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'Final nail in the coffin for businesses': Revenue claw back of wage subsidy funding raised with Taoiseach

Those that fell short of their 25% loss estimation are being asked by Revenue to repay the wage subsidy.

Image: Shutterstock/fizkes

CONCERNS HAVE BEEN raised over the Revenue Commissioners demanding a return of the temporary wage subsidy funding from businesses that over estimated their losses during the pandemic. 

The scheme was available to employers from all sectors who predicted they would be down a minimum of 25% of their turnover because of the pandemic.

The scheme was a rolled out in a bid to keep staff on their payroll during the pandemic. The Taoiseach told the Dáil yesterday that over 66,500 businesses had availed of the wage subsidy scheme, which supported over 664,000 jobs.

The Seanad and Dáil has heard that businesses that diversified have contacted politicians over concerns that they did a better turnover than expected, though still making a loss, and are now facing steep repayment bills.

“It would be a cruel irony if repaying the support received was the final nail in the coffin for this business, said Senator Sean Kyne, who called for government to intervene.

Independent TD Seán Canney raised the matter with the Taoiseach regarding the temporary wage subsidy scheme.

Minimum loss of 25%

“I now have some cases coming to me in which, when the Revenue Commissioners did some checks, they found that some of these businesses did not fully meet the criteria in the sense that their turnover is supposed to be down by 25%.

“In a number of these cases, when the businesses did their projections they had no business in March. They looked at all the options and looked at the scheme that was in place. They decided that in order to keep the loyalty of the employer and the employee intact, they would go with the temporary wage support scheme,” he said.

In one case, Canney said the owners of a company took out an overdraft to look at other options to try to create business, which it did.

Its online business grew substantially, leaving it in the position whereby instead of being down 25% on turnover, it was down 17% or 18%.

“The result of all this is that when Revenue checked up on the company in recent weeks, it asked the company to repay all the temporary wage subsidy scheme support it got,” he said. 

“If this is the way we are doing business, we will drive these small businesses out of business in a very short time. I ask the Taoiseach to look at this with the Minister for Finance and consider how Revenue is looking to recover this money,” he told Micheál Martin. 

Keeping business going and people employed

“These businesses have never defaulted. The sole purpose of what they did was to keep their business going and to keep their employees employed, yet they are now being penalised harshly for that. They are not looking for anything for nothing; they are just looking for perhaps a graduated refund of some nature because they still have a loss in their business,” said Canney.

He said the Revenue seems to be trying to get the money back before the end of this year.

“I think this will put a shiver down every small business’s spine if it is trying to remain in operation through next year,” he said.

Kyne told the Seanad that the wage subsidy proved to be a lifeline for many businesses across the country and kept work forces together.

Many businesses adapted their work practices and changed marketing strategies in order to survive, he said, adding that some businesses in the craft and retail sector increased their presence online in order to boost business.

“As we come to the end of the year, Revenue is now assessing these businesses in the context of the wage subsidy scheme and for some it is proving a sobering experience as their hard work and change of direction has meant that the 25% reduction in turnover necessary has been slightly missed and, as a result, Revenue is demanding the return of the temporary wage subsidy funding,” he said.

“My office has been contacted by one business whose trade has been devastated by the earlier lockdown. Their shop, selling high-end goods mostly to the tourist trade, was shut down and their craftspeople would all have been let go were it not for the temporary wage subsidy scheme.

“However, the couple in this case fought back, borrowed money to establish an impressive online presence and worked day and night to reposition their business. They paid VAT to Revenue even though they could have warehoused the debt because they felt that we were all in this together and wanted to pay their bills on time to the taxpayer.

“After an extremely stressful and expensive year, when their business went through hard work and innovation but survived, imagine their shock at getting a demand from Revenue that the wage subsidy scheme be repaid. That is €30,000 they do not have because their turnover dropped by close to 20%, not the 25% threshold,” said Kyne.

He said Revenue stated initially that if the original self-assessment was reasonable, it would not seek to claw back the subsidy for the original period.

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“The couple fought tooth and nail to hold on to their business, pumping borrowed money into it, and are now being penalised for their hard work,” he said.

He said Revenue should be a flexible in the manner in which temporary wage subsidy scheme recoupment is done and pointed out that the extraordinary efforts to which business people went to keep their businesses open should be taken into account.

The Taoiseach reassured the Dail that “there is no tactic or strategy to try to claw back revenue or anything like that”.

“That is not motivating any actions on the part of the Revenue Commissioners at all,” he added.

Businesses did have to demonstrate a 25% reduction in turnover during the second period of 2020 in order to avail of the scheme, said Martin, stating that such declarations are subject to compliance checks by Revenue to ensure that the considerable sums given to employers were in accordance with the rules set down in legislation.

That said, the Taoiseach said the initiative taken by the employer, “who probably was not in a position to predict how well the online part of the business would go and now finds himself or herself in difficulty”. 

The Taoiseach committed to speaking to the Minister for Finance about the matter, who in turn, will raised the matter with Revenue in relation to evaluating the scheme, and ascertaining how frequent these business cases are presenting.

Canney said small businesses did everything in good faith, and exceeded the projections they made “because the owners of the business rolled up their sleeves and looked around to see where they could get business”.

“Now they find they are being penalised horrifically. It is something that needs to be addressed rapidly,” he said.

Martin said there is genuinely is no motivation to target or undermine people who applied in good faith under the scheme.

He said this has been an unpredictable global pandemic that no one could anticipate.

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