Budget 2021 was framed amid extraordinary circumstances of an uncertain economic and societal future. The budget seeks to manage the impacts of the Covid-19 pandemic and Brexit, and also to make progress on the three “core missions for this government” of health, housing and climate. The budget framework was underpinned by the continued presence of Covid-19 and the prospect of a no-trade deal between the EU and the UK.
Budget 2021 webinar
Enhancements of Covid-19 supports
Budget 2021 develops some of the tax measures first introduced in the July Jobs Stimulus Package to support businesses and employment.
The Employment Wage Subsidy Scheme is to be extended to the end of 2021.
The Debt Warehousing Scheme is due to be expanded to include the balance of income tax for 2019 and 2020 preliminary income tax liabilities. Repayments of Temporary Wage Subsidy Scheme funds owed by employers are also to be included in the scheme.
A new Covid Restrictions Support Scheme is to assist businesses whose trade has been significantly impacted or temporarily closed as a result of Level 3 restrictions or higher, such as accommodation, foods and entertainment. It is due to come into effect from midnight and the first payments will commence mid-November. The finer details on the scheme are outstanding. Terms and conditions will apply.
Improved Income Tax credits
To reflect the increase in the minimum wage from January next, the higher rate of Employer PRSI will be charged on weekly income of €398 or more. Also the second USC band will be increased to €20,687.
The self-employed Earned Income Credit will increase by €150 to €1,650 and the Dependent Relative Tax Credit will increase by €175 to €245.
The Minister provided welcome clarification on expenses that employees working from home can claim in respect of utility expenses, which now include broadband expenses.
Corporation Tax measures
The film tax credit and in particular, the additional relief (of 5%) for particular regions, has been extended by a further year to 31 December 2023.
For Intellectual Property (IP) acquired from tomorrow, 14 October, a balancing charge may arise on subsequent disposals under the capital allowance rules. Prior to this change, there was no such charge to the extent the IP was held for over 5 years.
The date of implementation of new interest limitation rules, as required by the EU Anti-Tax Avoidance Directive, has been deferred until Finance Bill 2021, along with anti-reverse-hybrid rules.
A technical amendment to the ATAD-compliant Exit Tax rules to clarify the operation of interest on instalment payments will be introduced with effect from midnight tonight.
Innovation focused measures
Knowledge Development Box (KDB) is an incentive whereby profits arising from patented inventions, copyrighted software and certain other specific asset classes can effectively be taxed at a reduced rate of 6.25%. It will be extended by 2 years to 2022.
A tax credit is due to be introduced from January 2022 for the digital gaming sector but details on how this will operate have not been provided.
Housing supports continued
The temporary enhancements to the Help to Buy incentive provided in the July Stimulus have been extended to December 2021. These enhancements increase relief from 5% of the property value with a maximum cap of €20,000, to 10% with a cap of €30,000.
Consanguinity relief which provides a reduced 1% stamp duty rate on transfers of agricultural land between relatives is to be extended to December 2023. Farm consolidation relief and the residential development stamp duty refund scheme are both to be extended to December 2022.
Climate action getting real
Carbon Tax will increase by €7.50 per tonne of CO2. The resulting increases of €1.47 for 60 litres of motor diesel and €1.28 for 60 litres of petrol take effect from midnight tonight, while the increase for household fuels is delayed until 1 May 2021.
New Vehicle Registration Tax (VRT) and motor tax rates from 1 January 2021 to align with international standards. Used imports will have their CO2 values uplifted under this new procedure to ensure a level playing field with new cars.
Due to the lower VRT rates which will apply to lower emission vehicles the existing reliefs for hybrids and plug-in hybrids will expire. The €5,000 relief for battery electric vehicles is tapered where the OMSP exceeds €40,000, with no relief where the value is over €50,000.
The accelerated capital allowances (100% claim in year 1) for SEAI approved energy-efficient equipment is extended for 3 years to 31 December 2023. The current list is to be re-assessed to ensure the scheme remains up-to-date with the latest efficiency standards.
Hospitality and tourism sector boost
In an attempt to assist the beleaguered hospitality and accommodation sector the reduced VAT rate of 9% will be reintroduced from 1 November 2020 to 31 December 2021.
Anti-avoidance
A new anti-avoidance measure will take effect from 14 October 2020 to combat the creation of capital losses on the disposal of debt derived from currency speculation.
SME and Agriculture supports
Despite speculation, CGT Entrepreneurs Relief has not been significantly altered. Previously, to qualify for relief the shareholder must hold 5% of the ordinary share capital of a qualifying company for a continuous period of three years in the previous five. A continuous period of any three years now qualifies. The loosening of this restriction will allow for equity expansion without fear of jeopardising the relief.
Capital Acquisitions Tax and Capital Gains Tax rates remain unchanged.
The flat-rate farmer’s VAT rate is to increase from 5.4% to 5.6% with effect from 1 January 2021.
Fast facts
CRSS Scheme
New CRSS Scheme to assist businesses affected by COVID-19 (max. weekly payment of €5000)
Remote Working
Up to €3.20 per day may be paid to employees for expenses without BIK arising
Debt Warehousing Scheme
Debt Warehousing Scheme extended to include income tax liabilities
Hospitality and Tourism
Reduced 9% VAT rate from 1 Nov to Dec 2021
Carbon Tax
€7.50 increase in carbon tax rate
