With the Irish economy facing an uncertain 2020 final quarter, accountants are agreed that the government’s wage subsidy scheme has helped keep many clients afloat during the Covid-19 crisis. But they worry that a revised version of the scheme applied from September may not be enough for some companies.
The ‘vast majority of our clients have availed themselves of the Temporary Wage Subsidy Scheme, which is being replaced by Employment Wage Subsidy Scheme, running from September 1 to March 2021,’ explains Colm Sheehan, associate director for corporate finance at Crowe.
Sheehan thinks the support has kept a ‘large number of businesses viable since March’, but worries the reduction in payments from €410 to €203 per employee per week will represent a ‘significant increase in costs to be absorbed’.
Multiple pots
The wage subsidy is one of what David Farrell, director of corporate finance at Grant Thornton, describes as ‘several pots’ of supports, which his client companies have tapped since March when the pandemic first took hold, and which was last revised in August.
The Restart Grant scheme has been open since May to companies suffering a 25% loss in turnover because of the pandemic
Balance sheet
The Irish government’s Covid-19 business support – first announced in March and updated in July – has been estimated to cost €5bn by the end of 2020.
By mid-August, 35,544 applications for the Restart Grant had been approved, releasing €146.7m in assistance.
Applications for the Trading Online Voucher Scheme through the Local Enterprise Office network surged to 5,607 approvals worth €13.4 million.
As well as the wage subsidy, tax warehousing is also on offer, allowing tax payments to be parked or delayed. Farrell’s clients have also since March received financial planning grants from Enterprise Ireland and credit (including working capital) from the Strategic Banking Corporation of Ireland.
Restart Grant
A Restart Grant (payable to businesses paying local authority rates) from the Local Enterprise Office (LEO) network, whose ‘financial and non-financial supports, such as online trading training, can be hugely beneficial for certain businesses’, explains Farrell, who adds that microfinance loans are 1% cheaper through the LEO network.
The Restart Grant scheme has been open since May to companies suffering a 25% loss in turnover because of the pandemic, provided they commit to reopening, hiring and creating sustaining jobs.
However, some client companies are ‘concerned about the impact’ of future Covid-related movement restrictions ‘on their viability’, notes Frank Greene, partner and head of tax at Mazars.
Other supports from the LEO network can also create long-term positive opportunities for clients by accelerating changes that may secure a business’s long-term future.
Trading Online Voucher Scheme
Greene’s colleague Ken Killoran, partner and head of employment tax, points to the Trading Online Voucher Scheme operated by the LEO network: 183 firms have drawn down €6m to help them accelerate their online businesses. ‘We work with clients to revise operation plans and we track their operational performance on a monthly basis,’ he says.
Accountants are also proactively helping their clients tap such supports and survive. ‘As well as devising a tool to enable businesses establish which supports they qualify for, PwC has also shared a cash flow forecasting tool with clients to allow them prepare the cash flow forecast required for funding applications,’ explains Mairead Connolly, tax partner at PwC.
Over at Grant Thornton, ‘our emphasis has been to support where possible in as cost-efficient a manner as possible,’ says Farrell, whose office circulates updates to clients and runs webinars to keep them (and staff) aware of developments in Covid-19 support schemes.
More help needed
Connolly thinks government measures have been a ‘major step forward’, but she also wants government to ‘give consideration to areas such as accelerated capital allowances, including a “borrow back tax paid” scheme, as well as reliefs for business succession’.
Others too have suggestions for government: loan guarantee schemes have been useful, says Brian McEnery, corporate finance and advisory partner at BDO Ireland, but he wants to see interest on loans as well as equity injections becoming tax deductible.
Government will need to be ‘agile’ in its approach to adjusting supports
McEnery likewise wants the government to set up a fund taking equity stakes in firms to enable them to avoid further leverage. ‘I worry that many companies are taking on too much debt,’ he says.
Much remains unknown as accountants look ahead to the winter. The government will need to be ‘agile’ in its approach to adjusting supports ‘as Q4 and the first quarter of next year show the true impact of the crisis’, notes Farrell.
McEnery expects a ‘busy’ autumn and will be watching as companies come off supports like the more generous Wage Subsidy Scheme. ‘We will then see if there is a rise in insolvencies,’ he adds.
