National COVID-19 Income Support Scheme KPMG

On 24 March 2020, the Irish government announced as part of its National COVID-19 Income Support Scheme the introduction of a “Temporary Covid-19 Wage Subsidy Scheme” to provide financial support to Irish workers and companies affected by the crisis.

Temporary COVID-19 Wage Subsidy Scheme

The scheme, which will run for 12 weeks, replaces the COVID-19 Employer Refund Scheme previously announced which focused on assisting employers with employees who were laid off without pay. The new scheme provides wage subsidies to enable employers to preserve the important link between employers and their employees, whether they are laid off or face reduced working hours or pay as a result of the adverse business impact of COVID-19.

It is a very welcome development for many employers seeking to support their workforce through the crisis period. It is hoped that these measures will allow affected businesses to resume their activities at sustainable levels once COVID-19 restrictions have been removed.

In summary, the key features of the scheme include:

Initially, and from Thursday 26 March 2020, the subsidy scheme will refund employers up to a maximum of €410 per each qualifying employee. However, employers should pay no more than the normal take home pay of the employee.
From April 2020, the scheme will move to a subsidy payment based on 70% of the weekly average take home pay for each employee up to a maximum payment of €410. Revenue is to issue further detailed guidance on the calculation of the subsidy amount for different employee earning levels.
Employee Pay Related Social Insurance (PRSI) will not apply to the subsidy amount and employer PRSI will apply at a rate of 0.5%.
The subsidy is to be delivered by employers making the payment to employees as part of their usual payroll processes. Revenue will reimburse employers within two working days after receipt of the payroll submission. These payments are processed directly by Irish Revenue into ROS, Revenue’s online system which administers payroll taxes for the employer.

Employers who are in the position to make additional wage payments to affected employees should include this as additional gross pay subject to payroll taxes operated through payroll.

The subsidy remains taxable as part of the employment income of the employee. Where a refund of payroll taxes arises to the employee as a result of reduced pay, this can be refunded to the employee through payroll and Revenue will also refund this amount to the employer.

This scheme is open to impacted employers in all sectors. The employee must have been on the payroll in February 2020.

The employer is expected to make best efforts to maintain as close to 100% of normal income as possible for the subsidised period. There will be severe penalties for any abuse of the scheme.

To qualify for the wage subsidy scheme, employers must:

self-declare to Revenue that they have experienced significant negative economic disruption due to COVID-19,
demonstrate a minimum of 25% decline in turnover or customer orders being received,
be unable to pay normal wages and other outgoings, and
retain their employees on the payroll.
Further Revenue guidance is due to issue shortly which should outline the detailed workings of the scheme. Employers who have already registered for the previous scheme COVID-19 support scheme are automatically registered for the wage subsidy scheme.

Other Income Support Measures

In addition to the “Temporary Covid-19 Wage Subsidy Scheme” the government announced some further enhanced income support measures, including:

Where employees who have been laid off, they can avail of an enhanced emergency COVID-19 Pandemic Unemployment payment by making an application direct to the Department of Employment Affairs and Social Protection (DEASP). This payment has been increased from €203 to €350 per week. Those claiming under the existing scheme will receive the increased €350 amount.
Self-Employed individuals will be eligible for the COVID-19 Pandemic Unemployment Payment of €350 directly from DEASP rather than receiving payments from Revenue.
The COVID-19 illness payment available to workers who have who have either been told to self-isolate or have been diagnosed with COVID-19 of €203 has also been increased to €350 per week.
In addition to these measures, taxation measures to alleviate short-term difficulties faced by businesses are already in place. Irish Revenue has posted specific advice for businesses experiencing trading difficulties as a result of COVID-19 including information on tax returns, the application of late payment interest, debt enforcement, tax clearance and customs.

The broader package of measures announced also include enhanced protections for people facing difficulties with their mortgages, rent or utility bills.

These are welcomed measures to provide income support to employees while also providing businesses with an opportunity to return to normal operations after the pandemic concludes.

The outline of the measures is included in draft legislation released by government which is to be supplemented by Revenue’s implementing guidance. Further details will follow.

Other Measures

The government also announced that it has agreed with local authorities that they should defer rates payments due from the most immediately affected businesses, primarily in the retail, hospitality, leisure and childcare sectors, until the end of May.

The package of measures announced on 24 March 2020 include a range of financial supports such as a €200million Strategic Banking Corporation of Ireland Working Capital scheme and a €200 million Rescue and Restructuring Scheme available through Enterprise Ireland for vulnerable but viable firms.

The maximum loan available from Microfinance Ireland has been increased from €25,000 to €50,000 (these loans are now interest free with no repayments for 6 months). In addition, Local Enterprise Offices in every county will be providing vouchers from €2,500 up to €10,000 and a Finance in Focus grant of €7,200 will be available to Enterprise Ireland and Údarás na Gaeltachta clients.

Other supports including a First Responder support service through the Intreo Offices and development agencies, Enterprise Ireland and IDA Ireland in each region to provide tailored supports for affected businesses.

Finally, the government announcements confirmed that the main non-bank lenders have confirmed their intention to also support the range of measures announced by the country’s main retail banks to assist customers facing financial difficulties.

A deferral of up to 3-months on loan repayments will be available to many businesses. In addition, the banks are adopting a customer-focussed approach to these businesses with a wide variety of tailored supports including extensions of credit lines, risk guarantees, and trade finance.

The Central Bank of Ireland has confirmed that it will allow banks to dip into their rainy-day capital reserves to keep lending flowing. It is anticipated that this could free up considerable additional credit for households and businesses.

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

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