for any employee over €76,000 of income then no refunds are in place. We presume, but we don’t know, that if someone’s wages are reduced from €100,000 to €75,000 then the weekly refund of €350 should apply to that employee
- Revenue have given no guidance on what employers need to do to prove they are facing a reduction of at least 25% of turnover. We would assume that some form of 2020 updated budget and cashflows would need to be drafted by employers to ensure they qualify.
- There is also a question as regards the current financial position of a business on the basis that if a company has enough reserves to cope for the next 3 months and potentially they can meet all their outgoings but will incur significant losses in doing so, will they qualify for the scheme.
- The Minister has clearly stated that Revenue will be completing a full review of the scheme once this crisis is over and should a business be found to have made claims in bad faith then they will be severely punished and sanctioned for their actions.
Overall, the scheme should work relatively easy this week. For next week the mechanism is still clouded in doubt and we don’t think the government, or the Revenue know yet how it will work. We realise businesses need clarity in order to make really important decisions and unfortunately, we cannot give those businesses clarity as of now. We will provide further updates when we get them.
If you have any queries or concerns on how to operate the scheme, please contact either Dave or Mark on the details below.
Dave O’Brien (email@example.com) / Mark Ryan (firstname.lastname@example.org)
Quintas Tel: 021 4641400