Budget 2021 coverage brought to you with Michael J. McCormack & Co Accountants
“There will continue to be much uncertainty on many issues for the coming period. Our key objective here today is to ensure that economic policy does not compound the uncertainty, but helps to manage and mitigate it for individuals, for families and for businesses throughout the country,” Minister for Finance Paschal Donohoe said in today's Budget speech.
Of the total budgetary package of over €17¾ billion, more than €17 billion relates to expenditure and €270 million in taxation measures.
Minister Donohoe said the package is unprecedented in both size and scale in the history of the Irish State.
“The impact of this Budget will be felt in every household and business across the country,” he said.
Of the nearly €18 billion, €8 ½ billion is for our public services to address the challenges of Covid-19, including €2.1 billion in contingency funding.
€3.8 billion will be spent on supporting existing services across a range of departments, in particular the Department of Health.
Expenditure on core capital programmes is to increase by €1.6 billion next year, while €3.4 billion will establish a Recovery Fund to stimulate demand and employment.
Capital expenditure will increase to €10.1 billion, the largest amount that has ever been allocated to investment in schools, homes and public transport. In addition, a net tax package of €270 million has been provided.
Budget's Covid focus
€3.4 billion Covid-19 Recovery Fund
The Recovery Fund will be targeted and will help to stimulate increased domestic demand and employment. Crucially, given the evolving nature of Covid-19 and Brexit, the fund will be flexible in its design in order to provide the Government with the means to react swiftly to a constantly changing environment.
It will focus on three main areas: infrastructure development, reskilling and retraining, and supporting investment and jobs. It will support both those in employment and those whose jobs have not survived the pandemic.
This forms a cornerstone of the Government’s continued economic response in 2021.
Minister Donohoe said the SME sector requires a range of supports as it recovers from the immediate impact of the pandemic and the accelerated market and technological changes. These can take various forms, including the extensive supports already available through the July Stimulus Plan such as the Credit Guarantee Scheme and the Strategic Banking Corporation of Ireland (SBCI) Working Capital Scheme.
To build on this, the Department of Finance is coordinating a group of representatives from the Department of Business, Enterprise and Innovation, Enterprise Ireland, the Ireland Strategic Investment Fund, the European Investment Bank, and the European Investment Fund. This group will report to me by mid-November with proposals to leverage European capital and establish an equity fund with a mandate to invest in domestic, high innovation enterprises.
The Government will provide an initial €30 million in funding through the Ireland Strategic Investment Fund (ISIF) to support an appropriate and effective scheme and thereby leverage matching funding for early stage seed and growth capital.
In addition, as part of a continuing process of ensuring that our business supports remain efficient and responsive, the Department will this year initiate an assessment of how the Employment and Investment Incentive Scheme can be enhanced in light of the impact of the current crisis.
"In order to provide further additional liquidity support for employers, I will provide
or an extension of the tax warehousing scheme to include repayments of Temporary Wage Subsidy Scheme funds owed by employers and preliminary tax obligations for the adversely affected self-employed," Minister Donohoe said.
"I am aware that not all self-employed taxpayers can benefit from the losses provision introduced in the July Stimulus but will have suffered a significant drop in income and will struggle to pay their 2019 balance and preliminary tax for 2020. Therefore, I will provide that the debt warehousing provisions be extended to include the 2019 balance and 2020 preliminary tax to allow such taxpayers to defer payment for a period of a year with no interest applying - three per cent will apply
thereafter and will attract no surcharge."
Future of wage subsidies
On the Temporary Wage Subsidy Scheme (TWSS), the Department has begun the process to apply for EU funding towards its costs. This EU fund, known as SURE, is part of the European response to help protect jobs and workers affected by the Covid-19 pandemic. This could result in Ireland accessing just under €2½ billion. This funding will help to diversify sources of financing for the Exchequer over the coming period.
Similarly, this summer the European Council agreed to establish a Brexit Adjustment Reserve. While the technical details of this fund are still being worked out, Ireland will seek to avail of these funds in the coming years given the disproportionate impact of Brexit on us.
"We also need to meet the broader challenge of being responsive to the changing needs of the economy. The Employment Wage Subsidy Scheme is currently set to continue until March 31, 2021, however, a similar type scheme will be needed
out to the end of 2021 to provide businesses with greater levels of certainty in the most uncertain of times. There will be no cliff edge to this vital scheme. It will continue during 2021 and the Government will decide on the form of its extension when economic conditions are clearer," he said.
The Christmas bonus is to include those on the Covid-19 Pandemic Unemployment Payment.
Covid Restrictions Support Scheme (CRSS)
A new scheme will provide targeted support for businesses. The scheme is designed to assist those businesses whose trade has been significantly impacted or temporarily closed as a result of the restrictions as set out in the Government’s Living with Covid-19 Plan. The scheme will generally operate when Level 3 or higher is in place and will cease when restrictions are lifted.
The sectors impacted by the current Level 3 nationwide restrictions are accommodation, food and the arts, recreation and entertainment. If the Government decides to move to a higher level of restriction then other sectors may qualify.
For these businesses, the Government will make a payment, based on their 2019 average weekly turnover, to provide support at a difficult time. The scheme will apply to business premises where the Government restrictions directly prohibit or
restrict access by customers. Qualifying businesses can apply to the Revenue Commissioners for a cash payment in respect of an advance credit for trading expenses for the period of the restrictions.
The scheme will be effective from today, Budget Day, until March 31, 2021, and the first payments will be made to affected businesses by mid-November.
Payments will be calculated on the basis of 10 per cent of the first €1 million in turnover and five per cent thereafter, based on average VAT exclusive turnover for 2019. It will be subject to a maximum weekly payment of €5,000.
Once the scheme is operational and a county or region is subject to Government restrictions of Level 3 or above, qualifying businesses can claim in week one and valid claims will be repaid for the entire period of the restriction within two to three working days. Payments will automatically cease at the end of the Covid restriction period.
If restrictions are extended a subsequent claim can be made.
A reduced VAT rate for the hospitality and tourism sector from 13 ½ per cent to nine per cent with effect from November 1 was announced.
The Programme for Government includes a commitment to develop a strategy for remote working and remote service delivery. An inter-departmental group has already set to work on this.
In cases where the employer makes payments towards the expenses of working from home, up to €3.20 may be paid to employees without a benefit-in-kind arising:
• Where the employer does not make a contribution, the worker may claim a tax deduction for utility expenses such as heat and light. And, new for 2020, the Revenue Commissioners have now confirmed that this may include the cost
of broadband. Details will be set out in the Revenue guidance.
• Finally, claims may also be made for any other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of their employment.