Finance Act 2020
Finance Act 2020 sets into law many of the tax provisions announced on Budget Day, 13 October 2020. The measures it contains include provisions to provide support to businesses as they face unprecedented challenges including COVID-19.
This document is aimed to provide you with an updated summary of supports, schemes and reliefs available which may be useful for you and your business.
COVID RELATED MEASURES
Business Support Schemes:
- Covid Restrictions Support Scheme (CRSS)
- Please refer to PSC’s various circulars on our website, including our CRSS Update 6 January 2021
- Please also refer to Revenue’s guidance click here
- Employment Wage Subsidy Scheme (EWSS):
- Please refer to PSC’s various circulars on our website, including our EWSS Update
- Please also refer to Revenue’s guidance click here
- Debt Warehousing:
- Please refer to PSC’s various circulars on our website, including our note on Debt Warehousing for income tax and Warehousing of VAT and PAYE (Employer) tax debts
Taxation of PUP and TWSS:
The Pandemic Unemployment Payment (PUP) is taxable in the same way as employment income. It will be subject to Income Tax but not Universal Social Charge (USC) or PRSI.
The TWSS is liable to both Income Tax and USC, but not PRSI.
Revenue are currently issuing Preliminary End of Year Statements to all employees who have been in receipt of either PUP or TWSS, confirming whether they have a tax liability for 2020. Individuals can pay the liability to Revenue or else it will be collected interest free by reducing the individual’s tax credits for the tax years 2022 to 2025 inclusive.
Where the liability exceeds €6,000, the individual can apply to have their tax credits reduced (as above) up to a limit of €6,000 but the excess over €6,000 must be paid to Revenue.
Employer pays employees TWSS Income Tax liability:
Please refer to PSC’s circular Employer pays employees Income Tax liability for 2020 on our website.
VAT:
The following changes were made to the VAT rates:
- The standard rate of VAT was decreased from 23% to 21% on 1 September 2020 and is due to expire on 28 February 2021.
- The reduced rate of VAT was decreased from 13.5% to 9% on 1 November 2020. This 9% VAT rate will remain in place until 31 December 2021.
- The farmer’s “flat rate” of VAT increased to 5.6% from 1 January 2021.
Benefit-in-Kind concessions:
Revenue confirmed that due to the continuing public health restrictions, some benefit-in-kind measures are being retained. The list of benefit-in-kind short-term concessionary measures that will remain in place for the time being are:
- Benefit-in-kind on provision of COVID-19 testing,
- Benefit-in-kind on facilitation of flu vaccination,
- Benefit-in-kind on employer provided vehicles,
- Use of company cars by employees in the motor industry,
- Payment of taxi fares by an employer,
- Small Benefit Exemption, and
- Benefit-in-kind on employer provided accommodation.
Further information can be obtained from Revenue click here
OTHER MAIN MEASURES
Capital Gains Tax (CGT): Entrepreneurs Relief:
Entrepreneurs relief provides for a 10% rate of CGT on certain capital gains up to €1 million.
The relief allows an individual who has held at least 5% of the shares in a qualifying company (or group of companies) for a continuous period of three years to qualify.
Previously the business assets must have been owned for three continuous years in the five years immediately prior to the disposal of those assets.
This amendment came into effect from 1 January 2021.
Help-to-Buy Scheme:
This scheme was introduced to assist first time buyers to assemble a deposit to purchase or build their home. It applies to purchases of “new” houses or self-built properties.
The amount of the relief is the lesser of:
- €30,000 (€20,000 prior to 23 July 2020)
- The aggregate of Income Tax and DIRT incurred in the 4 years immediately preceding the year of claim, or
- 10% of the cost of the property (5% prior to 23 July 2020)
The enhanced relief amount will expire on 31 December 2021.
Accelerated capital allowances on certain farm safety equipment:
The proposed scheme will allow “eligible persons” to claim accelerated capital allowances of 50% per annum over two years for certain safety equipment in the period 1 January 2021 to 31 December 2023. For further information please see the link below:
Please refer to our Accelerated Capital Allowances on Farm Safety Equipment circular on our website
Stamp Duty: Repayment of stamp duty where land used for residential purposes:
This provides for a partial refund of stamp duty charged on the conveyance of land where that land is developed into residential dwellings within a certain timeframe.
The refund amounts to 11/15ths of the stamp duty paid on acquisition.
The following amendments came into effect from 19 December 2020:
- The refund will be clawed back if the residential construction is not completed within 30 months (previously 24 months).
- The amendment extends relief for a further year to construction operation that commence prior to 31 December 2022.
Extension of certain tax reliefs:
- Stamp duty Consanguinity relief has been extended to 31 December 2023..
- Stamp duty Farm consolidation relief has been extended to 31 December 2022.
- Accelerated Capital Allowances for energy efficient equipment has been extended to 31 December 2023
Sundry other measures
- The Earned Income credit for the self-employed and proprietary directors has increased to €1,650, with effect from 1 January 2020. It is now in line with the PAYE/Employee tax credit.
- The Dependant Relative credit has increased to €245.
- There have been small changes in USC bands.
- There is now a statutory requirement to file CAT returns when claiming either agricultural relief or business property relief.
- Share reporting requirements are now in place for all share schemes, with an annual deadline of 31 March.
Brexit
Although not covered in this circular, please refer to our website for detailed advice on the VAT and Customs changes that are in place since 1 January 2021.