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On Tuesday, 13th October 2020, Minister for Finance Paschal Donohue delivered Budget 2021, the biggest budget in Irish history to date, against the backdrop of a global pandemic and with Brexit looming.
The Minister announced an unprecedented total package of €17.75 Billion, which includes capital expenditure of €10.1 Billion and a recovery fund to stimulate demand and employment of €3.4 Billion.
Below are some key measures in the multi-billion-euro budget.
The Recovery Fund
Addressing Covid-19 and Brexit, the government has provided for a €3.4billion Recovery Fund which will focus on stimulating employment and those businesses affected by the pandemic.
The fund is bolstered by €1.6bn expenditure on capital programmes. The €1.5bn Rainy Day Fund already established will be also utilised to help finance the budget for next year.
It was confirmed that the wage subsidy scheme will continue past 31st March 2021. More details from the government will follow when the economic impact of the pandemic is clearer.
Covid-19 Restrictions Support Scheme (CRSS)
The budget introduced the “Living with COVID” plan, the scheme offers financial relief to those businesses forced to shut or operate at a reduced capacity. Generally, they apply to businesses affected by Level 3 and upwards.
The payment amounts to a weekly maximum of €5,000 cash and is expected to start in Mid-November and should run until 31st of March 2021.
Corporation Tax
Corporation tax will stay at 12.5% for 2021.
The budget introduced and extended certain corporate tax incentives including:
The Knowledge Box Tax incentive which offers a relief to certain intellectual property assets was due to expire this year but has been extended to the end of 2022. The scheme offers a 6.25% rate on qualifying IP assets.
The Energy Efficient Equipment Scheme has been extended for a further three years. It was due to expire this year. It allows Capital Allowance expenditure to be claimed in full on the first year, usually it must be claimed back over 8 years.
Work will commence on the development of a tax credit for the digital gaming sector.
Stamp Duty
There was no change in the Stamp Duty rate with regards to residential and non-residential property
Consanguinity and Farm Consolidation Relief – these reliefs were due to expire at the end of this year but have been extended until December 2023, they offer a 1% stamp duty rate on qualifying transactions instead of the usual 7.5% non-residential rate.
Residential Stamp Duty Refund Scheme – the scheme which was introduced in 2017 allows a refund of stamp duty (a reduction to a 2% rate) on land which is purchased and subsequently developed. It was due to expire at the end of this year but has been extended until December 2022.
VAT
The standard rate of VAT was decreased to 21% in September of this year until 28 February 2021. Tourism and Hospitality sectors will get an additional reduction to 9%, down from the current 13.5% from November 1st to the end of next year
The farmers’ flat rate of 5.4% has increased to 5.6% for the 2021 tax year
Capital Gains Tax (CGT)
No changes have been made to the CGT rate of 33%.
A change to the entrepreneurial relief has been made which now only requires that a person own at least 5% of the shares in a company for any three years of the previous five to claim the relief upon disposal. Previously the period of ownership was a continuous five years.
The Finance Act will be published in December and Lavelle Partners will provide an update on this once published.
About the author: Nicola Walsh, Partner – Head of Property