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Budget 2023 – What does it mean for your Business?

Paschal Donohoe and Michael McGrath have delivered Budget 2023 which the Minister for Finance specifically referred to as a “cost of living” Budget. The Minister referred to the difficult balancing act faced by the Government to help ease the burden of the rising costs of living on the public while also not driving up inflation which is currently at 8.5%. In this regard, the measures introduced were weighted strongly towards individuals’ financial position rather than towards businesses and corporates. Some of the main changes introduced to help for individuals include:
  • Each PAYE worker/sole trader in the higher tax band will see tax savings in 2023 of over €800 over the course of the year with the following measures:
    • increase of the standard rate band to €40,000,
    • increase of personal, employee and earned income tax credits by €75 each, and
    • increase in the 2% USC rate threshold by €1,625.
  • A tax credit for those who are renting of €500 per annum including for the year 2022.
  • Electricity credits of €600 of which €200 will be paid in December 2022 with the remainder early in the new year.
  • There were a number of increases for social welfare recipients including:
    • Social welfare payments to be increased by €12 per week;
    • One off double week payment to social welfare recipients in October in addition to the Christmas bonus in December;
    • One off payment of €200 for those in receipt of the Living Alone Allowance;
    • One off payment of €500 to those on Disabililty Allowance, Invalidity Pension and Blind Pension;
    • One off payment of €500 to those on Carer’s Support Grant.
  • Parents will benefit greatly in this budget with the following items being introduced
    • A 25% weekly reduction for those availing of the National Childcare Scheme
    • A once off double payment of child benefit to all qualifying households
    • Free school books to be provided for primary school children.
While the above are welcome measures for individuals feeling the strain of increased fuel and living costs, SME’s are also in danger of seeing increasing overheads reducing profits and having a major impact on their survival. The lack of measures to ease this burden will have caused great concern to business owners, many of whom have just got back to normal trading following the Covid pandemic. Many of these businesses will also have debt warehousing balances to begin paying off from 1 January 2023 and this will put further financial pressure on their cash flow next year. The main support introduced for businesses is the Temporary Business Energy Support Scheme. The scheme will compare the average unit price for the relevant bill period in 2022 to the corresponding period in 2021 and any increase of more than 50% will entitle the business to support calculated as 40% of the increase. A monthly cap of €10,000 per trade will apply. However, the scheme will need to be approved by the EU Commission in advance of payments being made. For businesses carrying on R&D functions, the Government has committed to enhancing the current R&D credits to make amendments to the payable element of R&D to align with other EU countries. We would hope this would see the refund of credits not used arising in year one rather than being spread over 3 years. The Knowledge Development Box regime has been extended a further 4 years to allow an effective corporation tax rate of 6.25% for businesses making a qualifying KDB claim. As noted above, employees will have some additional income in their take home pay due to the individual taxation measures, but to help businesses reward key employees the KEEP scheme has been extended to 2025. The KEEP scheme is an important consideration for SMEs who may wish to reward key staff with a share in the business, however, the administration and compliance of running the scheme has been known to be quite onerous and we would hope to see some tweaks to legislation in the Finance Bill next month to further encourage uptake in this scheme. The once off tax-free gift employers can provide to employees has also been increased from €500 to €1,000 with two vouchers now being allowed instead of one. Finally, the Special Assignee Relief Programme will continue until 2025 and the qualifying income has increased to €100,000 to encourage inbound expertise. These business measures, along with the continued commitment to both the 12.5% corporation tax rate and working closely with the EU and OECD on international changes, are aimed at keeping Ireland competitive and safeguarding Ireland’s attractiveness as a destination for talent and foreign direct investment. However, the lack of substantial support for SMEs given the rising overhead costs is a worrying result of the Budget announcements.  The implementation of the new TBESS once it gets EC approval will be of major interest to all business owners as this is the only significant financial saving for businesses arising from the announcements. Some may argue that business owners did benefit from significant supports during Covid but the cost-of-living crisis that we are facing could be every bit as detrimental to the future of many Irish SMEs if sufficient support is not provided. We would hope that the application of the TBESS is made seamless and practical to ensure at least this support is fully utilised by businesses in need. We await the publication of the Finance Bill on 20 October to see if any further measures are introduced.
September 27, 2022

Share Option Schemes

31 March is an important deadline for companies who have provided share option schemes to their employees. A Form RSS1 is required to be completed and filed with Revenue where share options are either granted, exercised or sold. The Form RSS1 must be sent to Revenue on or before 31 March in the following year of assessment i.e., for 2021 this would be due on the 31st of March 2022. This form is required to be returned to Revenue electronically by using their online system. Where the share option scheme is operated under the Key Employee Engagement Programme (“KEEP”) a KEEP 1 return is also required to be filed by the employer by 31 March for any KEEP options granted, exercised, assigned or released. As companies begin to see the light at the end of the Covid-19 tunnel we have seen an increased interest in looking at rewarding key management with an interest in the company. We have outlined below the reporting requirements for employees who obtain unapproved share options. As you will note, unapproved share options can often lead to a significant income tax bill for the employee and if not exercised at a point of sale can have cash flow implications.   Two common alternatives to unapproved share options which can have a more positive tax impact are both the KEEP mentioned above and growth shares which are popular to incentivise key staff to grow the business. We will look at the advantages of these share award options in our next article. In the meantime, below are the key considerations for employees obtaining unapproved share options from their employer.  

