Update on Government Financial Supports

Over the last couple of weeks, the government have announced numerous different updates on the existing schemes that are in place, also giving a quick overview of the new Business Resumption Support Scheme. This note gives a high-level summary of the changes to these schemes. Of course, if you require further details on any of the schemes mentioned below, please contact myself or your point of contact in Quintas and we can discuss how your business could stand to benefit from these financial supports available.

Employment Wage Subsidy Scheme (EWSS)

Good news is that the EWSS will be extended until 31^st December 2021. The current rates of payment will continue until 30^th September and the requirement for a 30% reduction in turnover remains.  For Q4 of 2021 the government has yet to decide on the payment rates or whether an increased employer contribution will be required.

The only noteable change for the next 3 months is that the reference period is for the full 12 months of 2021 compared to the full 12 months of 2019. The reference period previously was the first 6 months of 2021 compared to the first 6 months of 2019. What this really means is that from July onwards if you believe your turnover will not be down 30% for the full year compared to 2019 then you will no longer qualify for the scheme.

Pandemic Unemployment Payment (PUP)

Some of the main changes are:

• Closed for new entrants from 1^st July 2021
• Final payment of the PUP for students will be 7^th September
• From 7^th September the support for existing participants will be reduced by €50 per week
• The payment will further decrease in November 2021 and February 2022

Covid Restrictions Support Scheme (CRSS)

This scheme really was the saviour of many businesses. It is being extended to 31 December 2021 which is great for those businesses that will continue to qualify. If a business has resumed trading and they are no longer restricted by regulations then they will cease to qualify for the CRSS, even if they are not yet open to business. However, they would then be able to make a claim for an enhanced restart payment.  The enhanced restart payment is in respect to a 3-week period and is double what you would be allowed to claim via the normal CRSS. Thankfully the maximum amount that can be claimed (in respect of the enhanced payment only) is €10,000 per week as opposed to the usual €5,000 weekly limit. This means that someone who was claiming €3k per week from the CRSS can now claim €18k as a restart payment once restrictions are lifted.

Pubs and restaurants, for instance, who are allowed outside dining are still restricted therefore they can continue to qualify for the CRSS (if turnover is not more than 25% of the average weekly turnover in 2019). These businesses should not claim the enhanced restart payment until such time as they cease to qualify for the CRSS as once you claim the enhanced restart payment you will automatically cease to qualify for the CRSS.

Businesses, such as hotels, which do not need to significantly restrict access from 2 June will now cease to qualify for the CRSS irrespective as to whether they decide to reopen or not.

Business Resumption Support Scheme

This is a brand-new scheme and one which will be needed by some industries. Details of this scheme are unclear, and it will not come into existence until September. Businesses whose turnover is reduced by 75% for the period, 1^st September 2020 to 31^st August 2021 compared with 2019 will be eligible. Thankfully there appears to be no restrictions based on physical premises, rates or location. The amounts available will be similar to the CRSS and it will be run in a similar way. Businesses who previously qualified for the CRSS or other financial supports can still qualify for this support scheme. No further details are currently available on this and we will update you in due course once the finer details are announced.

Small Business Assistance Scheme

This scheme was not as beneficial as many others as the amount to be claimed was limited to €4,000 and businesses had to have a minimum turnover of €50,000. The real drawback was that businesses had to have a rateable premise. This condition has now lifted so it is worth businesses investigating whether this scheme might apply to them. For instance, a self-employed person working from home may now qualify. As before you cannot claim this and the CRSS. Additionally, also note that where a business has turnover between €20k and €50k they will now qualify for a grant of €1,000.

Tax Debt Warehousing Scheme

A very positive development here it would seem. Revenue guidance suggests that the scheme will extend to 31 December 2021 with an interest free period for all of 2022 for all eligible taxpayers. My understanding of this is that for anyone who has warehoused PAYE or VAT liabilities will now not be subject to interest on these taxes until 2023 and at that point the interest rate is only 3% (compared to the usual 10%). Also confirmed is that overpayments of the TWSS and EWSS can also be warehoused. Anyone who is unsure as to whether they have warehoused tax liabilities should contact their advisors straight away as Revenue are still accepting warehousing applications.

