Minister Donohoe publishes Finance Bill 2020 underpinning measures to support economy and society in Budget 2021

22nd October, 2020

The Minister for Finance, Paschal Donohoe TD, is today (Thursday) publishing the Finance Bill 2020 following Cabinet approval earlier this week (Tuesday) at the Government meeting.


Finance Bill 2020 runs to 74 sections and over 100 pages. The Bill underpins the Government’s support for the economy in the face of Covid-19 pandemic and the ongoing threat of a no-deal Brexit.


It includes the necessary legislative provisions to provide for the tax changes announced in the Budget as well as introducing some necessary anti-avoidance and technical changes to the tax code.


One of the key measures announced on  Budget day was the  Covid Restrictions Support Scheme (CRSS), which is designed to assist those businesses whose trade has been significantly impacted or temporarily closed as a result of the restrictions as set out in the Government’s ‘Living with Covid-19’ Plan. The details of this scheme are set out in the Bill.  The scheme will generally operate when Level 3 or higher is in place and will cease when restrictions are lifted. The scheme will apply to businesses where Government restrictions prohibit or reduce access by customers. Qualifying businesses can apply to the Revenue Commissioners for a cash payment to assist them and provide targeted support during their time of need.


Tax measures announced on Budget day include providing for an extension of the tax warehousing scheme to include excess Temporary Wage Subsidy Scheme (TWSS) payments received by an employer which are due to be repaid to Revenue and also the balance of 2019 income tax and 2020 preliminary tax obligations for the self-assessed taxpayers whose income has been adversely affected by Covid restrictions.


A range of other vital measures are included in the Bill as announced in the Budget to support businesses across the economy targeted at the agriculture, tourism, film, housing, and start-up sectors.


The Bill will also provide for the temporarily reduced VAT rate announced for the hospitality and tourism sector from 13 ½ per cent to 9 per cent with effect from 1st November 2020. This will apply to catering and restaurant servives, tourist accommodation, cinemas, theatres, museums, historic houses, open farms, amusement parks, certain printed matter and hairdressing.


There were no broad changes to income tax in the Budget but the Bill makes provision for specific announcements such as

  • Equalising the Earned Income Credit with the PAYE credit by raising it by €150 to €1,650;
  • Increasing the Dependent Relative Tax Credit from €70 to €245; and
  • Ensuring that the salary of a full-time worker on the minimum wage will remain outside the top rates of USC by increasing the ceiling of the second USC rate band from €20,484 to €20,687.

Important changes to taxation are proposed to deal with the issue of climate change.  The Bill implements the Programme for Government commitment to increase carbon tax by €7.50 from €26 to €33.50 per tonne/CO2. This increase applied to auto fuels from Budget night and will apply to all other fuels from 1st May 2021. The additional revenue raised will be used to meet the goals set out in the Programme for Government, while also ensuring the impact on those who can least afford it is minimised.


The Bill also makes provision for the transition of our CO2 based vehicle registration and motor tax regimes to the new more robust Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions test from January 2021. As a result, our VRT regime will be based on emissions performance levels which are much closer to real world performance levels than is currently the case.   


Further measures include the extension the NOx emission regime and the Accelerated scheme of capital allowances for Energy Efficient equipment.


The Bill also provides for a range of other measures across the tax code including changes to the calculation mechanism for the bank levy, taxation of the Pandemic Unemployment Payment, the modernisation of the encashment tax regime as well as the Professional Services Withholding Tax regime,  amendments to facilitate the migration of Irish shares post Brexit to the Euroclear Bank Central Securities Depository, as well as a range of technical updates to the VAT code including the application of the reduced rate of 13.5% to certain sanitary products and the transposition of certain EU Directives.


Finally, it is intended that a legislative amendment to give effect to the enhancements to the rates of subsidy available under the Employment Wage Subsidy Scheme (EWSS), announced earlier this week, will be introduced during the passage of the Bill through the Oireachtas.


Commenting on the publication of the Bill, Minister Donohoe stated that: ‘The Finance Bill 2020 sets out the legislative provisions to bring effect to the tax measures announced in Budget 2021.  The Budget preceded the Government’s decision that all of Ireland will be placed on Level 5 of the Plan for Living with COVID from midnight tonight’.


“The COVID-19 pandemic continues to present us with unprecedented economic and social challenges. This Government has continually restated its commitment to supporting the economy and society more broadly, particularly those sectors most negatively impacted by Covid-19 restrictions and most in need of additional support. This is possible because of the solid foundation we have already built in terms of the careful management of our public finances in previous years.  


“Another challenge facing our society is undoubtedly climate change.  The Bill sets out the Government’s commitment and a clear trajectory on carbon tax and the changes to the motor tax and VRT regime aimed at encouraging motorists to make greener choices.


“In particular, the Covid Restrictions Support Scheme will provide much needed support to businesses that have had to close or significantly reduce trading as a result of the recent move to Level 5 throughout the country. We understand the difficulties businesses and individuals are facing and are determined to do whatever we can to ensure we emerge as a stronger and more resilient society, in the period ahead.”


Details on the key provisions in the Bill are set out in the accompanying Notes to Editors