Finance Bill 2022 - Business Measures

TBESS

The Finance Bill provides further detail on the new Temporary Business Energy Support Scheme (TBESS) that was announced in Budget 2023. The aim of the scheme is to provide support for businesses that have experienced a significant increase in their electricity and natural gas costs.

Originally, TBESS was to apply only to businesses carrying on a trade. In a welcome change, the Finance Bill makes it clear that TBESS will apply to businesses carrying on a trade or profession including self-employed individuals, companies and partnerships. Charities and sporting bodies carrying on certain taxable activities taxable may also avail of TBESS.

In order to qualify for TBESS, eligible businesses must ensure that they satisfy a number of conditions including:

  • The business is eligible to obtain tax clearance
  • The business is tax compliant
  • The business must register to claim on ROS and make a declaration that they satisfy the relevant conditions

The scheme operates by reference to bills for the metered supply of electricity and natural gas through electricity accounts or gas connections which are identified by their own Meter Point Reference Number (MPRN) or Gas Point Reference Number (GPRN). To be eligible to make a claim under the TBESS a business must be able to demonstrate that the average unit price for electricity or gas on the relevant bill has increased by 50 per cent or more as compared to the average unit price in a “reference period”. The reference period is generally the average unit price in the month that is 12 months prior to the month to which the relevant bill relates. Once this threshold has been passed the business is entitled to claim a Temporary Business Energy Payment amounting to 40 per cent of its eligible cost (the uplift in the bill as compared to the bill amount in a reference period). The draft legislation also includes provision for businesses that do not have an electricity or natural gas bill for the reference period

The support is subject to an overall monthly cap of €10,000 per trade. Where the business operates from more than one location and has more than one MPRN the cap can be increased by up to 10,000 per MPRN, subject to a maximum amount of €30,000 per claim period. The overall maximum payment limit for support is €500,000 per undertaking with lower levels available to farming and fishing businesses

The scheme will be administered by the Revenue Commissioners and it is expected that operational guidelines will be published by the Revenue Commissioners. The legislation includes provisions in relation to repayments and clawbacks in respect of invalid claims or overclaims. Provision is also made for the publication of the name of claimants of TBESS on the website of the Revenue Commissioners

TBESS falls under the European Commission Temporary Crisis Framework (TCF) and is subject to State Aid approval. The scheme will run from 1 September 2022 to 31 December 2022, with the intention to extend it to 28 February 2023 subject to the anticipated extension of the TCF.

R&D Tax Credit

The Budget flagged changes to the R&D Tax Credit regime which are primarily timing changes and do not affect the amount of relief available.

The changes are designed to align the credit with new international definitions of refundable tax credits.

The changes which apply for accounting periods beginning on or after 1 January 2022 include:

  • The current regime of offsetting the R&D Tax Credit against corporation tax liabilities or claiming a refund payment in three instalments is amended.
  • A new three-year fixed payment schedule is provided in respect of refund payments
  • A company has the option to call for payment of their eligible R&D Tax Credit or to request for it to be offset against other tax liabilities and
  • Existing caps on the payable element of the credit are removed.
  • The first €25,000 of a claim on R&D expenditure will now be payable in full – this should provide a welcome cash-flow benefit for smaller R&D projects and hopefully encourage more companies to avail of the regime.
  • Pre-trading expenditure incurred on qualifying R&D activities can be claimed

The R&D Tax Credit in respect of qualifying expenditure (other than expenditure on buildings or structures) will be payable over three years, as follows:

  • The first payable instalment in Year One, shall equal the greater of:
    • €25,000, or if lower, the amount of the R&D Tax Credit, or
    • 50% of the amount of the R&D Tax Credit
  • The second payable instalment in Year Two, shall be three-fifths of the remaining balance of the R&D Tax Credit.
  • The last payment in Year Three shall be the remaining balance of the R&D Tax Credit in respect of the accounting period, less the sum of the first and second instalment amounts.

The R&D Tax Credit payment mechanism in respect of expenditure on buildings or structures used for qualifying R&D activities is broadly the same except the option to reclaim first €25,000 in full does not apply.

Whilst all of the above measures are very positive, regrettably the Bill also repeals the provisions of Finance Act 2019 relating to micro and small sized companies, which cannot be commenced for State aid reasons.

Knowledge Development Box (KDB)

As announced on Budget Day, the KDB is extended for 4 years and will continue to be available for accounting periods commencing before 1 January 2027. The KDB provides for a 6.25% effective rate of corporation tax on profits generated from exploiting certain qualifying intangible assets generated from R&D activities carried out in Ireland. However, to ensure compliance with OCED Pillar Two objectives, the effective rate of the KDB is increased to 10%.

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