Rising inflation and significant increases in energy prices and living costs were the central focus of Budget 2023 announced on 27 September 2022 by Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath.
The €11bn budget included a one-off €4.1bn package to tackle the surge in energy prices and other living costs, as well as to manage the impact of the Russia-Ukraine war and ongoing Brexit challenges.
In this article, we focus on the Budget 2023 measures introduced to support owners of small and medium-sized enterprises (SMEs) and cover the following:
- Energy and cost of living supports
- Changes to taxation
- Carbon tax and emissions measures
- Extensions to reliefs
- Further business supports
- Pandemic employment supports ended
- Final thoughts on Budget 2023
Energy and cost of living supports
Five new targeted schemes comprising three direct supports and two State-backed loans aim to help businesses through the current challenges.
Temporary Business Energy Support Scheme
The Temporary Business Energy Support Scheme (TBESS) will provide a monthly payment of up to €10,000 for qualifying businesses.
The new €1.25bn scheme will be open to businesses that have experienced a significant increase in their electricity or gas bills to provide support over the winter months.
Businesses must be tax compliant and classified as ‘Case 1’, which includes retail shops, hotels, pubs, restaurants, cinemas, entertainment venues, food and drinks suppliers, and farmers.
The scheme will run on a self-assessment basis based on a comparison of the average unit price for the billing period in 2022 and the equivalent bill period in 2021. If the increase is more than 50%, the business is eligible for support under the scheme.
The amount of support will be 40% of the increase in the bill amount, subject to a monthly threshold of €10,000. An overall cap on the amount that a business can claim will apply.
The scheme will be backdated to September 2022 and run until February 2023.
Details on how to register for the scheme will be available on the Revenue website soon.
Ukraine Enterprise Crisis Scheme
This scheme targets ‘viable but vulnerable’ businesses operating in the manufacturing and internationally traded services that are facing challenges due to the effects of the war in Ukraine and increasing energy costs.
There are two measures available under this scheme:
- The first provides financial assistance in the form of direct grants, repayable advances, equity or loans for businesses that are facing economic challenges due to increased input costs and supply chain difficulties. The co-funded support is subject to a minimum of €20,000 up to €500,000.
- The second measure will provide direct grants to businesses that are significantly affected by increases in gas and electricity prices and that qualify as energy-intensive – spending more than 3% of turnover on energy costs. The overall grant will be up to 30% of eligible costs and between €20,000 and €2m.
Under both measures, companies must have had a 15% decrease in operating surplus in 2022 compared to 2021 and submit an energy efficiency plan outlining how they propose to reduce energy costs as part of the application.
The €200m scheme is operated by Enterprise Ireland, the IDA and Údarás na Gaeltachta.
Ukraine Credit Guarantee Scheme
This €1.2bn scheme will provide low-cost working capital or medium-term investment to SMEs, primary producers and small mid-caps (businesses with fewer than 500 employees).
Loans of up to six years and between €10,000 to €1m are available, with no collateral required for loans up to €250,000.
The scheme will be operated by the Strategic Banking Corporation of Ireland (SBCI) and loans will be provided by finance providers signed up to the scheme.
Growth & Sustainability Loan Scheme
Budget 2023 sets aside €500m for the new Growth & Sustainability Loan Scheme, which will provide low-cost investment loans of up to 10 years to SMEs, including farmers, companies involved in fishing, and small mid-cap companies (an enterprise that is not an SME with fewer than 500 employees).
Eligible businesses won’t require collateral for loans of up to €500,000.
At least 30% of the loans will be targeted towards environmental sustainability and 70% for increasing productivity and competitiveness.
The scheme will be operated by the Strategic Banking Corporation of Ireland and loans will be available through participating finance providers. The scheme is set to open in the first half of 2023.
Small Firms Investment in Energy Efficiency Scheme
Micro enterprises (up to 10 employees) – except those involved in certain sectors, including primary agriculture, gambling, and tobacco – can avail of a grant to invest in energy-efficient technologies to reduce carbon emissions and energy costs.
The new scheme, which follows the Green for Micro scheme, will be operated by the Local Enterprise Office network and opens in 2023.
Note: For a full list of new and existing business support schemes visit the Department of Enterprise, Trade and Employment website.
Changes to taxation
This budget introduced a range of tax measures aimed at keeping disposable income levels in line with inflation and rising living costs.
These income taxation changes will come into effect on 1 January 2023 and will require adjustments to payroll. Depending on what payroll software you use, these updates may happen automatically, but it’s worth checking with your software vendor.
Income tax credits increase
The income tax credit for PAYE workers and Earned Income for self-employed will increase by €75, bringing the amount from €1,700 to €1,775. The personal tax credit will also increase by €75, bringing the total credits to €3,550.
Increase in standard tax rate band
The two income tax rates remain at 20% and 40%.
However, the standard rate band (20%) will increase from €36,800 to €40,000 for single individuals, and from €45,800 to €49,000 for married couples and civil partners with one earner.
Universal social charge adjustment
The National Minimum Wage is set to increase on 1 January 2023 by 80c, bringing the hourly rate up to €11.30 for workers aged 20 and over.