Grant of Share Option Scheme

The granting of share options would not be subject to tax in Ireland provided the share option is not capable of being exercised more than seven years after the date on which it is granted. If it is capable of being exercised more than seven years after the date of it being granted, you will only pay tax if the option price is less than the market value of the shares at the grant date. The tax is due on the difference between the:
  • market value of the shares on the grant date
  • amount you pay when you exercise the option.

Exercise of Share Option Scheme

Once share options are exercised, an individual will be subject to Income Tax, USC and PRSI at a rate of 52% on the gain arising on the exercise of the shares. The gain arising on the shares will be calculated as the difference between: (a) the market value of the shares at the date of exercise; and (b) the amount you paid for the shares at the time of exercise. Once a share option scheme is exercised, an individual is required to file an RTSO1 and remit the tax to Revenue within 30 days of exercising. You will also be required to register for income tax and a Form 11 will be required to be filed. If you exercise shares in 2021, you will be required to file a Form 11 by 31 October 2022.

Sale of Shares

If you exercise your share options and then subsequently dispose of the share you acquired you may be liable to Capital Gains Tax (CGT). You must report this disposal to Revenue, even if no tax is due. The CGT would be calculated as the difference between the sales proceeds and the base cost of the shares. The base cost would compromise the cost paid for the share options (if any), the price paid for the shares on the exercise of the share options and the gain arising on the exercise of the share option. The gain arising would then be subject to CGT at a rate of 33%. If the shares are disposed of between 1st of January and 30th of November, the CGT would be due on the 15th of December. If the shares are disposed of between 1st of December and 31st of December, the CGT would be due on the 31st of January. The disposal will be required to be reported in your income tax return for the year the shares were disposed. We have set out above a high-level overview of the compliance obligations for employers and employees on unapproved share schemes. As discussed, we will look in our next article at the benefits or alternative share option scheme such as KEEP and growth shares. If you are offering a share option scheme to your employees or have a share award you wish to exercise or sell you should
talk to our tax team at Roberts Nathan.
March 3, 2022

Revenue Update – Debt warehousing and Covid-19 supports

Last week Revenue began to write to taxpayers who are availing of debt warehousing and other Covid-19 supports. In relation to debt warehousing, Revenue are reiterating the need for all returns to be filed on time, even where warehousing is being availed of on payment. Any taxpayer availing of debt warehousing but does not have all tax filings up to date will be reminded to do so immediately or lose their entitlement to avail of the Debt Warehousing Scheme. Any returns outstanding will be brought to the taxpayers attention in the Revenue latest correspondence. For taxpayers availing of both Debt Warehousing and either the Employment Wage Subsidy Scheme or the Covid-19 Restrictions Support Scheme, they will be advised to bring any outstanding returns up to date within 21 days or their tax clearance will be rescinded and they will no longer be eligible for any of the support schemes. Revenue have also began a second stage of TWSS reconciliation, seeing employers who have availed of the scheme receiving a detailed reconciliation through ROS. Employers have until the end of June 2021 to review the information contained in the reconciliation by Revenue and accept, appeal or make any required adjustments to their claim by this date. It is also worth noting for taxpayers who are not availing of debt warehousing but do have tax liabilities outstanding that Revenue will seek to enforce debt collection of outstanding liabilities over the coming weeks as highlighted in a press release earlier this month. Finally, late filing surcharges for corporation tax returns had been suspended from March 2020, however Revenue have now confirmed that for corporation tax returns due between 23 March 2020 and 23 June 2021 (i.e. accounting periods ended between 30 June 2019 and 30 September 2020), will need to be filed by 30 June 2021. Corporation tax returns (including iXBRL financial statements if required) will be required to be filed on time from this period on to avoid late surcharges. If you would like to explore further options around your business, please contact Brendan Murphy who would be very pleased to assist you. Brendan Murphy: brendan.murphy@robertsnathan.com
March 30, 2021

Do you help international companies enter new markets?

Join Aidan Scollard, Partner at Roberts Nathan, who in conjunction with Soft Land Partners will be speaking to professionals who help international companies enter new markets at this free online event taking place on Thursday 4th February from 4-5pm. Register your attendance by clicking here.
February 1, 2021

Aidan Scollard Appointed as Non Executive Board Member


Congratulations to Aidan Scollard, Partner with Roberts Nathan on his appointment as Non Executive Board Member of The Saoirse Foundation – BUMBLEance, the children’s national ambulance service.

Commenting on his appointment, Aidan Scollard said:"I am delighted to be supporting this not for profit service. BUMBLEance is the first fully interactive ambulance on the planet specially designed for children and offering them safe and stress-free trips providing a wide range of entertainment on board to entertain them on their journey.

During my career, I have worked with a range of companies and foundations in the not for profit sector and I am looking forward to sharing this experience with The Saoirse Foundation - Bumbleance."

January 29, 2021