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Read Pensions and Tax in the Irish Agenda on Irish Tax Measures for 2021 in Response to COVID-19

Irish Tax Measures for 2021 in Response to COVID-19

Businesses and communities are dealing with many COVID-19 related issues that are causing severe business disruption. The Irish government has been swift to introduce new measures to mitigate the effects of COVID-19 on business. No doubt, further measures will be introduced in due course. Revenue has acknowledged that "tax payment difficulties are an inevitable impact of the COVID-19 pandemic" and has advised taxpayers to file tax returns and pay tax liabilities "if at all possible".

Business Supports

On 2 May 2020 the Irish government announced a suite of measures to support small, medium and larger businesses negatively impacted by COVID-19. These measures included:

  • "Warehousing" of tax liabilities for a period of twelve months after recommencement of trading, during which time there will be no debt enforcement action taken by Revenue (this measure has been legislated for by the Financial Provisions (COVID-19) (No.2) Act 2020). It was announced in Budget 2021 (13 October 2020) that this support will be expanded to include repayments of subsidies under the Temporary Wage Subsidy Scheme (TWSS). This expanded support also includes self-employed taxpayers that have difficulty meeting their 2019 income tax balance of tax and 2020 preliminary income tax payment obligations. Revenue confirmed on 13 January 2021 that the scheme remains available to businesses affected by the latest Level 5 COVID-19 restrictions. Around 70,000 businesses have availed of this scheme, delaying payment of €1.9bn in tax.
  • A commitment to local authorities to make up the rates shortfall, so that local authorities can continue to provide full services to the public.
  • The waiving of commercial rates for a three-month period beginning on 27 March 2020 for businesses that have been forced to close due to public health requirements. This incentive had previously been expanded until 31 December 2020. The relief will also apply for the first 3 months of 2021, for those businesses affected by Level 5 COVID-19 restrictions.

Reduction in the Rates of VAT

From 9 April 2020, a zero rate of VAT has applied to personal protection equipment, thermometers, hand sanitiser and respiratory equipment. This temporary measure is due to expire on 30 April 2021.

Revenue will apply a zero rate of VAT to the supply of COVID-19 vaccines, testing kits and services linked to both. This measure applies from 12 December 2020 until the enactment of the Finance Bill 2021 (likely to be some time in December 2021).
As part of the July stimulus package, introduced on 23 July 2020, the government announced a temporary reduction in the standard rate of VAT from 23% to 21% for the period from 1 September 2020 to 28 February 2021.

Budget 2021 introduced a temporary reduction of VAT for the tourism and hospitality sector from 13.5% to 9% effective from 1 November 2020 to 31 December 2021.

Revenue Interventions

Revenue has suspended tax audits and other compliance intervention activities on taxpayers' premises until further notice. Where possible, Revenue will engage with businesses to finalise open interventions through MyEnquiries on or by telephone.

Filing Tax Returns

Revenue has reiterated that taxpayers (individuals and businesses) should continue to file their tax returns even if payment of the resulting liabilities, in whole or in part, is not possible. Where, due to COVID-19, key personnel that compute tax returns are unavailable, Revenue advise that the relevant return is submitted on a "best estimate" basis. Subsequent amendments can be completed on a "self-correction" basis. They have also indicated that the application of the corporation tax surcharge (for late filing of corporation tax returns) for accounting periods ending June 2019 onwards (i.e. due by 23 March 2020 onwards) is suspended until further notice and there will be no restriction of reliefs (such as loss relief and group relief) due to the late filing.

Close Company Surcharge

Legislation provides for an additional corporation tax charge of 15% or 20% on certain undistributed income of close companies. This surcharge does not apply if such income is distributed within 18 months of the end of the accounting period in which it arose.

On 13 May 2020 Revenue announced that if a distribution is not made within the 18-month period "in response to COVID-19 circumstances affecting the company" Revenue will, on application, extend the 18-month period for distributions by a further 9 months. This is in recognition of the fact that the COVID-19 crisis may require many companies to retain cash to support their business, and that such companies may decide not to make distributions at this time. Revenue hopes that this additional time will enable the company to be better informed about the impact of the current circumstances before making a distribution.

This measure will apply for accounting periods ending from 30 September 2018 onwards for which distributions to avoid the surcharge would be due by 31 March 2020 onwards. Revenue recommends that companies keep a contemporaneous record of the circumstances in which the application to delay making a distribution was made

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