Measures to support business certainty
The Minister expressed strong confidence that the economy is firmly on the road to recovery and given this positive outlook, a reduction in Covid spending is now appropriate writes Claire Davey, Director at KPMG Ireland.
Employment Wage Subsidy Scheme (“EWSS”)
The Minister expressed strong confidence that the economy is firmly on the road to recovery and given this positive outlook, a reduction in Covid spending is now appropriate.
A central element of the Government’s response to the pandemic was the Employment Wage Subsidy Scheme (EWSS). The Minister acknowledged the vital role EWSS has played in providing much needed cashflow assistance to businesses during the pandemic and was instrumental in maintaining the relationship between the employer and employee.
The Minister reiterated the Government’s prior commitment to there being no “cliff-edge” to the EWSS and what he delivered in his budget speech was a graduated winding down of the scheme until 30 April 2022. The extension of the scheme will hopefully provide confidence to employers as they look ahead to the future and aid the continued operations of many Irish businesses who have been badly hit by the pandemic.
In terms of the operational aspects of the scheme, these will remain unaltered until 30 November 2021. Specifically, this means that the enhanced subsidy rates, reduced employer PRSI rate and employer eligibility criteria will remain in operation until this date.
However, for the months of December 2021, January, and February 2022, a reduced two-rate subsidy structure of €151.50 and €203 per employee will apply.
In a final phase during March and April 2022, a flat rate subsidy of €100 per qualifying employee will be paid. Further, the Minister confirmed that there will be a return to full rates of employer PRSI, with effect from March 2022.
Finally, the Minister announced that the scheme will not be open to employers who have not availed of EWSS by 31 December and so new entrants will not be permitted to avail of the scheme after this date.
COVID-19 has fundamentally changed the way in which we work and indeed from where we work. As a result, employers and employees across the country have had to adapt very quickly to remote working.
In a clear recognition that this trend is set to continue the Minister announced an enhancement to the current working from home income tax reliefs with a promise of formal legislation to support the future of remote working by employees.
Broadly, as things currently stand for employees whose employer does not pay a tax free per diem of up to €3.20 per day to cover increased utility costs, income tax relief is available for up to 10% of electricity and heating bills and up to 30% for broadband usage.
As anticipated, in an appropriate move to further support working from home arrangements, the Minister gave some insight into the proposed legislation which will allow relief of up to 30% on all of these vouched broadband and utility costs incurred on days where employees were working remotely.
Minimum wage – USC & Employer PRSI updates
The Minister also announced an increase in the national minimum wage to €10.50 per hour. This is an increase from the existing rate of €10.20 per hour and is in line with the recommendation of the Low Pay Commission to implement this increase.
Further, to ensure that the increase in the hourly minimum wage does not lead to an increase in the level of employer PRSI charged, with effect from 1 January 2022, the weekly income threshold for the higher rate of employer’s PRSI will increase from €398 to €410.
The USC bands will also be adjusted to keep a full-time worker earning the new minimum wage of €10.50 per hour outside of the higher rates of USC, achieved by increasing the ceiling at which the 2% rate applies from €20,687 to €21,295
Benefit in Kind (BIK) on electric vehicles
While not referenced in the Ministers speech, the government’s Tax Policy Changes document issued on budget day confirmed future changes to the BIK tax treatment on the provision of electric company car vehicles by employers to employees.
This confirms that the current system of exemption and reduction in rates of BIK will be extended out until 2025.
Presently, employees who are provided with an electric vehicle with an open market value (OMV) of €50,000 or less are entitled to an exemption from a BIK charge. For vehicles with a higher OMV the amount of €50,000 is reduced from this value to provide the basis for the BIK calculation.
There will, however, be a tapering effect on the vehicle value for BIK purposes with effect from 2023. The reduction amount will decrease to €35,000 for 2023, €20,000 for 2024 and €10,000 for 2025 which will result in an increased BIK amount payable by employees.
Temporary employment-related COVID concessions
The Minister did not refer to any of the temporary employment-related COVID concessions introduced at the early stages of the pandemic, some of which remain in operation.
Employers will be looking for certainty on when these concessions are likely to end and we would hope that further clarity in the form of Revenue guidance will be forthcoming as we move through the recovery phase.
Expansion of Debt Warehousing Scheme
In a welcome move, the Tax Policy Changes document issued on Budget day, confirms that a technical amendment will be made to expand the tax debt warehousing scheme namely to allow individuals who have a “material interest” in their employing company to participate in the scheme. Currently, these individuals do not qualify for income tax debt warehousing and as a result, a tax liability could immediately crystalise when the individual’s tax return for 2020 is filed.
Get in touch
Should you have any questions on the above Budget measures, please contact Claire Davey, Head of PAYE and Personal Tax Compliance, or one of the People Services compliance team.
Director, Head of PAYE & Personal Tax Compliance
KPMG in Ireland