The July Jobs Stimulus introduced on 23 July 2020 provides €7.4bn in investment to help the country recover while managing the impact of coronavirus (COVID-19).
The Stimulus includes more than €4bn of direct expenditure, €1bn in taxation measures to support businesses and €2bn in credit guarantees.
The package comprises a range of supports and incentives for businesses and individuals and includes wage subsidies, education supports and tax reliefs.
This article will focus on the measures introduced to support owners of small and medium-sized businesses affected by the coronavirus pandemic.
Here are the topics that are covered in this article:
VAT reduction from 23% to 21%
Under the July Jobs Stimulus, the government has introduced a series of measures that reduces taxes payable for businesses.
One of these is a temporary reduction in the standard rate of Value Added Tax payable on goods and services. The reduced rate from the standard 23% to 21% is effective now (it began on 1 September 2020) and will apply until 28 February 2021.
The standard VAT rate applies to more than half of all economic activity in Ireland and includes the sale of motor vehicles, petrol, diesel, tobacco, alcohol, household and electrical goods, furniture, computers, hardware, adult clothing and footwear.
You’ll need to prepare your business for the VAT rate change (if you haven’t already), which may involve setting up a new code on your accounting system, updating invoices, and contacting suppliers and retail customers.
Other factors to consider are whether you reflect the VAT cut in your pricing and if you need to update contracts depending on whether or not your pricing system is VAT-inclusive.
Employment Wage Subsidy Scheme
The Employment Wage Subsidy Scheme has been set up to support employers whose businesses have been adversely affected by coronavirus. The government expects the scheme to support 350,000 people for six months until 31 March 2021.
The scheme provides a subsidy per qualifying employee and a reduced rate of employers’ pay related social insurance (PRSI) for qualifying employments.
The subsidy applies to employees with gross weekly earnings of between €151.50 and €1,462 who may qualify for one of two flat-rate payments:
- €151.50 for wages between €151.50
- €202.99 and €203 for wages from €203 to €1,462.
Employments eligible for the subsidy also qualify for a reduced rate of employer PRSI of 0.5% (instead of 8.8% on earnings up to €395 and 11.05% on earnings above €395).
The reduction is given in the form of a PAYE credit to the employer.
Employers must have a valid Tax Clearance Certificate and be projected to experience at least 30% fall in turnover or orders from 1 July 2020 to 31 December 2020 when compared with the same period in 2019.
For new businesses, different comparative scenarios apply.
Stay and Spend
This tax incentive is for businesses operating in the hospitality and food sector and aims to boost tourism within Ireland during the off-peak season.
The scheme gives taxpayers credit towards their income tax when they spend money on accommodation and eating out.
It operates from 1 October 2020 to 30 April 2021 and includes expenditure on accommodation, food and non-alcoholic drinks subject to a minimum spend of €25 and a maximum of €625.
Customers avail of the tax credit by scanning their receipts and submit them to Revenue via a mobile app. A single taxpayer can get a tax credit of up to €125 and €250 for a jointly assessed married couple.
The scheme is expected to encourage staycationers to support the domestic hospitality sector with hotel and B&B bookings and dining out.
Cycle to Work
The Stimulus plan includes additional expenditure under the Cycle to Work scheme. The scheme operates through a company’s payroll where employees who use their bicycle for all or part of their commute can purchase a new model and avail of a tax credit on the cost.
If any of your employees are availing of the scheme, this increase will affect your payroll in two ways: allowable expenditure has been increased from €1,000 to €1,500 in respect of electric bicycles, and €1,250 in respect of bicycles and the amended scheme allows for the purchase of a bicycle every four years instead of five years.
Warehousing of PAYE/VAT
Businesses that are struggling to pay VAT and PAYE liabilities incurred during pandemic restrictions can choose to ‘warehouse’ their debt on an interest-free basis.
You can postpone payment of any taxes accumulated up to the end of the first bi-monthly VAT period following the resumption of trading for up to 12 months.
The legislation introduced under the July Jobs Stimulus has an additional provision that allows businesses with outstanding debts that predate coronavirus restrictions to delay payments for a set period with a reduced 3% rate of interest instead of standard late payment rates of 8% to 10% per annum.
To avail of the reduced rate, businesses must agree to a phased payment plan with Revenue before 30 September 2020.
Further details on the measures on debt warehousing can be found in this information booklet published by Revenue.
Further measures: Tax relief and commercial rates waiver
Under the July Jobs Stimulus, SMEs can avail of further taxation and other reliefs to help them to manage short-term financial challenges. These include:
- Tax relief to provide SMEs with additional cash flow. Trading losses for 2020 may be carried back against corporation tax paid for 2019, and sole traders can avail of an income tax relief against losses in 2020. Businesses should contact Revenue to find out more about these reliefs.
- A waiver of commercial rates for affected companies will be extended until 30 September 2020. Businesses should contact their local authority to avail of the waiver.
Restart Grant Plus
The Restart Grant scheme aimed at small and medium-sized businesses is being expanded with an investment of €300m to help businesses with the cost of reopening or staying operational.
Enterprises with 250 employees or less and a turnover of less than €100,000 per employee or a reduction of 25% in turnover as a result of coronavirus may qualify for grants of between €4,000 up to €25,000.
The scheme is run by the local authorities. Businesses in recently locked down counties, such as Laois, Offaly and Kildare, may be eligible for higher rates.
The grant can be used to implement health and safety measures in your premises or cover fixed costs such as utilities and insurance.
Eligibility is based on payment of commercial rates. If you are in arrears, your business can still qualify. Hospitality businesses, sporting organisations with a bar or restaurant and franchises may be eligible. B&Bs that don’t pay rates can apply for a minimum €4,000 grant if they meet the other criteria.
If your business qualified for funding through the Restart Grant scheme, you can apply for a top-up to the maximum amount by making a declaration that the information you previously supplied is still correct.
The closing date for applications under the Restart Grant Plus scheme is 30 September 2020.
Additional supports for SMEs
The Stimulus package also includes a range of expanded schemes to help ease financial pressures while businesses recover. These schemes include:
- The previously announced SME Credit Guarantee scheme run by the Strategic Banking Corporation of Ireland (SBCI) scheme has been expanded. It provides an 80% guarantee for participating lenders for loans between €10,000 and €1m for terms up to six years.
- Small and micro companies – with 10 or fewer employees – can avail of a range of supports through Microfinance Ireland and their Local Enterprise Office. These include reduced interest rates on loans including an interest waiver on the first year of SBCI and MFI loans.
- The Future Growth Loan Scheme is being expanded by €500m, bringing the scheme to €800m with the European Investment Bank Group. Businesses with less than 500 employees can apply for long-term loans at competitive rates.
Conclusion on the Jobs Stimulus Package
As the economy recovers from the coronavirus pandemic, businesses face many challenges.
The July Jobs Stimulus provides a wide range of initiatives and schemes in the form of subsidies, taxation measures, grants and loans to ease some of the burden and provide financial support to keep businesses afloat and help them to retain jobs into the future.