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Businesses must make use of the CRSS as part of their CRiSiS planning

On Budget Day, Minister for Finance, Paschal Donohoe explained the Covid Restrictions Support Scheme (CRSS) as being designed to assist businesses whose trade has been significantly impacted or temporarily closed as a result of the restrictions in the Government’s ‘Living with Covid-19’ Plan.

The Summary of Budget measures published on Budget Day showed an estimated cost of €40m for every week nationwide at Level 3 and we know how fast things have changed since then. It continued that the actual cost would be determined by reference to Covid-19 restrictions. Any costs arising in 2021 will be met from the National Recovery Fund.

Qualifying businesses can apply to the Revenue Commissioners for a cash payment in respect of an “advance credit for trading expenses” for the period of the restrictions. The scheme is effective from Budget Day until 31st March 2021. The devil in the detail came about with the publication of Finance Bill 2020 recently. The Budget may be Oscar night for accountants but the Finance Bill is where the “lights, camera, action” stuff happens.

The CRSS applies to companies and self-employed individuals carrying on a trade or trading activities either solely or in partnership. Tax nerds will note the nebulous nature of the term “trade” but in general you’ll know one when you see one. Generally, the trade should be carried on from a business premises located in a region subject to restrictions introduced in line with the Living with Covid-19 Plan. This refers to Covid restrictions at Level 3, 4 or 5 of the Government’s Plan for Living with Covid-19 but Revenue guidance, published shortly after the Bill’s publication explains that certain businesses may qualify for the support where lower levels of restrictions are in operation.

Revenue’s guidance on the CRSS explains that where a company or a self-employed individual is either forced to temporarily close their business, or the business is required to operate at significantly reduced levels, because of Covid restrictions, the company or self-employed individual will qualify for the support where the required Ts and Cs are met. The nutshell version is that a business must be able to demonstrate that because of the Covid restrictions the turnover of the business in the period for which the restrictions are in operation, and for which a claim is made, will be no more than 25% of the average weekly turnover of the business in 2019 (or average weekly turnover in 2020 for a new business) multiplied by the number of weeks in the period for which a claim is made.

Revenue’s guidance gives the fictional example of “Showtime Theatres Limited” which operates a large theatre in Dublin’s city centre. The business premises encompass a 1,000-seat theatre, a bar and cloakroom. The Covid-19 restrictions prohibit theatres from opening their doors to the public and as a result it has temporarily closed “but does intend to re-open when allowed in the future”. That intention is key. The guidance continues that as the company ordinarily operates from a fixed business premises and, under the Covid restrictions, it’s not permitted to allow customers to access its business premises, the company can make a CRSS claim provided all other Ts and Cs are met.

Where the person meets all the required conditions, they can make a claim to Revenue under the CRSS for a cash payment referred to as the “Advance Credit for Trading Expenses”. It’s so called because the cash payment will reduce tax deductible expenses up to the amount of the payment received. Revenue’s guidance explains that the CRSS payment won’t result in an additional tax liability unless that business has trading profits for the year. Where a business is in a loss-making position, the payment will have the effect of reducing the amount of trading losses available for offset against future or previous profits of the business. Effectively, cash now instead of reduced taxable profits in the future; jam today is always better than jam tomorrow.

The payment will be equal to 10% of their average weekly turnover in 2019 up to €20,000 and 5% thereafter, subject to a maximum weekly payment of €5,000, for each week that their business is affected by the Covid restrictions. For businesses established between 26 December 2019 and 12 October 2020, the claim will be based on their weekly average turnover in the period between the date of commencement and 12 October 2020 (subject to the weekly cap of €5,000).

The taxpayer has to register on the Revenue Online Service (ROS) to make the claim, provide certain information and make a declaration that they satisfy the conditions in order to make that claim. Where Covid restrictions for a geographical region are extended beyond the date on which they were due to expire, a new claim may be made.

Where a taxpayer makes a CRSS claim and it subsequently transpires that the person wasn’t entitled to it then the person can withdraw the claim by notifying Revenue of that withdrawal and handing back the cash claimed. Revenue guidance explains that provided the person does so “as soon as is reasonably practical, penalties and interest will not be applied”. It also explains that this can happen when the person’s turnover for the claim period is greater than expected. Similarly, where a person makes a claim and the person finds out that the amount claimed was more than the amount that the person was entitled to then the same process applies. Revenue’s guidance explains that can happen where the person calculated their average weekly turnover for 2019 (or 2020 for new businesses) incorrectly.

CRSS operates on a self-assessment basis. A person registering their details and the details of their business activity for the purposes of a making a claim should retain evidence supporting their basis for making a claim under the scheme, which Revenue may request under future eligibility checks. As with other subsidies provision is made for the publication of claimant details on Revenue’s website. There is provision for the Minister for Finance to amend the scheme by Ministerial order, specifically the restrictions, the end date, the percentage rate payable and the turnover test to determine a person’s eligibility.

Overall the CRSS payment tries to keep some lights on for businesses while everyone else is at home. We haven’t seen anything like this before, and therefore, any business that qualifies, which by definition is a severely hit business, should consider the necessary claim in these Jurassic times.

Please note this article first featured in the Business Post on 1 November 2020 and was re-published kindly with their permission on our website.

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