Businesses hit by Covid restrictions to be offered up to €5,000 a week

Major shake-up in VRT and rise of up to €50 in motor tax for cars with high emissions

The budget will announce a shake-up of the tax scheme for cars designed to discourage the use of the most polluting vehicles. SUVs now account for 45% of new car sales. Photograph: Getty Images

The budget will announce a shake-up of the tax scheme for cars designed to discourage the use of the most polluting vehicles. SUVs now account for 45% of new car sales. Photograph: Getty Images

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A special scheme offering cash payments of up to €5,000 a week for firms forced to close due to Covid-19 restrictions is to form part of Tuesday’s budget.

The relief will be based on companies getting advanced credit for trading expenses that they would normally claim against corporation tax or income tax.

The scheme, which businesses can apply for as restrictions are announced, will involve payments of up to 10 per cent on turnover of up to €1 million a year and 5 per cent on the balance of turnover up to €4 million a year.

This is designed to offer significant cash flow advantages for companies forced to close if restrictions are extended.

Budget 2021

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As it will involve business owners getting advanced credit, via cash payments, for future expenses, it is is not clear how the impact on future tax bills will be managed. However, the measure will offer a cash boost to firms during the period of closure, and, given the threat of further restrictions as virus numbers rise, will be a key part of the package.

Specific packages for sectors like hospitality, events and the arts are also expected, and a cut in the VAT rate for the hospitality sector from 13.5 per cent to 9 per cent is on the cards.

Another key announcement for business will be an extension of the wage subsidy scheme, which had been due to end next April, to the end of 2021.

VRT regime

The budget will also announce a major shake-up of the tax scheme for cars designed to discourage the use of the most polluting vehicles. SUVs now account for 45 per cent of new car sales, up from 19 per cent in 2013.

The budget will announce a reform in the VRT regime, expanding the number of bands from 11 to 20, and based on new EU-wide measurement criteria it will create a much bigger gap in the tax between more and less polluting cars.

The motor tax regime will also be shaken up and will also have more bands in future and a greater gap in the annual charge between more and less polluting cars. There will be no change for 88 per cent of motorists. However, more than 7 per cent will see a €10 rise in their motor tax, and the remainder will face a rise of €30 to €50 in the annual charge on their vehicle.