Revenue to check businesses are not misusing Covid wage subsidy scheme
Companies must cease claiming if they no longer meet criteria for €1.59bn scheme
Companies have just five days from the date of the letter to respond. Failure to do so will lead to the potential suspension of payments. Photograph: Joe St Leger
Tax authorities are contacting every employer who has availed of the Covid-19 temporary wage subsidy scheme as part of a compliance programme to ensure it has not been misused. Revenue is checking to see if companies are correctly claiming under the scheme, which has cost the State €1.59 billion up to last week.
The clampdown comes just as large swathes of the economy are reopening for the first time since a lockdown was imposed in March to prevent the further spread of coronavirus. Daryl Hanberry, a tax partner at Deloitte, described the timing as “unfortunate”.
“It is very unusual that every company would be asked to respond to a letter or questionnaire by Revenue,” he said. “ And the timing, just as those employers, largely small and medium businesses, are reopening and will be focusing on the health and wellbeing of their staff and customers, is unfortunate.”
Companies have just five days from the date of the letter to respond. Failure to do so will lead to the potential suspension of payments, Revenue has warned. Some 1,300 letters were sent electronically on Monday, with Revenue saying the process will take a number of weeks.
More than 61,000 companies have tapped the scheme under which Revenue subsidises up to 85 per cent of pay for employees of companies at risk of having to cut jobs due to the impact of the virus. Sums up to €410 per person a week are being paid, depending on payroll.
A total of 551,000 workers have had their pay subsidised, with 410,000 still relying on the programme.
The rules of the scheme say that a business must have suffered a “significant negative economic impact as a result of the Covid-19 pandemic” – a minimum 25 per cent fall either in sales, orders “or any other reasonable basis” – in the three months to the end of June.
Revenue acknowledges that in March and April, when most companies had to make a decision on whether to tap the subsidy scheme, they were relying on their best guess as to how their business would be disrupted.
With the three-month period ending on Tuesday, Revenue says businesses will now be clear on whether they did, in fact, meet the necessary criteria.
“If a business did not meet the eligibility criteria but had reasonable grounds for assuming it would, it should immediately cease claiming the subsidy for the extended scheme,” the tax agency said in a briefing note.
“Revenue will require evidence of the assumptions supporting the original self-assessment of eligibility and, once the basis is reasonable, will not seek to claw back the subsidy paid for the original period,” it said.
However, it warned that if it is determined there had not been a reasonable basis for a claim, “the subsidy is repayable”.
The temporary wage subsidy scheme was set up on March 26th. It was due initially to run for 12 weeks to June 18th, but was extended to August 31st. While 61,300 companies have registered with the scheme, just 55,500 have started claiming money to help meet the cost of staff wages.