30TH JULY, 2020

Calls For 4-Year Spread Of Wage Subsidy Tax Burden

Further support is needed

The group which represents Irish accountancy bodies is putting pressure on the Government to avoid hitting individuals and SMEs with a huge tax bill at the end of the year. Instead, it’s pushing the Government to allow those who have received help from the various pandemic wage subsidy schemes to pay back their tax over a four year period.

How the Temporary Wage Subsidy Scheme (TWSS) has worked

The Temporary COVID-19 Wage Subsidy Scheme was launched on the 24th March 2020 to support employers in paying their staff during the COVID-19 crisis. It has helped to avoid mass redundancies, and meant that staff can return to work quickly when needed.

The scheme will finish at the end of August 2020 and over 66,500 employers have signed up. Additionally, current figures show nearly 700,000 workers have received one payment or more using the scheme.

What’s the concern?

The income that workers receive via the Temporary Wage Subsidy Scheme is subject to tax. But this could cause a problem for those who are used to having tax taken from their pay at source, usually monthly, weekly or fortnightly.

The concern is that people who may already be struggling financially won’t have the money to pay what is likely to be a very substantial tax bill in one lump sum at the end of the year.

Recipients of the Pandemic Unemployment Payment will currently be subject to tax in the same way.

The proposals

Whilst the Consultative Committee of Accountancy Bodies acknowledges the value of the supports on offer, the group warns that vast numbers of SMEs in Ireland simply won’t survive without further government support. As part of its pre-budget submission the Committee made it clear that an urgent review us required. It said:

"If an employee receives €350 per week under the TWSS, this amounts to €7,700 over 22 weeks and is a substantial amount of untaxed income for a worker to deal with at the end of the year.

"Tax due on these payments should be spread over four years or more to avoid a significant drop in the worker's take home pay”.

Elsewhere in the proposals, the Committee also strongly advises that self-employed people in severe financial hardship due to the pandemic should not have to pay tax on the first €10,000 of 2019 tax liability. Other proposals include the introduction of a digital tax credit for SMEs and tailoring the R&D Tax Credits scheme to further benefit SMEs in particular.

"When we talk about small businesses, we mean local retailers, manufacturers, hospitality, and service providers. They are reeling from the economic impact of COVID-19 and face liquidity pressures which could result in business closures without Government support", Norah Collender, Professional Tax Lead, Chartered Accountants Ireland said.

"The tax system is a powerful means of getting supports to SMEs, which in turn always respond positively with increased economic activity”.

"SMEs account for over 1 million employees, or 68.4% of total employment in the Irish business economy and economic recovery is simply impossible if these businesses don't get the tax supports they need” she added.

Too many SMEs are still missing out on R&D Tax Credits

In addition to the above supports, the R&D Tax Credits scheme is incredibly generous and can represent a massive saving on a company’s Corporation Tax bill. Even companies that have made a loss can benefit, by receiving a cash credit instead.

R&D Tax Credits can be worth thousands of euros even to the smallest of SMEs and there’s no minimum claim value. If this sounds like your company, read on.

R&D Tax Credits in brief

The R&D Tax Credits scheme is a Revenue-backed tax incentive that Irish companies can claim in respect of various research and development projects. It works by providing as much as 25% of R&D expenditure back to companies in the form of either a reduction in their Corporation Tax or as a cash credit for those companies that have made a loss. This 25% is offered as well as the standard Corporation Tax deduction rate of 12.5%, making the scheme even more lucrative.

Essentially, if your company as developed a brand new product, process or service from start to finish, or has substantially upgraded an existing one, then R&D Tax Credits are likely to follow.

Which companies are eligible and what costs can be included?

The good news is that any Irish company in sector can be eligible for R&D Tax Credits regardless of size. As long as some kind of technological or scientific advancement was made where the outcome was uncertain from the start, then a project will likely qualify.

In terms of costs, this is deliberately very broad too. Typically expenditure including staff wages and costs, R&D materials and overheads, certain types of software and subcontractor costs can be included in a claim, but this is by no means exhaustive.

If you believe your company may be eligible for the scheme, it’s well worth reading more about it on our R&D Tax Credits page.

There’s R&D grants too

Companies in Ireland are fortunate in that access to grant funding for research and development is plentiful. There’s a broad range of regional, national and EU funding on offer for those looking to undertake technological or scientific research.

Myriad Associates can help with this. We have years of experience in supporting Irish companies in achieving the R&D grant funding they need - after all, competition is fierce. Many companies are bidding for what’s available, and only the highest quality bids will win. At this point we strongly recommend you find out more about R&D grant funding and how to apply on our R&D grants page.

Claim R&D Tax Credits using the Tax Cloud

The Tax Cloud portal (developed by Myriad Associates) means you can make a great value, hassle-free claim for R&D Tax Credits. It’s accurate and easy to use, and will guide you through the application process from beginning to end. Not only that, but even though it’s a self-service tool, our specialist R&D team are ready to offer advice if you need us.

There are no upfront fees either, and the portal integrates with Xero - so you know you’re making a fully optimised, accurate claim.

Ready to claim?

Try the Tax Cloud portal for businesses today or call our Dublin-based team on +353 1 566 2001. Alternatively feel free to drop us a message and we'll ring you back.

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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