Temporary Business Energy Support Scheme (TBESS)
The Bill provides for the TBESS, which was first announced on Budget Day. This scheme aims to support businesses that have experienced a significant increase in their electricity and natural gas costs. The key points are:
- Initially, it was to apply to businesses carrying on a trade only. A positive change is that the scheme will now also be available to those carrying on a profession including self-employed individuals, companies and partnerships. Charities and certain sporting bodies who may be exempt from tax are also included. ‘New businesses’ will also qualify.
- The reference will be bills for the metered supply of electricity and natural gas through electricity accounts or gas connections which are identified by their own Meter Point Reference Number (MPRN) or Gas Point Reference Number (GPRN). Eligibility for ‘new businesses’ will be calculated using a deemed unit price provided by Sustainable Energy Authority of Ireland (based on data provided by suppliers and the Commission for Regulation of Utilities).
- To make a claim, the business must be able to demonstrate that the average unit price for electricity or gas, on the relevant bill has increased by 50% or more as compared to the average unit price in a reference period. Broadly, this is the average unit price in the month that is 12 months prior to the month to which the relevant bill relates. Once this threshold is passed in relation to a particular bill, and other conditions are satisfied, a claim can be made.
- The payment amount will be 40% of the eligible costs. A monthly cap of €10,000 per trade or profession will be applied. For qualifying businesses that operate across more than one location and that have multiple MPRNs, the monthly cap of €10,000 may be increased to a maximum of €30,000.
- The scheme will be administered by the Revenue Commissioners and a claim must be made within 4 months of the end of the relevant claim period. A claim must be made via the Revenue Online Service (ROS), tax clearance must be valid and a declaration certifying that the relevant conditions are satisfied must be made.
- It is intended that the scheme will operate in respect of energy costs relating to the period 1 September 2022 to 28 February 2023. However, pending revision of the European Commission’s Temporary Crisis Framework (“TCF), which is expected to occur by the end of October, the Department of Finance has stated that it is not possible to provide for an end date to the scheme beyond 31 December 2022. It is likely that the legislation will be amended at Committee Stage to include the 28 February end date. There is provision to extend the scheme by Ministerial Order subject to certain conditions but not to later than 30 April 2023.
The scheme is subject to EU State Aid approval under the TCF and payments cannot be made under the scheme until State aid approval has been received.
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Defective Concrete Products Levy
The Bill provides for the new Defective Concrete Products Levy. According to the government, the levy is to be imposed on the construction sector to contribute towards meeting the substantial cost of the Mica Redress Scheme.
The legislation applies a levy on the first supply of a defined list of certain concrete products calculated at 5% of the open market value of the products. The concrete products within the scope of the levy are concrete that is ready to pour (aka ready-mix) and concrete blocks.
As flagged in advance of the Bill publishing, the levy will come into effect on 1 September 2023 so as to allow time for all stakeholders to prepare for its introduction.
Share schemes
The Bill does not include the amendments announced on Budget Day to the Key Employee Engagement Programme (KEEP). Supporting documents from the Department of Finance tell us that amendments will be included at Committee Stage to provide for the buy-back of KEEP shares by the company from the relevant employee and to raise the lifetime company limit for KEEP shares from €3 million to €6 million. As also mentioned at Budget time, changes to broaden out the relief to allow for group structures and more flexible arrangements are also expected at Committee Stage.
The documents also tell us that two technical amendments related to share-based remuneration can be expected so as to:
- align the rate of interest that arises on late payments of Relevant Tax on Share Options with that which arises on unpaid income tax; and
- make reporting of share schemes under form RTSO1 mandatory, thereby addressing an omission and enabling Revenue to apply a penalty in cases of non-compliance.
Corporation Tax and measures impacting business
The Bill includes measures not previously announced on Budget Day and also insight into some of the measures that were announced. The key points are:
- The Bill extends the Foreign Earnings Deduction, which provides income tax relief to Irish residents who spend time working abroad in certain States, to 31 December 2025. The relief had been due to expire on 31 December 2022.
