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VAT reduction for hospitality sector and weekly rebates for businesses closed at Level 3 or higher

Paschal Donohoe announced the various reliefs today.

Image: Leah Farrell via RollingNews.ie

A NEW WEEKLY rebate and a return to a lower VAT rate for the hospitality sector made up part of today’s Budget announcements by Finance Minister Paschal Donohoe. 

The government’s raft of Covid-19 related reliefs include a new scheme for businesses which have been most impacted by the pandemic, such as pubs and hotels. 

The Covid Restrictions Support Scheme (CRSS) has been established “to provide targeted support for businesses”, according to the Department of Finance.

“The sectors impacted by the current Level 3 nationwide restrictions are accommodation, food and the arts, recreation and entertainment. If the Government decides to move to a higher level of restriction then other sectors may qualify,” Donohoe said today. 

The scheme, which will operate when Level 3 or higher of the Covid roadmap is in place, will see businesses receive weekly payments of up to €5,000 if they are forced to close or effectively close because of prohibited or restricted assess by customers.

The rebates will be based on average 2019 weekly turnover, and will be paid in addition to the Employment Wages Subsidy Scheme (EWSS). 

Donohoe said that payments will be calculated on the basis of 10% of the first €1 million in turnover and 5% thereafter, based on average VAT-exclusive turnover for 2019. It will be subject to a maximum weekly payment of €5,000.

“The scheme will operate on a self-assessment basis and qualification will require a business to demonstrate that their turnover has been severely impacted; that is it may not exceed 20 per cent of the turnover for the corresponding period in 2019,” he continued. 

The CRSS comes into effect today and those who meet the criteria have been urged to contact the Revenue Commissioners as soon as possible. It’s expected the first cash payments will be made by mid-November. Qualifying businesses can claim in week 1 and valid claims will be repaid for the entire period of the restriction within 2-3 working days.

The payments will cease when restrictions are lifted, and the entire scheme is due to close on 31 March 2021. 

VAT reductions

In relation to VAT, Donohoe said that the rate for the hospitality sector will be reduced from 13.5% to 9% from 1 November. This will remain in place until December 2021. 

The hospitality sector has been calling for further cuts to the VAT rate in light of the pandemic. The government steered away from it in recent years, after pushing it back up to 13.5%, but significant pressure had been placed on representatives.

Publicans, bar workers, DJs, comedians, actors and event organisers, among others, have all be calling for additional supports after their businesses were told to cease operations.

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Publicans have been very vocal on the threat to their livelihoods since they shut their doors in March. Dublin’s so-called wet pubs (those which do not serve food) have not done one day’s normal trade since March. Other pubs nationwide got a slight reprieve last month where they were all able to open.

However, last week’s move to Level 3 nationally has meant these pubs can only serve outdoors.

More than a fifth of pubs in Ireland have continuing costs of up to €2,000 a week to sustain while generating no revenue during lockdown, according to a new report from the Drinks Industry Group of Ireland (DIGI) earlier this week.

The Budget was made, Donohoe said, by using two critical assumptions; that no UK-EU trade deal would be agreed and that a widespread vaccine for Covid-19 will not be available in 2021. 

Managing director of The Armada Hotel in west Clare, John Burke, said that today’s news is a “small change in the right direction”.

“It is still unknown how many hospitality casualties there will be, but there will be many, and whilst this is a small step in the right direction, the industry still needs to hear more from Government on the long-term repair strategies and it’s hoped that this cut to VAT and the new payment scheme is just the start of their plans.

“At this point I feel deeply for business owners like myself. Even all the creativity and gumption in the world doesn’t make it feasible to keep investing in innovation in response to the guidelines.”

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