Budget 2021 was delivered by Minster for finance Paschal Donohue TD and Minister for Public Expenditure and Reform, Michael McGrath against a backdrop of dealing with a global pandemic while continuing to prepare for Brexit. The Budget focused on the coming year and was underpinned by there being no bi-bilateral trade deal between EU and UK and the continued presence of Covid 19 in 2021, without the broad availability of a vaccine.
Overall there were limited tax measures which amounted to €270m of an overall budget package of c.€17.75bn. However, there were significant supports put in place for the business sector to support them during Covid 19 and Brexit.
While there were no specific tax measures introduced to deal with Brexit, additional funding of €350m has been made to various government departments. On the basis of a No deal scenario, the government has allocated €650m in contingency funding to support affected sectors with €200m being released immediately. This will be funded from a €3.4bn Recovery Fund, its establishment being announced yesterday.
Recognising the significant impact that Covid has had on certain industries, the Minister announced the introduction of the Covid Restrictions Support Scheme (CRSS) aimed at supporting those sectors of the economy effectively suffering loss as a result of the introduction of level 3 (and above) locks downs. The principal applicants will likely be the hospitality, arts and entertainment sectors. Qualifying businesses will be able to apply to the Revenue Commissioners for a cash payment in respect of an advance credit for trading expenses for the period of the restrictions. Payments will be calculated on the basis of 10% of the first €1m in turnover and 5% thereafter, based on average VAT exclusive turnover for 2019, subject to a maximum weekly payment of €5,000.
There were a number of tax specific measures introduced to deal with Covid 19 and these included:
· Reintroduction of the reduced 9% VAT applying to the hospitality and Tourism sectors
· Extension of various incentives introduced in the July Stimulus package, including the extension of debt warehousing of Income Tax liabilities for the self-employed individuals which would have become due by 10th December next and has also been extended to include Income Tax liabilities arising in 2021.
The Minister also acknowledged the importance of continuing to tackle the housing crisis and with this in mind, introduced a number of measures in relation to housing, including
· Extension of the Help to buy scheme
· Extension of the Stamp Duty residential Development refund scheme
It was widely acknowledged that there would be very little in the way of changes to our Income Tax regime. In this context there were no changes in Income Tax rates and bands, with minor increases in the earned income credit and dependent relative tax credit. With an increase in the minimum wage effective from 1st January next, there were minor amendments to the USC band 2 and Employer PRSI to ensure that these employees remained in the lower tax bands.
Climate Action remains an important part of the Programme for Government and this was re-confirmed in the Budget which saw changes in carbon tax rates and changes of the VRT and Motor Tax system.
The Minister acknowledged the significant contribution that Corporation Tax has made in financing some of the Covid related supports introduced earlier in the year. He re-affirmed their commitment to the 12.5% Corporation Tax rate. A commitment was given to update the Department of Finance Corporation Tax Roadmap which was originally published in September 2018. This will provide an update on the actions taken to date and the highlight the areas that are for future review and require consultation. The Roadmap will deal with OECD’s recently published BEPS 2.0 blueprints dealing with the tax challenging of digitalisation of the economy.
Overall, this Budget is clearly a response to the pandemic and the significant challenges facing the economy. It is focused on the short term and protecting the economy and employment. The introduction of the CRSS will provide a valuable support to Businesses alongside the EWSS. While there were no major changes to CGT rates and reliefs which might be viewed as a missed opportunity, the current economic climate dictates that the timing is not correct. As the Minister indicated this budget is a “Bridge to that Better future” and once the economy stabilises, it is hoped that we will see changes to our tax regime which will enhance our tax offering.
by Fiona Murphy, Tax Partner, RBK Chartered Accountants