Tax clearance is one of the most important things employers will need to prepare to qualify for the Employment Wage Subsidy Scheme.
At the end of the month, the Employment Wage Subsidy Scheme (EWSS) will take over from the Temporary Wage Subsidy Scheme (TWSS), which was introduced in March as a short-term emergency income support.
Registration for the EWSS opens today (18 August). Starting on 1 September, employers will stop receiving TWSS payments and will move instead to the EWSS payroll, provided they meet the eligibility criteria. EWSS is expected to run until April 2021.
While the TWSS made payments to eligible employees through their employers, the EWSS will instead offer a flat-rate subsidy to employers that meet the necessary conditions. Subsidies will be based on the numbers of paid and eligible employees on the company’s payroll.
EWSS can only be claimed in respect of monthly or more frequent payroll submissions. Quarterly, annual or bi-annual claims will not be processed.
To qualify for the EWSS, businesses will need to demonstrate an expected 30pc reduction in turnover or orders between 1 July and 31 December 2020. The period will be treated as a whole rather than a monthly basis and will be compared with the same term in 2019.
Employers will need to provide self-assessments to qualify for the scheme. This won’t be necessary at the registration stage, Revenue has said, but eligibility will be reviewed further down the line.
Eligible companies will need to prove that the disruption to their business has been caused by Covid-19. At the end of each month, they will be required to review their eligibility criteria and if they no longer qualify, companies must deregister from the scheme.
When undertaking reviews, businesses will have to state all sources of trade income, including sales, donations and State funding.
Unlike the TWSS, employers will need to have a valid tax clearance certificate and maintain tax clearance for the duration of the scheme to be eligible for the EWSS. Employers can check their current status online and can apply for tax clearance through Revenue’s website.
According to RTÉ, Revenue’s records indicate that 16,000 employers registered for the TWSS do not currently hold tax clearance. RTÉ said many companies may never have applied for tax clearance before as it wouldn’t have been relevant to their business.
EWSS payments for eligible employees will be transferred directly into employers’ bank accounts once a month.
For employees earning less than €151.50 or more than €1,462 per week, no subsidy will be available. Workers receiving gross weekly wages between €151.50 and €202.99 will be eligible for a subsidy of €151.50 and those earning between €203 and €1,462 will be eligible for a subsidy of €203.
For employees, the requirement to pay PAYE and PRSI on all wages will be reintroduced, but PRSI will be reduced to 0.5pc in respect of employees for whom a subsidy is payable.
At the end of each month, Revenue will issue a statement to the Revenue Online Services inbox of employers detailing the subsidy they are due based on the EWSS submissions they have made.
As stated in the July Stimulus Package, company debt linked to the Covid-19 pandemic can be “warehoused” for the amount of time the business was unable to trade and for an additional two months after trading starts again.
For older debts not linked to the pandemic, the stimulus brought in a reduced interest rate of 3pc per year, down from 8pc or 10pc. These elements will stay the same under the EWSS.
Taking on new staff
Taking on new hires or moving staff around won’t be restricted under the EWSS but there will be checks to ensure new recruits aren’t being taken on to maximise subsidy claims. Revenue has said it will also implement “safeguards to minimise abuse”, ensuring employers are not laying off one employee to replace them with others earning lower salaries to capitalise on subsidy payments.
An initial draft of the EWSS said that company proprietary directors would no longer qualify for a subsidy as they did under the TWSS. However, after concerns were raised by SMEs it was agreed that EWSS can be claimed in respect of certain proprietary directors. Revenue said that additional guidance on this will be provided in due course.
More information on the EWSS can be found here.