One negative point though is Revenue have not changed their view on directors claiming a PAYE deduction in their income tax return, where the company is warehousing the PAYE. This means that directors may have a substantial income tax liability in October if their company has not paid PAYE for the 2020 period.

We appreciate this is a high-level overview of some of the changes that have been announced. While I know business owners are feeling drained from the past 15 months and are looking forward to reopening it is still worth having another look at these schemes to see if there is anything further which you may be entitled to.

Please let us know in Quintas if you need any further guidance on this.

Kind Regards,

Dave O'Brien

Maximum Funding

Is it now time to act?

Is it now time to act and advise your clients to maximum fund their pensions or are we no closer to seeing changes to the tax reliefs available to pension savers?

For years now we have heard murmurings about a change to the pension tax relief system in Ireland with nothing coming to fruition.

The arguments both for and against changes to the current tax relief system have been considered but no changes to the current system have been proposed. That doesn’t mean to say though change isn’t on the horizon. We would have to think that one of the key drivers will be the introduction of Auto Enrolment pensions in Ireland as government is more than likely going to standardise the pension tax relief at that point. Another possibility is that the current pandemic and the impact it is having on State finances will force government to reduce tax relief's available or cap large employer contributions.   

Occupational pension schemes are one of the most tax efficient ways of providing pension benefits for Schedule E company directors and employees. This is because employer contributions can be written off against corporation tax as a business expense and are not treated as a benefit in kind for the employee.

There are Revenue limits on the maximum pension that a scheme member can have, which means there is a maximum fund that can be accumulated to reach this target pension.

I want now to look at the concept of maximum funding. If someone asked you to explain the concept to them would you be able to?

In simple terms you are looking to get the cost of the Revenue maximum pension at normal retirement age by applying a factor to the pension to turn it into the estimated fund to buy that pension, next take into account all existing pension funds and lastly work out how much needs to be contributed on an annual basis so as to reach that maximum fund at normal retirement age. This amount is the maximum annual contribution allowable to the occupational pension scheme.

The maximum pension is typically a pension of two-thirds of salary on the basis the individual has 10 years or more service with the employer at normal retirement age.

There are numerous online funding calculators you can use that will tell you the maximum allowable pension contribution but it is important you don’t rely on them as they don’t tell the full story. It is widely accepted industry practice that within 5 years of normal retirement age you can use current annuity rates and this is where the funding picture really changes. The reason for the 5 year timeframe is that this is in line with the guidance from the Society of Actuaries in Ireland where you use current annuity rates in pension projections where the term to retirement is less than 5 years.

I’ve set out some examples in the table below to show you how the funding position changes dramatically if you use current annuity rates instead of the Revenue capitalisation factors. It is based on a married individual earning a salary of €75,000 a year, so a pension of €50,000 a year (two-thirds of salary as greater than 10 years service at normal retirement age):

The annuity rates are based on a pension with a 10 year guarantee period, increasing at 3% per annum and a 100% spouse’s pension where the spouse is the same age as the main life. The current lifetime pension fund limit or Standard Fund Threshold (SFT) for an individual is €2 million.

Contribution Types

There are two types of allowable contributions that can be paid into a scheme-Ordinary Annual contributions and Special Contributions.

• An Ordinary Annual Contribution is the maximum contribution a company can make to fund ongoing and get tax relief in the company tax year it is paid. It can be paid into a scheme on a regular basis (monthly, quarterly, half yearly or yearly) or by way of a single contribution top up.

• A Special Contribution is used to provide benefits on behalf of unfunded past service with an employer and is normally paid as a single contribution top up.

The generous limits of maximum funding shows the importance of questioning the funding   position under a clients pension as there may well be plenty of scope to fund where at first look that isn’t obvious.

Take action now it may be only a matter of time before we see change.

Kind Regards,

Anne O'Doherty

TWSS Reconciliation update

Revenue released the reconciliation process for the Temporary Wage Subsidy Scheme (TWSS) and sent reconciliation statements to employers in mid-March 2021. These reconciliation statements were issued directly to employers Revenue Online Service (ROS) inbox instead of by post.

