BRYAN FARRELL
Tax Director Walsh O’Brien Harnett
“With such fundamental changes to the way we work, the tax environment and the speed of these changes, it certainly has been a challenging few months,” says Bryan Farrell. The practice developed a Covid-19 hub on its website to detail all the financial and tax supports available for businesses, which Farrell says was greatly appreciated by clients.
WAGE SUBSIDIES Many employees will still be unaware of the tax liabilities potentially arising on the TWSS payments. We advise our clients to inform their employees of their potential tax liabilities and that their net pay in future years may be adjusted by Revenue.
From speaking with our clients, it appears many will operate the new EWSS. Under the new EWSS, businesses must expect a 30% drop in turnover, compared with 25% under TWSS. With the ongoing uncertainty in trading conditions across the economy, many businesses may find this assessment of expected turnover challenging.
There is significant concern among our clients about the short-term economic outlook, with many expecting difficult trading conditions over the coming six to 12 months. In our view, the full effects of Covid-19 have been deferred by the TWSS and EWSS, and when these subsidies come to an end, the real damage will be experienced in the economy.
WAREHOUSING TAX DEBT The good news for small businesses with less than €3m turnover, is that they qualify automatically for Debt Warehousing. Larger businesses are assessed by Revenue on a case-by-case basis. These businesses must be able to show Revenue that they are unable to pay the relevant VAT and PAYE liabilities due to the impact of Covid-19.
All returns for the affected periods must be filed, even if a payment is not being made. Where returns were prepared on a best estimates basis, the relevant returns should now be amended to ensure the correct amount is included in the warehousing scheme.
In all cases, once normal trading resumes, current taxes (for example, VAT and PAYE/PRSI) must be filed and paid by the normal due dates. We have cautioned clients that while debts are to be warehoused, they have not gone away, and will need to be paid at some stage. Businesses must also be mindful of their banking requirements, in particular, covenants regarding loan and lease finance facilities. Businesses availing of the debt warehousing scheme should review their obligations and liaise with their bank.
SELF-EMPLOYED TAX RELIEF The relief is to be made by way of direct application to Revenue (via My Enquiries). Once approved, Revenue will amend the taxpayer’s Form 11 for 2019. Taxpayers are therefore relying on Revenue to action the request and amend the Form 11 for the relief to be issued, rather than being able to amend the return themselves via ROS. This may result in claims being slow to process.
Interestingly, a taxpayer does not need to claim all of their loss under this relief — rather, they choose the relevant amount to carry back. This will be relevant where, for example, an individual wants to retain the tax relief associated with their pension contributions or their tax credits.
Many self-employed taxpayers prepare their accounts on a December year-end basis. This means they will need to opt for an interim claim on the basis of an estimate of their loss for 2020. Helpfully, such interim claims may be amended (increased or decreased) and a final claim should be submitted with the 2020 tax return in October 2021.
BUDGET 2021 We would encourage a review of interest charges arising in respect of the late payment of preliminary tax. For many taxpayers, the October/mid-November payment date for preliminary tax will be of particular concern this year, with interest rates of 8% per annum potentially arising.
‘When the wage subsidies end, the real damage will be experienced’