MICHAEL O’LEARY
Tax Partner JPA Brenson Lawlor
WAGE SUBSIDIES Employees liable for the tax will need to establish what the liabilities will amount to, and how and when it will be collected. The collection of underpayments of tax is now deferred — possibly to 2022 — and will most likely be through the reduction of tax credits available for the tax year. Employers availing of the scheme should keep their employees informed about what is happening and help them understand the tax liabilities that would be due anyway, but for the pandemic. Employers in sectors with staff shortages and where wages are tightly controlled, may need to be aware of the reduction in staff net wages and the sensitivities around this.
TAX RELIEFS The practicalities of the new once-off Income Tax relief for self-employed individuals may prove difficult. It is likely that certain sole traders are expecting losses and will make a claim based on an estimated amount. Problems arise when the actual loss is not as large and part of the tax refunded must be paid back.
BUDGET 2021 Other than through the deferral of taxes arising on income and payments such as PAYE and VAT, it appears difficult to provide immediate support to businesses through the tax system where there are losses. Cashflow will continue to be a significant challenge and any assistance for business owners will be welcome. Supports for the wage costs of employers and other already announced supports should continue, although whether such supports should continue in circumstances where the trade has failed and will not re-emerge, may lead to restrictions.
Additional business supports could include the extension of the warehousing of PAYE and VAT liabilities, and reducing employers’ PRSI costs. The extension of personal tax credits for engaging with businesses should also be considered, for example, personal expenditure on targeted areas such as energy-efficient work on homes, where the costs are not grant-aided.
Targeted tax measures for the retail and hotel and leisure sectors, in addition to the wage support, will be required. A temporary reduction in the VAT rate in the autumn/winter period should also be considered.
‘Cashflow will continue to be a significant challenge for business’