Individuals and Entrepreneurs has been saved
Individuals and Entrepreneurs
Finance Bill 2020
The Finance Bill implemented many of the announcements made in the Minister’s Budget Speech in respect of individual taxation and entrepreneurs. These include the following:
- The increase in the earned income tax credit to €1,650
- The amendment to CGT entrepreneur relief to provide that relevant individuals who held shares in a company can qualify for the relief if they owned those shares in any three years prior to the disposal (subject to all other conditions being met)
- The support scheme for business impacted by Covid restrictions referred to as the Covid Restrictions Support Scheme or “CRSS”. The scheme will apply where business can show that their turnover has fallen to a level where it is no more than 25% of the average weekly turnover of the business in 2019 (or 2020 in the case of a new business). A claim can be made of up to 10% of the first €20,000 of average turnover plus 5% thereafter, up to a total refund of €5,000
- By way of example, a business that is closed due to Covid restrictions for a period of 6 weeks, which had an average weekly turnover in 2019 of €15,000 should be eligible for a refund of €9,000 (i.e. 10% of €15,000 multiplied by the 6 week closure period)
- Tax debt warehousing has been extended to include the balance of income tax due by relevant individuals for 2019 and also preliminary tax for 2020. Warehousing can apply where it can be shown that the individuals 2020 income is reduced by at least 25% compared to their 2019 income. No interest is payable for the first year following the filing deadline. A rate of 3% per annum applies thereafter (rather than the 8% that would normally apply)
- In respect of capital acquisitions tax it will now be mandatory that a CAT return be filed in all situations where agricultural relief or business relief is being claimed, even where the taxable value of those benefits does not exceed 80% of the tax free threshold. Generally, a CAT return is only required to be filed where the taxable value of gift or inheritance exceeds 80% of the relevant tax free threshold for CAT
- Stamp duty farm consolidation relief has been extended to 31 December 2022 to come in line with the equivalent provisions for capital gains tax
Overall there were very few surprises in the Finance Bill with respect to individuals and entrepreneurs. Most of the measures announced in the Budget have been provided for largely as expected, other than a number of technical changes to various provisions.
The Minister announced in the Budget that a review of the employment incentive and investment scheme would take place to ensure it is fit for purpose. No provision has been made in the Finance Bill in this regard but we look forward to the outcome of this review.
Given the current funding difficulties that many businesses are facing, it would have been welcome to see provision for incentives for investors to invest in business in the SME sector in the short to medium term. Such incentives might include a reduced rate of CGT for gains arising on such investments. Obtaining bank financing is a considerable challenge for many businesses at the moment and so incentivising investors with funds available to invest in our domestic economy through the SME sector would have been a welcome development.
The introduction of CRSS is a welcome measure and will provide vital funding support for hard hit business. Such business are under huge pressure to meet funding requirements such a loan/rental costs and so the availability of funding through CRSS will provide an element of welcome relief.
The measures to support tax payers through the tax warehousing provisions are welcome. Cash flow is an acute issue for many people at the moment, particularly business owners who have been impacted by Covid restrictions. As such being able to warehouse tax liabilities even for the short term is a welcome relief to many. However, for some people who have significantly reduced income in 2020, they might opt to pay their preliminary tax based on 90% of the current year rather than basing it on 100% of 2019. As such they may have little to no preliminary tax liability for 2020 and so the impact of the warehousing scheme may be minimal for some.