An Overview of Ireland’s July Stimulus Package
On the 23rd of July 2020, the Irish Government announced a host of economic support measures for businesses and the self-employed. Our expert team in CityTrust has provided an overview of Ireland’s July Stimulus Package.
The main announcements to come out of the package includes a temporary cut to Ireland’s value-added tax rate from 23% to 21%, which will be introduced in September and will run until the end of February 2021. The stimulus package also includes tax reliefs for businesses and those who are self-employed that will allow them to claim back income tax paid last year more quickly, against their current-year losses.
Also included in the package:
- Enhancements to the Help to Buy Scheme for the remainder of 2020;
- Amendments to tax relief under the ‘Cycle to Work Scheme‘;
- Warehousing of tax liabilities now has a legislative basis; and
- Interest rate reduction applying to agreed repayments of all tax debt.
Temporary Wage Subsidy Scheme (TWSS)
The July Stimulus package also sees an extension of the support the Government is providing to employers through the Temporary Wage Subsidy Scheme.
Initially, the TWSS was set to be phased out from the end of August. The Irish Government have not laid out plans to offer a new Employment Wage Subsidy Scheme (EWSS). This will open on the 31st of July and run until the end of March 2021. The aim is that it will provide support to those businesses who are continuing to see a slump in their turnover of at least 30%.
Tax Reliefs for Business
Ireland’s July stimulus package includes two measures that will provide considerable cash-flow support for businesses.
Firstly, Ireland is to speed up the processing of companies’ claims to carry back losses estimated this year to reduce the corporate tax paid in 2019. Under this measure, previously profitable companies can immediately carry back up to 50% of a current-year loss to obtain a refund of corporate tax paid in 2019. Any remaining loss will then qualify for carry-back under the normal rules.
Secondly, there is a new one-off income tax relief measure will be introduced to help self-employed persons who made a profit in 2019 but, due to the pandemic, expect to post a loss this year. Individuals carrying on a trade or profession as sole traders or member of partnerships will have the option of setting off against 2019 profits up to €25,000 of 2020 losses and certain unused capital allowances.
Other Measures Included
The stimulus package also introduces improved support for first-time buyers. The Government is offering an enhanced Help to Buy scheme to first-time buys who during the period of 23rd July 2020 – 31st December 2020, sign a contract for the purchase of a new house or apartment or make the first drawdown of a mortgage in the case of a self-build.
The relief is the lesser of:
- 10% of the purchase price of the new home. Or the completion value of the property in the case of self-builds. Or the amount of income tax and DIRT paid over the four years before making the application.
- The standard thresholds under the HTB scheme are €20,000 and 5% of the purchase price or completion value of the property in the case of self-builds.
Anyone who has pending claims under the existing HTB scheme may be able to cancel their claim and submit a new one to take advantage of the increased relief.
Lastly, the stimulus package includes a measure to allow all taxpayers that have declared but not paid tax debts to avail themselves of a reduced interest rate of 3%. Providing they contact Revenue to agree on payment of these debts or have entered into an agreement to pay these debts on or before the 30th September 2020.
These measures are included in the Financial Provisions (Covid-19)(No.2) Act 2020, which has been approved by parliament. At the time of publication, the bill required only approval from the President to be made law.