This budget introduced an adjustment to the threshold for universal social charge to keep full-time workers on the new minimum wage outside the higher rates of USC.
The ceiling of the second rate of 2% will increase from €21,295 to €22,920. This change will take effect on 1 January 2023.
If you have any employees on the minimum rate, you should prepare by updating payroll and ensuring the correct rates and bands are applied in advance of the increase.
Increase to Small Benefit Exemption
The Small Benefit Exemption amount has been doubled to €1,000. Under the scheme, employers can reward their employees with a tax-free bonus each year.
The amount was €500 payable in one voucher or gift which was exempt from income tax (PAYE), universal social charge (USC) and pay-related social insurance (PRSI).
The new terms mean that one or two gifts in the form of gift cards, vouchers, concert tickets or gym membership can be given up to the value of €1,000 providing considerable savings for both employer and employee.
The exemption applies for the 2022 tax year.
Remote working relief: No changes announced
There were no changes to remote working relief in this Budget.
Under the measures introduced in Budget 2022, employees who are not receiving a daily expenses amount from their employer can claim 30% of “vouched expenses” of electricity, heating and broadband against their tax bill based on the number of days worked outside the office.
For more information on remote working relief, go to the Citizens Information website.
Changes to VAT and excise rates
New and extended VAT and excise rates and other measures are as follows:
- Newspapers VAT rate: A new zero-rate of VAT will apply to the price of newspapers (currently at 9%), including digital editions, from 1 January 2023. The measure is part of a targeted €6m package to support local and independent media.
- Hospitality rate: The reduced rate of VAT for the hospitality and tourism sectors will end on 28 February 2023. The 9% rate introduced as part of pandemic restrictions measures will return to the 13.5% rate on 1 March 2023.
- Nightclubs fee cut: The cost of applying for a Special Exemption Order for late-night opening for bars and nightclubs decreased from €110 to €55 and took effect on 27 September 2022.
- Cider excise relief: Independent small producers of cider and pear cider will continue to benefit from a 50% relief in excise duties payable.
- Extension of agricultural tax reliefs: Young Trained Farmer Stamp Duty Relief, Farm Consolidation Stamp Duty Relief and Farm Restructuring Capital Gains Tax Relief have been extended to 31 December 2024. Young Trained Farmer Stock Relief and Registered Farm Partnership Stock Relief have been extended to 31 December 2025.
- Concrete levy: For businesses operating in the building industry, a levy of 10% on concrete blocks, pouring concrete and certain other concrete products will apply from 3 April 2023.
Carbon tax and emissions measures
This Budget continued with planned measures to reduce carbon emissions through taxation.
Increases in carbon tax on motor fuel will affect your transport bills if you provide company vehicles or pay mileage to your employees.
A planned €7.50 increase per tonne of carbon dioxide brings the cost to €48.50 per tonne. This increase of around 2c per litre will take effect at the petrol pumps from 12 October 2022.
However, the increase will be offset by a reduction in the levy for the National Oil Reserves Agency by the same amount, so there won’t be a net price increase. Increases in the price of other fuels such as heating oil will apply from 1 May 2023.
Extensions to reliefs
- VAT rate reduction: The reduced 9% VAT rate for gas and electricity has been extended to 28 February 2023.
- Excise rate reduction: Excise rate reductions of 21 cents per litre tax for petrol, 16 cents per litre for diesel and 5.4 cents per litre for Marked Gas Oil have been extended to 28 February 2023.
- Electric vehicle relief: Grants for the purchase of new electric vehicles, worth up to €5,000, from the Sustainable Energy Authority of Ireland (SEAI), will continue until July 2023 after which the grant is expected to be phased out.
- There were no changes to vehicle registration tax (VRT) rates for private cars or commercial vehicles.
Further business supports
Additional funding and extensions for the following schemes were announced as follows:
- Enterprise Ireland receives an additional €12m for the Climate Transition Fund and the Digital Transition Fund, both are part of Ireland’s National Recovery and Resilience Plan (NRRP).
- The Design and Crafts Council of Ireland receives additional funding to expand marketing and development programmes for micro-enterprises and startups in the craft and design sector.
- The Key Employee Engagement Programme (KEEP) has been extended to include share options granted up to 31 December 2025. Under KEEP, full-time employees and directors can acquire shares at a future date at a fixed price without being liable for tax even if the share value increases. To find out more visit the Revenue website.
Pandemic employment supports ended
Although not part of Budget 2023, all Covid-19-related employment supports have ended.
However, if you availed of any of the supports as a sole trader or employer, you’ll need to factor these payments into your end-of-year accounts and when processing year-end payroll.
These were:
- Employment Wage Subsidy Scheme, which ended on 31 May 2022.
- Pandemic Unemployment Payment, which ended on 28 February 2022.
Final thoughts on Budget 2023
As Ireland’s economy faces ongoing challenges related to rises in inflation and cost of energy as well as increases in living costs, small and medium businesses are particularly vulnerable to these increases.
This Budget aims to relieve some of the financial pressure for owners of small and medium businesses, with a range of targeted one-off supports as well as continuing supports in the form of grants and low-cost loans to enable businesses to manage current challenges and plan for future growth.
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