Budget 2021 was announced yesterday, here is the summary of the main points I’ve noticed so far.

Income Tax

The main changes to income tax are an increase in the Earned Income Credit up €150 per annum in line with the PAYE Credit of €1,650, an increase in the Dependent Relatives Tax Credit from €70 to €245 and minor changes to the second-rate USC band.

Indirect taxes increases may mitigate any of the reductions.

The income tax 2019 deadline has been extended until Thursday 11 December 2020.

VAT

The 6-month reduction in the standard rate of VAT from 23% to 21%, effective from 1 September 2020, will end 28 February 2021.

The tourism and hospitality sector will see a VAT cut from 13.5% to 9% from 1 November 2020 until 31 December 2021.

Employment Wage Subsidy Scheme (EWSS)

The EWSS under the current system will finish on 31 March 2021. It was confirmed that the EWSS will be replaced by a similar scheme for the remainder of 2021.

For your business to qualify for the EWSS, you as an employer must be able to demonstrate and reasonably anticipate a minimum of 30% reduction in turnover or customer orders in July to December 2020 compared with the same period in 2019. In the case of new businesses, this is based on a projected forward test.

Where the employer is a registered childcare provider, the EWSS is available without the requirement to meet the 30% reduction in turnover or customer orders test.

EWSS provides a flat-rate subsidy to qualifying employers, based on the number of qualifying employees on the payroll.

Please click on the this link for more information on EWSS.

COVID Restrictions Support Scheme

This will support certain businesses significantly impacted or temporarily closed as a result of Government restrictions.

The scheme operates as a cash payment when the business is at Level 3 or higher (10% up to €1m and 5% thereafter, up to a maximum weekly payment of €5,000) based on 2019 turnover. Valid claims will be repaid for the entire period of restrictions. This scheme is effective from budget day, 13 October 2020 until 31 March 2021 with the first payments being made mid-November.

The support will be administered through the Revenue Commissioners.

Qualifying businesses can claim in week 1 of the imposition of Level 3 restrictions and valid claims will be repaid for the entire period of the restriction within two to three working days.

The citizens information have details of what supports you can apply for now on this website

Warehousing of tax liabilities

The Revenue will extend the previous warehousing scheme to include repayments of Temporary Wage Subsidy Scheme funds owed by employers, 2019 balance and 2020 preliminary tax obligations of self-employed taxpayers.

This will allow for those affected by Covid-19 to delay payment of their tax obligations in part of in full for a set period of 12 months free of interest or penalties. After the end of the 12-month period, warehoused debt may be discharged or entered a phased payment arrangement at a reduced interest rate of 3% per annum with no surcharge.

Please refer to revenue website for any updates on Debt Warehousing Scheme or the their booklet which clarifies how the scheme could help you.

Capital Gains Tax Entrepreneur Relief

Entrepreneurs who have owned at least 5% of the shares of a company for any continuous three-year period will qualify for relief, removing the need for this three-year period to be within the last five years. This gives a reduced CGT rate of 10% instead of 33%. Passive investors do not benefit, as the requirement to work in the business for three of the past five years remains. The relief has remained unchanged at €1m, well below the £10m relief offered in the UK.

Commercial Rates Waiver

There is a further commercial rates waiver for the final quarter of 2020.

Please click on this link for Revenue summary of Budget 2021.

Please free to contact us if you need any help with your tax.

The income tax deadline has been extended until Thursday 11 December 2020.

Take care and stay safe.