The TWSS was designed to assist employers impacted by COVID-19 and to encourage employers to keep their employees on the payroll. These reconciliation statements compared what Revenue have paid to employers against what Revenue say the employer was entitled to receive whilst availing of the TWSS.

When the TWSS was first introduced back in March 2020, during the transitional phase, Revenue refunded a flat rate of €410 per employee per pay period regardless of the employees' earnings.

In a lot of cases this €410 exceeded the subsidy that the employee was entitled to receive, and it was made very clear from the start that there would be a reconciliation to rectify this overpayment.  After that period, Revenue revised the scheme, and the TWSS was based on the average weekly net pay which could be topped up.

The TWSS reconciliation process is nearing completion. Employers have until the 30th June 2021 to review, correct and accept their TWSS reconciliation. If an employer does not accept the reconciliation on or before 30th June, Revenue will deem it to be accepted. Revenue consider any TWSS liability up to €500 as balanced and no repayment is due. Where the outstanding liability exceeds €500, Revenue will notify the employer and normal enforcement and collection processes will begin. Employers who have yet to accept their TWSS reconciliation should take action as soon as possible as it may take a period of time to complete the reconciliation, especially where it is not currently balanced.  If no subsidy paid data is reported then Revenue will recover all payments. If the TWSS reconciliation is not accepted Revenue will continue with normal collections and enforcement processes will begin. Quintas payroll department has undertaken the reconciliation for their payroll clients and some extra requested ones.

EWSS Update

The EWSS scheme replaced the TWSS. The Employment Wage Subsidy Scheme (EWSS) does not have the same tax implications as the TWSS as this is a subsidy paid to employers rather than employees. The EWSS will not appear on the employee’s payslip and the scheme has been extended until 31^st December 2021. The EWSS is currently based on a gross pay tiered pay rates which have been in affect from 20^th October 2020 up to 30^th September 2021 as follows:-

Employers Gross Weekly wages                                           Subsidy

Less than €151.50                                                                  €0

From €151.50 to €202.99                                                       €203

From €203 to €299.99                                                            €250

From €300 to €399.99                                                            €300

From €400 to €1462                                                               €350

Over €1462                                                                             €0

To qualify for the EWSS, businesses must expect to experience at least 30% reduction in turnover/customer orders by comparing the actual reported turnover for the period January to December 2019 against the Financial predictions for the period January to December 2021 and have a valid tax clearance certificate.  The eligibility for the EWSS must be reviewed on the last day of each month.  If the business is no longer eligible then the business must de-register for EWSS from the following day.  If circumstances change then the business can re-register again.

The EWSS is indicated in the payroll submission report to Revenue and Revenue will calculate the subsidy due based on the gross pay, pay frequency and insurable weeks. EWSS will generally be paid to the employer within two workings days of the payroll submission. A 0.5% rate of Employer PRSI applies for employments that are eligible for the subsidy and this will be refunded on the statement of account as a credit.

Kind Regards,

Sally Turner

Covid-19 lending supports

At last count there were 32 Covid-19 different supports available to business.  Here is a summary of the loan products with a link to the more detailed terms and conditions for each one. 

COVID-19 Credit Guarantee Scheme 

Limits:                       €10K to €1m

Term:                         Up to 5.5 years

Provided by:            various lenders  

Strategic Banking Corporation of Ireland fund the scheme, but it is applied for through the banks, credit unions and finance companies.  80% Government guaranteed. 

COVID-19 Business Loans 

Limits:                       €5K to €25k

Term:                         typically 3 years, but up to 5 years

Provided by:            Micro finance Ireland  

Micro businesses only and the business will need to have been turned down by a mainstream lender.  Apply through your local LEO . 

SBCI COVID-19 Working Capital Scheme

Limits:                       €25k to €1.5m

Term:                         up to 3 years

Provided by:            Strategic Banking Corporation of Ireland 

SME only and certain sectors are excluded.  Business needs to meet certain “innovation” criteria. For loans of up to €500,000 no security is required.

