Recovery And Growth At The Heart Of Ireland's Budget 2021

Supporting and rebuilding

On the 13^th October the government unveiled its Budget 2021, outlining its financial measures and plans against the backdrop of COVID-19.

The Budget looks to prioritise business investment in light of the unprecedented impact of the pandemic plus Brexit uncertainty. With these twin crises in mind, this year’s Budget is worth more than €17 billion. It also comes on top of the measures announced previously in the €7 billion July stimulus package.

€3.4 billion Recovery Fund

A €3.4bn Recovery Fund has now been unveiled, helping to secure jobs and support an extension of the Employment Wage Subsidy Scheme into 2021 if required. Employees who need to self-isolate due to COVID-19 will be able to access sickness benefit on day three instead of day six, which will particularly help those on lower pay. Furthermore, the commercial rates holiday is being extended, helping businesses cut their costs.

Infrastructure spending has also been touted as key to economic recovery, both during the pandemic and after it. So the government has announced a €10.1 billion spending package on infrastructure throughout the coming 12 months, bringing in work for the construction sector especially. Building projects will include new schools and homes, as well as improvements to public transport.

Tourism and hospitality VAT rate to drop

One of the most notable measures in the Budget is the slashing of the VAT rate for businesses in the hospitality and tourism sectors, from 13.5% to 9%.

The new lower rate will kick in from the 1st November. Leo Varadkar, Tánaiste and Minister for Enterprise, Trade and Employment, has voiced his hopes that this will ease pressure in the sector and go some way to aiding recovery.

New COVID-19 Restrictions Support Scheme

The new COVID-19 Restrictions Support Scheme (CRSS) has also been unveiled, offering additional targeted support to businesses that have had to close temporarily (or who have made a substantial loss) due to COVID-19 measures. Find out more.

The challenges of Brexit

Measures to support businesses in adapting to Brexit also now include the following:

• €15 million for supporting businesses as they respond to customs and tariff changes
• €11 million for Local Enterprise Offices working with local businesses right across Ireland
• €8 million to undertake new market surveillance and certification. This will be required even if a Free Trade Agreement has been agreed
• €7 million to aid the food processing industry in adapting to Brexit
• €675,000 for InterTrade Ireland to administer practical help to businesses trading with Northern Ireland.

Further recovery supports

The government also announced a number of further investments focussed on recovery, to include:

• €39 million set aside so businesses can continue accessing low cost loans
• €30 million ring-fenced to help regional enterprise centres identify and implement initiatives designed to boost jobs in every region of Ireland
• €30 million for applied research in the healthcare and pharmaceutical industries
• €10 million to help businesses develop their online presence with the Online Retail Scheme
• €10 million for IDA Ireland to build advanced factory facilities and industrial estates to attract new companies to Ireland. These will particularly be developed outside of Dublin
• €6.6 million for a state-of-the-art advanced manufacturing site in Limerick. Companies can then use this site for developing brand new technologies
• €3 million for a network of digital hubs designed to keep businesses connected.

In addition to the measures above, Paschal Donohoe TD, Minister for Finance, has said that no changes will be made to the income tax credits or tax bands.

Remote working

The pandemic has seen large sections of the population working remotely. With this unlikely to change any time soon, the working from home allowance will stay at €3.20 per day. Applications for rebates can now also include heating and electricity costs as well as broadband.

The entire Budget 2021 for Ireland and all the measures in detail can be found on the Budget 2021 page of the Citizens Information website.

How R&D Tax Credits are also funding Ireland’s post-Coronavirus recovery

The above measures are broadly very welcomed by businesses across the Irish Republic but they’re set to be temporary. Longer term support that allows businesses to innovate and grow is also crucial to Ireland’s ongoing economic success. The government’s answer? R&D Tax Credits.

R&D Tax Credits have been around in Ireland since the early 2000s and are offered by the government as a tax incentive for companies to grow and innovate. Administered by Revenue, the scheme works by covering a large proportion of the costs a company incurs on eligible R&D (research and development) activities.

The scheme is incredibly generous too, with as much as €37.50 for every €100 of R&D expenditure claimable.

How does the R&D Tax Credits scheme work?

Much more detail about R&D Tax Credits can be found on our R&D Tax Credits page, so we recommend having a read through. But broadly speaking, the R&D Tax Credits scheme works by providing a Corporation Tax rebate to reflect R&D expenditure, if the company made a profit. Loss making companies can receive the benefit in cash instalments instead.

Companies are likely to be eligible for R&D Tax Credits if they:

• Have a Corporation Tax liability in the Republic of Ireland
• Have undertaken qualifying R&D work in Ireland or inside the EEA
• Are not able to apply for a tax deduction in any other country.

What are qualifying R&D activities?

To qualify for R&D Tax Credits, a company’s research and development activities must involve investigative, experiment or systemic tasks. This activities must be in the field of science or technology, and benefit the wider industry the company operates in (so not just the company itself). R&D projects must also involve basic or applied research, or experimental development, that looks to resolve a specific technological or scientific uncertainty.

If you’re not sure, this is something the Myriad Associates team will be pleased to guide you on - get in touch.

How to claim R&D Tax Credits

Companies need to claim their credit on their Corporation Tax return. Applicants must also ensure that all requirements are met before applying - and this is the tricky bit.

At Myriad Associates our Dublin-based team is here to help you put together a 100% successful, optimised R&D Tax Credits claim that stands up to Revenue scrutiny. Don’t make one of the common mistakes in applying - and with thousands or tens of thousands of euros at stake, why take the risk?

Ask a question or start your claim today by sending a message or calling our team on +353 1 566 2001.