Thursday, 27 June 2019

Questions (47)

John McGuinness


47. Deputy John McGuinness asked the Minister for Finance the details of the scheme and tax breaks under the back to work enterprise allowance relative to the qualifications or requirements for an exemption from income tax for two years to a maximum of €40,000; the number of applicants that applied for the tax exemption; the number approved for the maximum exemption; and if he will make a statement on the matter. [27320/19]

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Written answers (Question to Finance)

In the form in which it is presented, the Deputy's question refers to two separate schemes, namely the Back to Work Enterprise Allowance (BWEA) scheme and the Start Your Own Business (SYOB) tax incentive scheme; however both share the common objective of encouraging enterprise by individuals.

The former is operated under the auspices of the Minister for Employment Affairs and Social Protection. It is designed to encourage long-term unemployed individuals to develop a business by allowing these individuals to retain a reducing proportion of their qualifying social welfare payment for a specified period of time. While BWEA is a social protection scheme, decisions regarding the tax treatment of payments under same, and indeed all other Social Welfare payments, fall under my remit.

Section 13 of Finance Act 2018 amended section 126 of the Taxes Consolidation Act 1997 to bring clarity to the issue of the taxation of Social Welfare payments in light of the imminent introduction of PAYE modernisation from 1 January 2019. A range of payments, including the Back to Work Enterprise Allowance, were exempted from taxation with the objective of maintaining the pre-existing de facto tax treatment of these payments.

The latter SYOB tax incentive scheme was provided for in section 472AA of the Taxes Consolidation Act 1997. SYOB provided relief from income tax for long-term unemployed individuals who set up their own business between 25 October 2013 and 31 December 2018. It applied up to a maximum of €40,000 in profit per annum over two years, provided certain eligibility criteria were met, including the following:

1. The individual must have been unemployed for 12 months or more and been in receipt of one of the following:

1. crediting PRSI contribution;

2. Jobseekers' Allowance;

3. Jobseekers' Benefit;

4. One Parent Family Payment; or,

5. Partial Capacity Payment.

The business must have been a new and unincorporated enterprise.

With regard to uptake of SYOB, Revenue has provided me with the following information on the relief, from its inception in 2013 up until 2016 (the latest year for which data are currently available):











I am further advised by Revenue that, for the year 2016, some 174 taxpayer units received an exemption of €40,000 (out of 5,473 availing of the incentive in total). The equivalent figures for 2014 and 2015 were 25 (out of 1,820 availing of the incentive) and 151 (out of 3,910 availing of the incentive) respectively. (Taxpayers in a marriage or civil partnership are represented as one taxpayer unit in cases where they have elected for joint assessment).

The introduction of SYOB relief in Finance Bill 2013 was designed to address the high rate of long-term unemployment, which stood at 7.6% at the time. The targeting of unincorporated businesses and the simultaneous introduction of the Home Renovation Incentive were intended to focus the relief on the construction sector, which was disproportionately represented in the unemployment figures at the time. Taking into consideration the cost of the measure (€19.6 million in 2016), and the changed economic circumstances, including the falling long-term unemployment rates, the incentive expired at the end 2018, in accordance with its sunset clause and is no longer available to new applicants.