No Match Found
Brexit will be one of the dominant themes in Budget 2021. While the successful negotiation of a tariff free Free Trade Agreement between the European Union and the United Kingdom is the result all Irish businesses crave, a significant change to the trading relationship with the United Kingdom is imminent regardless of the outcome.
The most significant disruptor will be in the area of customs, with many businesses facing a myriad of new requirements and paperwork. The Government is somewhat hamstrung in terms of tax mitigation measures it can introduce as the competence for customs and trade policy lies with the European Commission. It is likely that we will see very targeted spending and support measures introduced to bolster the most impacted sectors of the economy.
Recent developments in the United Kingdom and the British Government's stated intent to disregard parts of the Northern Ireland Protocol threaten to undermine progress made between the UK and EU on the future trading relationship.
It is therefore not surprising that Minister Donohoe has stated that Budget 2021 will be based on the continued economic and societal impact of COVID-19 and the assumption of a disorderly Brexit, that no trade deal will be agreed and the EU and UK will be trading on WTO terms.
It is likely that Budget 2021 will contain targeted measures to support the most impacted sectors of the Irish economy in preparing for a no-deal scenario.
In fact, we expect that the Budget 2021 speech will reinforce measures already introduced in 2020 in the July Jobs Stimulus package.
These supports included some key initiatives to help business manage the impact of additional customs requirements, such as:
The announcement also included a commitment that the COVID-19 wage subsidy schemes will remain in place until 2021.
These measures are welcome, given the myriad of additional documentation requirements facing business and the exposure of sectors of the Irish economy, such as the agri-food sector, to the most severe impacts of Brexit.
Last year's Budget indicated that more than €1 billion was to be made available in the event of a no-deal Brexit with significant support earmarked for the agriculture, enterprise and tourism sectors. It remains to be seen whether similar commitments will be given in Budget 2021, but targeted sectoral support will be required.
Further EU support has also been announced, with the European Council recently approving a €5 billion Brexit Adjustment Reserve which will support countries and sectors most impacted by Brexit. The recent Brexit Readiness Action Plan confirmed that the Government is engaging with the European Commission to ensure that Ireland benefits to the "maximum extent possible".
Further clarity on Budget day on how funding is to be allocated would be welcomed, given Ireland's particular exposure to the disruptive impacts of Brexit.
While the Government has flexibility in terms of spending support it can offer impacted businesses, it is restricted in terms of specific customs tax changes that can be made. Customs and trade is an EU competence. So the taxation measures and changes that it can adopt in this area are limited.
In terms of measures that it can introduce, it is expected that the Budget speech will make reference to the measures to be adopted through the new Brexit Omnibus Bill. Measures introduced will include postponed accounting for import VAT which will ease the cash-flow burden for businesses importing into Ireland post-Brexit and this will be welcomed by all impacted sectors. The new measures mean that businesses will, in most cases, no longer have to pay import VAT at the point of import. Rather, they can account for import VAT as part of their bimonthly VAT returns.
Other measures included in the new Brexit Omnibus Bill will include new procedural and compliance measures such as the powers for Customs officers to inspect traders' approved premises and making it an offence for a truck driver to leave a customs port without customs clearance. This will reflect the new reality of a significant increase in the level of customs and regulatory checks being undertaken when compared with existing levels.
Further, specific and targeted changes to some key provisions of the tax legislation would enhance certainty and Ireland's attractiveness for financial services companies in particular, given many UK businesses in this sector have reorganised to ensure continued access to EU markets post Brexit.
As the transition period comes to an end, it is critical that you commence, or reactivate, your Brexit planning. Regardless of the outcome of the ongoing negotiations, the trading relationship between the European Union and the United Kingdom will change from 1 January 2021. Our team of experts are well placed to identify the key actions that your business can take to be Brexit-ready.