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Temporary Business Energy Support Scheme

  • Ireland
  • Tax planning and consultancy

01-11-2022

Introduction

The Temporary Business Energy Support Scheme (the “Scheme”) was announced by Minister for Finance Paschal Donohoe T.D. in Budget 2023 and is included in the draft Finance Bill 2022 (the “Bill”). The Scheme falls under the European Commission Temporary Crisis Framework and has been introduced with a view to assisting businesses with the unprecedented increase in energy costs. It is expected to cost €1.25 billion to the Irish Exchequer. While the claims periods for the Scheme are currently the calendar months from September to December 2022, the Scheme may be extended to the end of February 2023. The Scheme will operate on a self-assessment basis and be administered by Irish Revenue.

Eligible businesses

The Scheme applies to persons that carry on a trade or profession chargeable to tax under Case I or II of Schedule D, including self-employed individuals, companies and partnerships. Charities and sporting bodies that carry on certain activities which would be chargeable to tax under Case I or II but for an available exemption also qualify for the Scheme. Collectively, these are known as ‘eligible businesses’ for the purposes of the Scheme.

Energy costs threshold

In order to qualify to make a claim in respect of a claim period, an eligible business must be able to demonstrate that the VAT-exclusive unit cost on its electricity or natural gas bills has increased by at least 50% compared to the average unit price of electricity or natural gas in a reference period. Broadly speaking, this is the average unit price in the month that is 12 months prior to the claim period to which the relevant bill relates. This 50% increase is known as the ‘energy costs threshold’.

The Bill envisages circumstances where an eligible business has not been issued with an electricity or natural gas bill for the reference period (for example, where the connection to the supply did not exist or was not held by that eligible business at any time during the reference period). In these cases, a deemed reference unit price for a reference period will be made available by the Sustainable Energy Authority of Ireland.

Other criteria

In addition to satisfying the energy cost threshold, the following criteria must also be satisfied by the eligible business:

• The electricity/gas is supplied by a licensed supplier to an account for which a Meter Point Reference Number (MPRN) has been assigned in respect of electricity or a Gas Point Reference Number (GPRN) in respect of natural gas.

• The business is tax compliant and eligible for tax clearance throughout the claim period.

• Registration requirements associated with the Scheme have been satisfied and claims are submitted via the Revenue Online Service (“ROS”) together with a declaration that the qualifying conditions are satisfied.

Where an eligible business satisfies the energy costs threshold as well as the other criteria outlined above, it will be considered a ‘qualifying business’ for the purposes of the Scheme.

Payments under the Scheme

Where the relevant criteria under the Scheme are satisfied, a payment known as a ‘Temporary Business Energy Payment’ (“TBEP”) will be due to the qualifying business. This is calculated as 40% of the increase in electricity or natural gas costs in accordance with the relevant formulae in the Bill. The maximum amount of the TBEP is €10,000 per trade per claim period. However, businesses that operate in a number of locations with multiple MPRN/GPRNs with separate addresses not adjacent to each other may claim up to €30,000 per claim period. The increased cap relates to both electricity and natural gas costs relating to the trade or profession.

There is also an overall cap on support of €500,000 per undertaking generally, with lower limits applying to businesses engaged in farming (€62,000) and fishing (€75,000) activities.

A claim for the Scheme must be made within four months of the end of the relevant claim period. It is expected that qualifying businesses will be able to make claims via ROS by the end of November 2022.

The TBEP will be taken into account when calculating the taxable trading profits of a claimant. This will be done by reducing the amount of expenditure that can be deducted in arriving at the claimant’s taxable trading profits.

Guidelines and publication

On 27 October 2022, Irish Revenue issued guidelines in relation to the operation of the Scheme. These guidelines can be accessed here. They include helpful guidance in relation to the application of the energy costs threshold, including the determination of electricity or natural gas reference unit prices, and the calculation of eligible costs for the purposes of the TBEP and practical issues that may be experienced by certain businesses.

Provision is made in the Bill for the publication by Irish Revenue of the name of claimants under the Scheme.

Commentary

The introduction of this targeted support is to be welcomed at a time when businesses, and in particular SMEs, face heightened economic challenges in the form of increased energy bills and record levels of inflation. While the requirement for eligible businesses to overcome the energy cost threshold will be essential in order to qualify under the Scheme, the need for the business to remain tax compliant and be eligible for tax clearance throughout the claim periods should not be forgotten or understated. Similar to the wage subsidy schemes introduced in response to the Covid-19 pandemic, we expect that the guidelines issued by Irish Revenue in relation to the Scheme will be continually updated as practical issues are encountered regarding the Scheme’s operation.

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