On 13 October 2020 the Minister of Finance, Paschal Donohoe, and the Minister of Public Expenditure and Reform, Michael McGrath, delivered Budget 2021 – the largest budget in Irish history.
This budget was delivered in the midst of great uncertainty and extraordinary circumstances. Covid-19 was, unsurprisingly, the basis for many of the announcements with large funding packages announced for the health services and other affected departments. Brexit also featured, with the budget prepared on the basis that a trade deal will not be agreed.
A €3.4bn recovery fund is to be created to assist in stimulating the economy and employment in the aftermath of both Brexit and Covid-19.
The Rainy Day Fund created in Budget 2019 is also to be used in full.
- Minister McGrath announced a new Covid Restrictions Support Scheme (CRSS) which will provide financial support to businesses significantly impacted or forced to close temporarily due to Covid restrictions. It will apply when restrictions are at level 3 or higher. The cash credit will be payable to businesses who can demonstrate that their turnover has been severely impacted, i.e. reduced to less than 20% of their turnover for the corresponding period in 2019. The payment will be 10% of the first €10m of turnover and 5% of the remainder, up to a maximum of €5k per week. The scheme will run from 13 October 2020 until 31 March 2021, with the first payments to be made in November 2020 and administered by the Revenue Commissioners.
Given that many sectors of business are already impacted by level 3 restrictions such as the hospitality trade, the announcement of this relief will be a welcome relief for many.
- The existing Employment Wage Subsidy Scheme which is due to end in March 2021 will be extended in some form until the end of 2021. The format of the extended scheme is yet to be decided and will depend on future economic conditions.
Employers and employees alike will be pleased to hear that there will be no cliff-edge at the end of the existing scheme and that the government will continue to provide further support after March 2021 taking into account the impact that Covid-19 may continue to have on the economy.
- The Tax Debt Warehousing Scheme is to be extended to include TWSS repayments owed by employers, the 2019 income tax balancing payment and 2020 preliminary tax payments. No interest or surcharges will be applied for the first year and 3% interest will apply thereafter. Further details will be released in the near future.
This will be welcome news to individual taxpayers facing uncertainty and financial difficulties due to Covid-19.
- Commercial Rates have been waived for the remainder of the 2020 year.
- The Pandemic Unemployment Payment (PUP) rates remain at the rate set from 17 September 2020.
With tighter restrictions recently re-introduced, some will feel that the rate should be increased again to the €350 rate paid in Spring 2020.
- Budget 2021 has been prepared on the basis of no Brexit Trade Deal. New funding of approximately €340 million has been set aside to get Ireland ready for changes in trading with the UK from 1 January 2021.
- Funding measures include €25m to the Department of Agriculture to support additional jobs and funding for Bord Bia and €14m to the Revenue Commissioners to provide additional staff recruitment to enable them to carry out customs controls and checks.
- No major changes were made to personal taxes rates and bands.
- The Employers PRSI threshold will increase from €394 to €398 per week in 2021.
- The dependent relative tax credit is to increase from €70 to €245 in 2021.
- The self-employed earned income tax credit will increase by €150 to €1,650 in 2021, to bring it in line with the employee tax credit.
- The ceiling of the second USC band rate will increase from €20,484 to €20,687 in 2021.
- The reduced rate of USC for medical card holders is being extended for a further year.
- The Help To Buy Scheme has been extended until the end of 2021, and the limit has been extended to the lower of €30k, 10% of the cost of the property, or the amount of income tax paid in the prior 4 years.
- Employers can pay employees working at home due to the pandemic up to €3.20 per day to cover their costs without any charge to Benefit in Kind arising. Where no costs are covered by employers the existing scheme allowing individuals to claim deductions for light and heat will be extended to include broadband.
- The government’s continuing commitment to the current corporation tax rate of 12.5% was confirmed.
- The shareholding requirement for Capital Gains Tax Revised Entrepreneurial Relief will change to 5% for a continuous period of 3 years prior to disposal from 1 January 2021. The requirement for the relief is currently a continuous 3 years in the 5 years prior to sale. All other qualifying criteria remains unchanged.
This new measure will provide a degree of flexibility while still ensuring that the scheme is not open to exploitation.
- The Knowledge Development Box scheme originally introduced in 2016 has been extended by a further 2 years to 31 December 2022.
- The Accelerated Capital Allowances scheme which gives 100% tax relief in the year of purchase for Energy Efficient Equipment has been extended for a further 3 years, and the qualifying equipment list will be reviewed to ensure it is reflective of recent energy efficiency developments.
- The provisions for capital allowances on intangible assets will be amended so that all assets acquired on or after 14th October 2020 will be fully within the scope of the balancing charge rules.
This brings Ireland’s intellectual property regime into line with international best practice.
- Work is to start in 2021 on the development of a tax credit for the digital gaming sector, with the credit expected to apply from 2022 onwards.
This is a clear sign that Ireland is looking to the future and how it seeks to help the economy to recover by continuing to attract digital based business to Ireland.
- An amendment has been made to the Exit Tax legislation to comply with the EU Anti Tax Avoidance Directive (ATAD).
- Farm Consolidation Relief which allows for 1% Stamp Duty to apply to replacement of agricultural land when consolidating an existing farm, has been extended until 31 December 2022. It will then be reviewed at the same time as the equivalent CGT relief.
- Consanguinity Relief which allows for 1% Stamp Duty to apply to transfers of agricultural land to close relations, has been extended until 31 December 2023.
- The Residential Development Stamp Duty refund scheme which brings the effective rate of stamp duty on the purchase of non-residential land subsequently used for residential development down to 2%, has been extended for an additional year, with applications now possible until 31 December 2022. The allowable period allowed between commencement and completion of construction has also increased from 24 to 30 months.
VAT and Excise Duties
- The VAT rate for the hospitality and tourism sectors will reduce from 13.5% to 9% between 1 November 2020 and December 2021.
This will help sustain industries which have been particularly badly hit by the virus.
- The Farmers Flat Rate VAT charge is increasing from 5.4% to 5.6% with effect from January 2021.
- Excise on cigarettes is to increase by 50 cents per packet of 20, effective from 14 October 2020. Any 20 pack priced below €11.50 will be charged as if it were priced at €11.50.
- The carbon tax is increasing by €7.50 from €26 to €33.50 per tonne of CO2. This will take effect for vehicle fuel from 14th October 2020 and for all other fuel from 1 May 2021. Legislation will be provided to increase the tax each year by €7.50 up to 2029 and by €6.50 in 2030 to achieve €100 per tonne.
- A new rates table for Vehicle Registration Tax (VRT) is being introduced with rates ranging from 7% for cars with CO2 emissions up to 50g/km to 37% for cars with emissions over 191g/km. The NOx surcharge is also being amended.
- A new Motor Tax rates table is being introduced for cars first registered in Ireland from 1 January 2021 and subject to the new WLTP system. Minor changes will also be made to the rates for cars registered since July 2008. Tax charges will range from €120 for zero-emission vehicles to €2,400 for very high emission vehicles. The existing VRT reliefs for hybrid and electric vehicles will be allowed to expire.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.