Donohoe Promises Wage Subsidy U-Turn

31 Jul 2020 | 06.05 pm

Donohoe Promises Wage Subsidy U-Turn

Reprieve for proprietary directors

31 Jul 2020 | 06.05 pm

Finance minister Paschal Donohoe (pictured) has pledged to alter legislation approved by the Oireachtas yesterday that excludes proprietary directors from the new wage subsidy scheme.

The minister’s u-turn followed a storm of criticism on social media from owners of micro enterprises. In addition Donohoe’s department colleague, Fianna Fáil minister Michael McGrath, indicated that he was taking up the issue with Donohoe.

The new legislation excludes proprietary directors from the new Employment Wage Subsidy Scheme (EWSS) which replaces the TWSS from 1 September 2020.

Donohoe stated this afternoon: “Over the past 48 hours I have listened to the concerns of certain proprietary directors in relation to provisions of the EWSS.

“They have been using the Temporary Wage Subsidy Scheme (TWSS) to retain ‘ordinary’ employees in their business over recent months and they would wish to continue to do so under the new EWSS.

“Having considered the points raised with me, I have decided to ask the Revenue Commissioners to reinstate proprietary directors to the EWSS from 1 September where they are retaining ‘ordinary’ employees on their payroll.”

The relevant legislation was rushed through the Oireachtas in one day, yesterday July 30, before the summer break.

The EWSS is expected to run from September to 31 March 2021. Both schemes will run in parallel from 1 July 2020 until the TWSS ceases at the end of August 2020.

To qualify for the EWSS, employers must be able to demonstrate that:
• The business will experience a 30% reduction in turnover or orders between 1 July and 31 December 2020,
• And this disruption is caused by COVID-19.

According to Revenue, this reduction in turnover or orders is relative to:
• the same period in 2019 where the business was in existence prior to 1 July 2019
• the date of commencement to 31 December 2019, or where a business commenced after 1 November 2019, the projected turnover or orders.

Employers availing of EWSS will be required to undertake a review on the last day of every month to ensure they continue to meet the eligibility criteria. If they no longer qualify, they should deregister for EWSS with effect from the following day.

Childcare businesses registered in accordance with Section 58C of the Child Care Act 1991 are also included in the scheme.

Owner Manager Exclusion

Legislation enacted this week provides that certain categories of employees are excluded from EWSS such as proprietary directors or newly hired connected parties.  A proprietary director is a director who own 15% or more in the shares of the employer company.

The curbing of the wage subsidy benefit for owner managers would affect tens of thousands of individuals who run micro enterprises, many of them in sectors that have been severely impacted by the NPHET lockdown.

The scheme will be administered by Revenue on a ‘self-assessment’ basis.

The other major change is that EWSS will re-establish the requirement to operate PAYE on all payments. This includes the regular deduction and remittance of income tax, USC and employee PRSI.

In addition, from July 31:
• TWSS employers can claim for non-TWSS employees (new hires) under the new EWSS.
• Non-TWSS employers who have not previously availed of TWSS will only be eligible to apply for the EWSS.
• TWSS employers will still be able to rehire eligible employees.

EWSS Payment Levels

The level of subsidy the employer will receive is per paid employee as follows:

Employee Gross Weekly Wages
Less than €151.50: Nil subsidy
From €151.50 to €202.99: €151.50 subsidy
More than € 203 and less than € 1,462: € 203 subsidy
More than € 1,462: Nil subsidy

Revenue says that this support will be backdated to 1 July for employees of qualifying employers who did not qualify for TWSS. A 0.5% rate of employers PRSI will continue to apply for employments that are eligible for the subsidy.

In a statement Revenue also said that further guidance and support material re EWSS will be published in due course.

Dáil Debate

In the Dáil debate on the relevant legislation, only two TDs spoke up for owner managers, both from the government benches.

Fianna Fáil’s Eamon O Cuiv commented that the he is always worried about the second iteration of a scheme because sometimes when people get at it they add more and more conditions.

O Cuiv added: “When I looked at the small print, I noticed that for some reason proprietary directors are now excluded from the EWSS scheme. Ireland is full of very small self-employed businesses, some of which are formed into small companies, and the proprietary directors can sometimes comprise between 40% and 70% of the workforce. These proprietary directors are ordinary workers in the business as well.

“This Bill proposes to allow them to write off last year’s tax, take a credit or average it over two years, but that is not going to solve these people’s problems because while some of these companies will be making a profit, the actual profits will be very small once they have paid themselves a salary.

“I hope that even at this late stage the minister might be able to look at the exclusion and take it out of the Bill, at least for very small companies. It would make a significant difference if he did so.”

Fine Gael deputy Kieran O’Donnell stated: “I ask the minister to look specifically at amending the legislation to include proprietary directors who are effectively the owners of SMEs that happen to be incorporated, as many businesses are.

“That is something that needs to be corrected and amended. That would make an enormous difference to businesses. There is an anomaly whereby employees are in receipt of the WSS but two, three or more proprietary directors cannot claim Covid payments because their company has had to cease operation. It is an anomaly that needs to be corrected.”

In the Dáil yesterday, finance minister Paschal Donohoe rejected his colleagues’ suggestions, and in the process revealed that he may not really understand the issue (unless the stenographer misheard him). Donohoe stated that proprietary directors own in excess of 50% of the equity of a company, whereas as far as Revenue is concerned proprietary directors only have to own 15% of the shares.

Donohoe told the Dáil: “Reference was made to proprietary directors. It is correct to say that a provision involves a change to the temporary wage subsidy scheme. It is a standard measure that is being introduced to deal with compliance issues for schemes like this.

“As has been said by a number of deputies, in order to be a proprietary director a person has to have more than 50% of the shares issued for his or her company. This scheme is about supporting employees and allowing owners and employers to keep businesses going.

“This change will not create some of the difficulties to which deputies have referred but I acknowledge that over the past 24 hours I have received correspondence on this measure from small companies who have raised concerns. It is something I will review as the EWSS gets up and running.

“I want to avoid being in a situation where in a few months’ time deputies ask me why particular forms of directors are benefiting from the scheme. I seek to proactively deal with this issue. I acknowledge that I have received correspondence on the issue and when the scheme is up and running, I will review its impact on smaller employers and directors of small companies.”

Small Firms Reaction

Small firms lobby group ISME said in a statement that TWSS has been the only source of income for very many proprietary directors.

“Its withdrawal is yet another sign (if we needed one) of how detached the government and the senior civil service have become from the needs of small business. What is being done to proprietary directors is unfair and unjust,” ISME stated.

The lobby group is urging owner managers to make their displeasure known to politicians through this portal.

 

 

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