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On 20th and 21st April 2020, the Revenue issued updated guidance with respect to the Temporary Covid-19 Wage Subsidy Scheme. The updates include clarifications on the eligibility of certain employers to participate in the Scheme as well as further guidance on Phase I of the Scheme.  

Employer eligibility – 20 April 2020

In order to be eligible for the scheme, an employer must be able to demonstrate that its business will be significantly and adversely affected by COVID-19 in quarter two of 2020 resulting in an inability to pay employee wages as normal. This has previously been defined as a 25% reduction either in the turnover of the employer’s business or in customer orders being received by the employer during the period of 14 March 2020 to 30 June 2020. Prior guidance also noted that where the 25% reduction would not be met, this did not preclude eligibility to participate where an alternative supporting basis could be demonstrated by the employer.

Over the course of the last few weeks, a number of queries and issues have been raised by many companies with regard to the eligibility criteria particularly;  start-up companies, single corporates with business divisions impacted differently as a result of COVID-19, companies with large cash reserves and employers within multinational group structures.

While Revenue’s latest updates do not provide an exhaustive overview on these matters, the latest guidance should provide helpful clarity for many employers. The guidelines are stated to apply equally to Irish branches of foreign entities.

Can eligibility be determined at a business division level within a Company?

Revenue has confirmed that assessing employer eligibility based on the decline in turnover or customer orders may occur at the level of a specific business division (rather than taking the whole company into consideration) where the following applies:

  • The company was formally structured into specific business divisions pre-COVID,
  • Each business division had a separate management structure which was formalised and well established pre-COVID,
  • It must be possible to separately identify the turnover or customer orders in each specific business division.
  • The company will need to show that the employees concerned are not transferable across different businesses in the company.  Any staff member whose duties include working in more than one business division is to be excluded, unless it can be shown that such an individual’s working time is spent, wholly or mainly (i.e. more than 50%), working in the business division that is eligible for the subsidy.

If the above cannot be met, the entire company should be reviewed in terms of eligibility. Revenue also note that it will examine closely registrations which have been made in respect of one or more of a company’s Business Divisions rather than made in respect of the overall company.

In the guidance, Revenue specifically reference employees based in a “Head Office Division” and advise that such employees can be eligible for the scheme where it can be shown that their working time is spent, wholly or mainly (i.e. more than 50%) performing functions for the business division that is now eligible for the subsidy.

Only a company which can clearly demonstrate, by reference to pre-existing documentation, that it is organised in a structured way into a Head Office Division and clearly separate Business Divisions will qualify for the subsidy. 

Can an employee paid by a group company but working for another group company qualify?

There are situations where an individual is paid through the employer payroll registration of a group company but works for another trading company within the group.

In the latest guidance, Revenue has stated that the subsidy may be available to the payroll company regardless of whether it is eligible, where the group can show and provide supporting documentation that the employees concerned were, wholly or mainly (i.e. more than 50%) employed in one or other of a group’s trading companies which is now experiencing significant adverse trading consequences of COVID-19. 

How should the 25% decline in turnover or customer orders be measured in different sectors/business types?

Additional illustrative guidance is provided on what test should be applied in different sectors. For example, in the case of retail businesses, pubs, fast food outlets or similar type businesses, evidence of at least a 25% reduction in overall sales (i.e. cash, credit card, online and telephone etc.) should be retained. For businesses operating largely by bookings, such as restaurants and hotels, a 25% reduction in bookings for the relevant period would be relevant. The guidance also covers transport providers, service providers, energy suppliers and businesses involved in servicing equipment. 

What basis for assessment can be used where the 25% decline in turnover or customer orders test cannot be applied to the business in question?

Revenue has confirmed that in instances where turnover or customer orders do not adequately demonstrate the significant negative economic disruption experienced by the business, an alternative “reasonable basis” can be applied. It is important to note that it is not enough that the business does not meet the customer order or turnover test but rather that those tests are not capable of being applied to the business in question before an alternative basis for assessing eligibility is used. In all such cases, guidance from Revenue should be sought through the relevant Revenue Division/Branch responsible for the tax affairs of the employer concerned.  

Measuring availability of cash reserves

While there is no update with regard to whether employers should be assessing cash reserves at a company or group wide level, Revenue has stated that a company formally structured as a single entity generating income from both trade and non-trade activities should consider the accumulated cash reserves at the company level, including reserves derived from other investments not linked with the trade, when assessing the company’s ability to pay normal wages and normal outgoings fully. The company should have regard to reserves committed to service ongoing debt obligations and working capital requirements.

Updates to Phase I Operational Guidance – 21 April 2020

Version 7 of the Phase I guidance has just issued and includes the following key updates:

  • Confirmation that employees whose employment transferred to another employer under the European Communities Transfer of Undertakings (Protection of Employment), (commonly known as TUPE Regulations) and whose payroll position to enable verification of the Average Revenue Net Weekly Wage and employee eligibility for the scheme was affected will not be penalised. The ‘new’ employer should contact the relevant Revenue Division in advance of submitting any payroll that includes subsidy scheme J9 submissions, providing details of the company reconstruction and the related legal TUPE agreement, as well as details of all affected employees.
  • Detailed guidance on the Department of Children and Youth Affairs Wage Subsidy Childcare Scheme which will operate from 20 April 2020 to 3 May 2020. This scheme will supplement the Temporary Wage Subsidy Scheme and aims to address the needs of the Early Learning and Care (ELC) and School Age Childcare (SAC) sectors.

Get in touch

If you would like to discuss further any of the above matters, please do not hesitate to get in touch with any member of our KPMG team listed or your usual KPMG contact. 

Further information