- The Special Assignee Relief Programme (“SARP”) has been extended by three years to 31 December 2025 as announced on Budget Day. The income threshold to avail of the scheme has been increased to €100,000 (previously €75,000), although existing claimants will not be impacted. A minor technical measure provides that SARP applications must include the employee’s PPSN.
- There is an amendment to the treatment of capital sums received for the sale of patent rights. The provisions deem an intra-group transfer of patent rights to be tax neutral where certain conditions are met. Additionally, there is a technical amendment which confirms that the sale of a patent is chargeable to capital gains tax, whereas the sale of patent rights for a capital sum is subject to tax as income.
- In relation to the taxation of foreign exchange gains and losses arising to trading companies, the definition of “relevant monetary item” has been expanded to include trade debtors and trading bank accounts. This is a welcome development as foreign exchange movements on trade debtor balances were not previously covered by the relevant legislation.
- A number of minor technical amendments are being introduced in respect of the existing interest limitation rules, introduced in Finance Act 2021, to ensure that the rules operate as intended.
- The Bill continues the transposition into Irish domestic law of an EU Directive (DAC7), requiring digital platform operators in the EU to report certain information to the relevant tax authorities each year. Certain Committee Stage amendments are proposed to ensure that the implementation date of 1 January 2023 is met.
- The Bill proposes amendments to the provisions on material interest in offshore funds to clarify that an authorised unit trust, the general administration of which is carried on in Ireland, will not be treated as an offshore fund solely on the basis that its trustee is an Irish branch of a company resident in another EU or EEA Member State.
Income and employment tax measures
The Bill confirms the changes to the main income tax credits as announced as part of Budget 2023. A new measure in the Bill relates to the cycle to work scheme. The scheme is to be extended to cargo bikes and e-cargo bikes and the threshold is to increase to €3,000.
A new automatic reporting requirement for employers is included in the Bill. Broadly employers will have to report to Revenue details of three specific benefits, collectively referred to as “reportable benefits”. Such reportable benefits are made without the deduction of tax and are:
- the remote working daily allowance of €3.20;
- the payment of travel and subsistence expenses; and
- the small benefit exemption.
Supporting documents to the Bill tell us that the reporting of such measures will align to the existing mechanisms used for payroll purposes. This provision will be subject to a commencement order. Stakeholder consultation is expected.
The Bill includes provision to exempt employer contributions to an employee’s PRSA or Pan-European Personal Pension Product (PEPP) from an income tax charge to Benefit-in-Kind (BIK) from 2023. There is a consequential change to the treatment of employer and employee contributions to a PRSA for the purpose of tax relief which is no longer required due to the BIK exemption.
Capital Acquisitions Tax
The Bill provides for a number of technical amendments to the legislation, notably around the definition of a child as follows:
- The definition of “child” is amended to include an “affected person” which is a person who is affected by an incorrect birth registration
- Definition of father, mother or parent includes a reference to “social father”, “social mother” or “social parent”. Social means that the relevant person has lived with this family their whole lives and distinguished from birth parents.
The amendment further provides that the person can make an election to the relationship to apply for CAT purposes where a person takes a taxable benefit from his or her birth parents or from his or her social parents.
Other technical amendments proposed include:
- certain information which has to be provided or the Revenue Commissioners and the Probate Office in respect of the estate of a deceased person;
- statutory obligation for banks to provide information in relation to a deceased person’s accounts to the person applying for probate in relation to the deceased’s estate or to an agent acting on their behalf.
An exemption from gift tax for any payments made under the Covid-19 Death in Service Scheme for Healthcare Workers is also proposed.
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VAT
With regards to the financial services industry, the notable amendments proposed are as follows:
- The VAT exemption has been removed from agency services relating to the management of certain investment funds.
- Clarity has been brought that the management of special investment funds which are subject to Directive 2009/65/EC (the Undertakings for Collective Investment in Transferable Securities Directive) and Directive 2011/61/EU (the Alternative Investment Funds Managers Directive) and which are registered in other EU Member States are exempt from VAT, similar to such funds which are regulated by the Central Bank of Ireland.