Future Growth Loan Scheme

Limits:                       €25k to €3m

Term:                         7 to 10 years

Provided by:            Strategic Banking Corporation of Ireland through participating lenders

Apply initially to SBCI  and the scheme is nearing full capacity.

Sustaining Enterprise Fund     

Limits:                       €100k to €800k (with up to €200k in grant also available)

Term:                         5 years

Provided by:            Enterprise Ireland

Open to manufacturing or internationally traded services companies that employ more than 10 people.

Pandemic Stabilisation and Recovery Fund      

Limits:                       Total fund is €2bn and lending is on a commercial basis

Term:                         commercial terms 

Provided by:            Ireland Strategic Investment Fund

This fund is for large and medium enterprises employing more than 250 employees or with annual turnover of more than €50 million.  Lending will be on a commercial risk adjusted basis.

As with any loan application the usual terms and conditions are required to be met as regards approval by the relevant banks credit department and the requirement to show repayment capacity for the loan.

Regards

Eddie O'Shea

COVID 19 Part Time Job Incentive for the Self Employed

The Part-Time Job Incentive Scheme for the Self-Employed (PTSE) is a new scheme for self-employed people. This scheme is available to self-employed people who are in receipt of COVID-19 Pandemic Unemployment Payment (PUP) or a jobseekers payment in the week immediately prior to their application.

Currently self- employed persons may retain PUP and engage in limited self-employment where their trading income does not exceed €960 gross over an 8 week period. However, if your income does exceed €960 gross you would no longer be allowed to claim PUP.

PTSE is paid instead of your PUP or jobseeker’s payment. It is paid at a lower rate but there is no limit on the amount you can earn. There is however a limit on the number of hours that can be worked. You cannot work more than 24 hours per week with the PTSE.

Who can apply?

Self-employed people who:

• Work less than 24 hours per week
• Are currently in receipt of PUP and earn more than €960 over 8 weeks from self-employment
• Are in receipt of Jobseeker’s Benefit, Job Seeker’s (Self-Employed) or Jobseeker’s Allowance because of COVID-19 and want to return to self-employment or increase your income from self-employment

How to qualify?

• Be self-employed
• Be aged between 18 and 66
• Be tax and PRSI compliant
• Be resident in Ireland
• Have been receiving the COVID-19 Pandemic Unemployment Payment or a Jobseeker’s payment in the week immediately prior to your application
• Return to self-employment for up to a maximum of 24 hours per week (no limit on the amount you can earn)
• Submit a monthly statement of hours worked each week
• Be genuinely seeking to increase your level work

Please note, if your income falls below €960 in an 8 week period, you can close your claim for PTSE and re-apply for PUP. If your income increases at a later stage you can re-apply for PTSE - if you still meet the conditions for the scheme. This scheme will run for as long as the PUP scheme is in operation.

Rate of PTSE

There are 2 rates of weekly payment:

• €128.60           -           Personal rate
• €209.70           -           Jobseekers payment with an increase for adult dependant

PTSE is paid instead of your PUP or Jobseeker’s payment. It is paid at a flat rate each week. A higher rate is payable if you are getting an increase for an adult dependant with your jobseekers payment. There is no increase for a child dependant.

How to apply?

You can download a copy of the PTSE1 application form or email the DSP at forms@welfare.ie for a copy of the form.

Completed forms should be emailed or posted to your local Intreo Centre or Social Welfare Branch Office.

Kind Regards,

Jennifer Brosnan

Small Company Administrative Rescue Process (SCARP)

Introduction

As part of the Government’s medium-term stabilisation response to the economic challenges of the Covid 19 pandemic, the Companies (Small Company Administrative Rescue Process and Miscellaneous Provisions) Bill 2021 provides for a stand-alone rescue framework for small and micro companies.

I have summarized some of the key requirements of SCARP below but having reviewed the Bill I would suggest that the process involved in reaching arrangements and settlements with corporate creditors in this format would be similar to the Personal Insolvency legislation. In my role as a PIP we have been actively managing personal insolvency cases since 2012 following the last financial and economic crash.

