Mary Healy, senior representations manager, and Lorraine Sheegar, tax manager, Irish Tax Institute

On 23 February, the government announced a revised ‘Living with Covid-19‘ plan and confirmed that the support schemes for business would be extended until the end of June 2021 (at least).

The wage support schemes and the Covid Restrictions Support Scheme (CRSS) had been due to expire at the end of March. The government is also working on a new National Recovery Plan for after the pandemic.

Reinstatement of 23% VAT rate

The standard rate of VAT of 23% was temporarily reduced to 21% for a six-month period from 1 September 2020 until 28 February 2021. The minister for finance, Paschal Donohoe, has confirmed that he does not intend to extend this measure beyond its expiry date.

Therefore, businesses will need to ensure that they are prepared for the reinstatement of 23% VAT on standard-rate supplies and purchases from 1 March 2021 onwards.

Covid-19 Pandemic Unemployment Payment (COVID-PUP)

Practitioners will be familiar with the standard procedure to collect tax, if due, on taxable Department of Social Protection (DSP) payments. Tax is collected by reducing a person’s tax credits and rate band, and applying these adjustments on a non-cumulative (‘week 1’) basis. This treatment applies equally to individuals receiving the COVID-PUP in 2021.

Revenue has created a new webpage to assist taxpayers in understanding the tax treatment of the COVID-PUP. It also reminds employees of their responsibility to inform DSP immediately if they have returned to work. This allows the appropriate revisions to be made to the Revenue Payroll Notification to include in their payroll calculations.

Due to the speed of its introduction, tax on the COVID-PUP in 2020 was not collected in line with the standard arrangement for taxing social welfare payments. Therefore, COVID-PUP entitlements in 2020 will form part of an individual’s 2020 income and tax liability (if any).

Both the Revenue and DSP websites confirm that COVID-PUP amounts paid in the period to 13 January 2021 were earned in 2020. Tax imposed on taxable social welfare payments, including the COVID-PUP, is assessed on the ‘earnings basis’, ie when the entitlement to the income arose regardless of when it was paid. This ensures that where an accumulation of arrears is paid by DSP, these payments, which would normally be taxed at the lower rate of tax, do not come within the charge to tax at the higher rate (ie as a lump sum in a single year).

Given the rapid closure of some businesses in the final days of 2020, COVID-PUP entitlements relating to some December dates would have been paid in January 2021 and may be reflected on the pre-populated information on employees’ Preliminary End of Year Statements and income tax returns for 2020.

Revenue interventions during Covid-19

The Covid-19 pandemic has altered the manner in which Revenue audits can be conducted, given the restrictions on travel and physical meetings and the move to remote working. Revenue has published new Guidelines for conducting Revenue Interventions remotely during Covid-19, which outline how the important procedural aspects of the Code of Practice for Revenue Audit and Other Compliance Interventions will operate in a remote environment.

The guidelines deal with matters such as the process for issuing an audit notification letter, the point at which the audit actually begins (ie when the opportunity to make a prompted qualifying disclosure ends), and procedures for providing records to Revenue in soft and hard copy.

Digital levy

The European Commission has launched a public consultation on the introduction of a digital levy in the form of a questionnaire. An impact assessment will also be conducted to inform the commission’s decision on the parameters of the digital levy. The stated aim of this initiative is to help address the issue of fair taxation related to the digitalisation of the economy.

The commission has confirmed that this initiative does not interfere with the ongoing work at the G20/OECD level on the reform of the international corporate tax framework. However, it is interested in gathering views from member states and businesses on the main problems and suggested solutions in taxing the digital economy.

OECD/G20 Inclusive Framework on BEPS

The 11th plenary meeting of the 137 members of the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on BEPS took place virtually at the end of January. The meeting provided an update on the various international tax-related workstreams undertaken by the Inclusive Framework and further discussed the tax challenges arising from digitalisation and the future of international taxation.

The OECD noted that simplification was a core issue to be considered based on the responses to the public consultation on the Reports on the Pillar One and Pillar Two Blueprints. Political agreement on the scope and quantum of the pillars still needs to be resolved, and the OECD will continue intensive discussions with the various dedicated working groups in the upcoming weeks and months to agree a solution by mid-2021.

Disclaimer: While every effort has been made to ensure the accuracy of this information, the Irish Tax Institute does not accept any responsibility for loss or damage occasioned by any person acting, or refraining from acting, as a result of this material.