- From 1 March 2023, the VAT exemption for fund management will exclude qualifying companies under section 110 of the Taxes Consolidation Act 1997 which hold qualifying assets (within the meaning of section 110) that consist of plant and machinery.
- A technical amendment has been made in respect of obtaining a VAT deduction for costs relating to the issue of new stocks, new shares, new debentures or new securities for the purpose of raising capital. A VAT deduction is now available under general VAT recovery provisions.
- The VAT exemption in respect of cost sharing groups has been extended to include groups whose members also carry out activities which are subject to VAT, in line with recent EU case-law.
Revenue may request information from financial institutions where that information has been requested by another EU Member State under EU Council Regulations. A penalty may be imposed where such a request is not complied with.
In a change to VAT registrations, where a trader registers for VAT in respect of a “domestic only” registration but subsequently engages in intra-community trade with other EU Member States, the trader is now required to notify Revenue within 30 days.
As announced on Budget Day, VAT at the 0% rate, will apply to the below products, with effect from 1 January 2023:
- newspapers, including e-newspapers;
- menstrual cups, menstrual pants and menstrual sponges;
- non-oral hormone replacement therapy medicine and non-oral nicotine replacement therapy medicine; and
- automated external defibrillators, including parts or accessories suitable for use solely or principally with an automated external defibrillator.
In an adjustment to food and drink VAT rates, the 0% rate has been removed from products which are classified as “preparations and extracts derived from milk”.
The temporary 9% VAT rate applying to the supply of electricity and gas has been extended to 28 February 2023.
The updated rate of 5% for the flat rate farmer addition is due to come into effect from 1 January 2023.
The VAT exemption in respect of medical care services is amended to clarify that the persons who may supply exempt medical care services under this provision are registered medical professionals and registered members of designated health and social care professions as provided for by the Department of Health.
Customs & Excise
Numerous customs and excise changes were brought in as part of the budget announcement with the Finance Bill confirming these changes. In summary, the key changes which have been introduced are outlined below:
- A 50c increase to the price of a package of 20 cigarettes (pro-rated for other tobacco products).
- The extension of the existing Mineral Oil Tax reductions of 21 cent per litre on petrol, 16 cent on diesel and 5 cent on Marked Gas Oil. These reductions were first introduced in March 2022 and were due to be reversed from 12 October 2022. The reversal of these reductions will now be implemented from 1 March 2023.
- Reduction on the excise fees on the application of a late night special exemption order (SEO) from €110 to €55. This is applicable to SEO’s granted from 28 September 2022.
- In relation to betting duty, where a person places a free bet, it is taxable at the value of the bet.
- In accordance with the EU Alcohol Directive, up to 50% excise relief will apply to cider and pear cider produced by small independent producers. This is provided for in the Finance Bill as applying to cider and perry with a volume of between 2.8% and 8.5%. The relief will apply up to a maximum of 8,000 hectolitres in a calendar year.
- The production threshold for eligibility to claim relief from alcohol products tax on beer brewed in small breweries is raised to 75,000 hectolitres per annum, the limit on the amount of relief granted remains unchanged at up to 30,000 hectolitres per annum. Detailed terms and conditions are set out within the Finance Bill.
- Self-certification requirements applying to small independent producers (within the State) of beer, wine, other fermented beverages, intermediate products and ethyl alcohol who wish to avail of reduced rates in other Member States, have been clarified in detail.
Tax Appeals
Changes to the timelines for parties requesting a ‘case stated’ for the purposes of an appeal of a Tax Appeals Commission (TAC) determination to the High Court. In particular, it is proposed that the 21 day period for a party to request a ‘case stated’ be extended to 42 days, and the time to respond to a draft ‘case stated’ be increased to 42 days.
Next steps
The Bill is scheduled to be debated in the Dáil over the coming weeks and is due to pass to the Seanad at the end of November. A common budgetary timeline applies to all EU Member States which means that this Bill will be enacted by the end of the year. In recent years the president has signed the Bill into law close to Christmas Day.