The Small Company Administrative Rescue Process (SCARP) seeks to mirror key elements of examinership in an administrative context thereby reducing court oversight resulting in efficiencies and lower comparable costs. It has limited court involvement where creditors are engaged in the process and they are willing to support a rescue plan.

Main Provisions

The main provisions of the Bill can be broadly summarised as follows:

• Designed for “small” and micro companies (as defined by the Companies Act 2014) which represents the majority of companies in Ireland.
• To qualify a company must satisfy two or more of the following three requirements:
• Annual turnover of up to €12m;
• A balance sheet total of up to €6m;
• Up to 50 employees.
• Commenced by resolution of directors rather than by application to Court.
• Concluded within a shorter period than examinership.
• An insolvency practitioner (who must be qualified to act as liquidator under the Companies Act) is appointed by the company to begin engagement with creditors and prepare a rescue plan
• A majority of value (50% + 1) of the total creditor pool is required to support the rescue plan,
• Provides for format of cross class cram down of debts designed to reduce costs.
• Does not require application to Court for approval of rescue plan (provided no creditor objections).
• Gives safeguards against irresponsible and dishonest director behavior.
• The rescue plan must satisfy the ‘best interest of creditors’ test and provide each creditor with a better outcome than a liquidation.
• In addition to this, no creditor may be unfairly prejudiced by the plan.
• Creditors are invited to vote on the rescue plan by day 42 of the insolvency practitioner’s appointment. The proceedings in relation to the required meetings of creditors are in keeping with existing provisions of the Companies Act.
• The rescue plan is approved without the requirement for Court approval provided that a majority in value of an impaired class of creditors vote in favour of the proposal and no creditor raises an objection to the plan within the 21-day cooling off period which follows the vote.
• Where an objection to the rescue plan is raised, there is an automatic obligation on the company to seek the Court’s approval. This acts as a safeguard for creditors.
• Concluded within a shorter period than examinership (examinerships can currently run for up to 150 days, SCARP seeks to arrive at a conclusion within 70 days, subject to extension where necessary for Court applications).
• Provides that State creditors, the Department of Social Protection and the Revenue Commissioners may be excludable from the process. This means they may determine to “opt out” of the process on the basis of statutory grounds, for example if the company has a poor history of tax compliance. 

Protection for Creditors

SCARP also incorporates sufficient safeguards for the protection of creditors:

• As there is no automatic stay on proceedings, creditors are not impaired by virtue of entry to the process.
• Creditors are afforded an opportunity to provide input to the process advisor (insolvency practitioner) upon his or her appointment to disclose any facts they consider material to the process.
• There are various enforcement provisions in relation to failure to comply with filing, notice and information obligations.
• The process advisor (insolvency practitioner) will be subject to the same reporting requirements as a liquidator.
• The current requirements in respect of restriction applications will also apply. 
• It will allow Landlord’s leases to be repudiated, but an application to court will be necessary if the landlord does not voluntarily agree

Why should a company consider SCARP

The process will be an agreement between your company and its creditors to gradually pay off your debts over an agreed (short-term or a long-term) period, typically from one to five years, or, alternatively, to accept a lump sum payment.

Availing of the Small Company Administrative Rescue Process can prevent creditors from closing down your business using a winding up petition. This allows you to continue trading while paying back your creditors over time and keeping your company in business.

Not all companies will be eligible to enter into a SCARP. If your company has a business model that just isn’t viable and hasn’t ever produced a profit, it’s unlikely that your creditors will be willing to accept a SCARP proposal. It maybe difficult for some sectors to prove that they will be viable over the coming years as the economy recovers as this may depend on how badly their business has been impacted by the pandemic.

Unlike liquidation, which could leave creditors with little or no money once your company is wound up, a SCARP guarantees creditors a certain amount of their debt over the repayment period.

If you believe that your company may need to seek the assistance of SCARP then I would suggest that you take preparatory steps to review your business with an experienced insolvency practitioner and seek the appropriate advice now.

Regards

Mark Ryan, CPA,

Personal Insolvency Practitioner (PIP),

Partner, Quintas

Email: mark.ryan@quintas.ie

Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.