When the government initially called on pubs, restaurants and other licenced premises to close on 15 March 2020 due to the spread of COVID-19, it might have been hard to believe that nearly one year later, their doors would still be shut.
Following a series of lockdowns, businesses in the food and beverage sector that remain in operation have become more and more reliant on State support.
We reviewed the initial measures introduced in March and April 2020 here. More recently, other initiatives have been introduced such as a further waiver of commercial rates, a reduction in VAT, the COVID-19 Restrictions Support Scheme (CRSS), the Employment Wage Subsidy Scheme (EWSS), tax warehousing arrangements and various reduced cost loans and grants options for affected businesses.
In addition, a recent High Court ruling may provide a glimmer of hope for some publicans who held business interruption insurance for losses sustained as a result of the pandemic.
There is a commercial rates waiver in place for the first three months of 2021. It is reported that there are plans to further extend this. For eligible businesses, a 100% credit should be automatically applied to their rate account for the three-month period, i.e. 25% of their annual rate bill. Businesses eligible for the waiver include those who are severely impacted by the restrictions. Some businesses in the hospitality, leisure and retail sectors may qualify however, some exceptions do apply. Businesses should contact their local authorities for further details.
The standard rate of VAT was reduced from 23% to 21%, on 1 September 2020 until 28 February 2021. The Minister for Finance has indicated that the government does not intend to extend this standard rate VAT reduction when it expires.
The separate VAT rate for the hospitality & tourism sectors was reduced from 13.5% to 9%, on 1 November 2020 until 31 December 2021. The categories of items that are subject to this reduced VAT rate have been temporary expanded to include, for example, catering and restaurant supplies and hot takeaway food and drinks. Although a positive move for businesses in the food and beverage sector, this measure is only of benefit to businesses that are actually open and trading in some capacity, for example, takeaway and deliveries.
Financial support schemes
Several supports are available to help businesses impacted by COVID-19. The EWSS and CRSS are available until 31 March 2021 and it is reported that there are plans to further extend the CRSS and EWSS beyond this date.
The EWSS is designed to help businesses retain their employees. It is available to qualifying employers whose turnover has fallen by at least 30%. It provides a flat-rate subsidy to employers based on the numbers of eligible employees on their payroll and the amount is based on the employees’ gross weekly wage.
The CRSS is available to businesses that were prohibited or considerably restricted in allowing customers to access their business premises as part of COVID-19 restrictions. It operates as an Advance Credit for Trading Expenses, payable for each week a business is affected by the restrictions. The payment available is 10% of the average weekly turnover of a business in 2019 up to €20,000, plus 5% on turnover exceeding €20,000. For new businesses, the turnover is based on the average actual weekly turnover in 2020. The maximum weekly payment is €5,000.
In addition to these existing schemes, the government recently announced that it is planning to launch a new financial support scheme, the COVID-19 Business Aid Scheme (CBAS), for businesses that have been badly affected by the pandemic but do not qualify for the CRSS as they do not have premises open to the public, such as wholesalers and caterers.
In addition, there are several reduced cost loans and grants available for businesses that have been affected by the pandemic, for example, the COVID-19 Credit Guarantee Scheme, COVID-19 Business Loans, the Working Capital Scheme and the Tourism Business Continuity Scheme.
Stay and Spend Scheme
Under the Stay and Spend Scheme, customers can claim a tax credit for expenditure on either holiday accommodation or ‘eat in’ food and drink, for up to €125 per person, between 1 October 2020 and 30 April 2021. However, take-away food and drinks do not qualify for the credit and it has been claimed that this scheme has been poorly received.
Business interruption insurance
In a recent High Court ruling, the court held in favour of four publicans whose insurer, FBD Insurance, had refused to pay-out for losses arising from the closure of their businesses due to COVID-19. This is positive news for other business interruption insurance policy-holders who may take the court’s decision as an indication that their losses should also be covered. However, it is not a guarantee as each policy must be determined on a case-by-case basis. We reviewed this very significant decision here
Debt Warehousing Scheme
Legislation was introduced to allow businesses to ‘park’ payroll taxes and VAT owing to Revenue to ease cash flow burdens arising from trading restrictions. The debts can be warehoused for a period of 12 months interest-free after a business resumes trading. The debts can be repaid in full without interest or repaid in a phased manner subject to a lower interest rate of 3% per annum. This compares to the standard rate of 10% that would usually apply to such debts.
The third wave of COVID-19 infections has meant that 2021 has been another tough year so far for businesses in the food and beverage sector. Many businesses continue to rely on State support for survival. So far the government has provided assistance by reducing VAT rates, deferring the payment of commercial rates and providing a range of income supports, loans and grants. With strict restrictions likely to extend further than 5 March 2021, the landscape for 2021 remains uncertain and therefore government supports for the sector will continue to be crucial in the months ahead.
The content of this article is provided for information purposes only and does not constitute legal or other advice.