The Government has today announced more measures to help businesses deal with cost-of-living increases.
It announced a final extension of the 9% reduced VAT rate for the hospitality sector for a further six months.
The reduced VAT rate will return to the standard 13.5% rate from September.
The measures announced today will also see the Temporary Business Energy Support Scheme (TBESS) extended until the end of May.
In order to help more firms to qualify for it, the threshold for qualification will be cut from the current 50% increase in electricity or gas costs compared to the same period a year ago, to a 30% increase.
Those changes will apply retrospectively from the start of last September.
The level of relief will also increase from 40% to 50% of eligible costs from March 1st.
The payment will remain subject to a monthly limit, but that will also rise from the current €10,000 to €15,000 per month per trade or profession from next month.
Payment will be subject to an overall cap of €45,000, up from €30,000 where the business is carried on from more than one location.
The Government said the changes are subject to State Aid approval from the European Commission.
Because the scheme as currently designed does not enable businesses that use LPG, kerosene or fuels other than natural gas or electricity, the Government is to look at introducing a new grant to help such firms.
However, it is understood details of how that will work have not been finalised yet, although it will sit outside of TBESS.
The cost of the extension to the TBESS will be met from the allocation provided in the budget.
€1.2bn was set aside for the scheme.
But because businesses found the eligibility criteria to be too tight, just €38m has so far been approved for pay out under it.
Supports will ‘bring certainty to businesses’
Business representative group Ibec welcomed today’s measures, saying they will “bring certainty to businesses.”
It said attention “must now turn to ensuring the delivery of effective support to viable but vulnerable businesses”.
“It is welcome to see reforms to the TBESS as the previous eligibility criteria and support levels were too restrictive, leading to poor take up from industry despite there being an ongoing energy affordability crisis,” said Fergal O’Brien, Executive Director of Lobbying and Influence and Ibec.
“The support levels to date have been below that seen in other European countries, so today’s announcement will go some way to addressing the competitive disadvantage many businesses have faced in recent months,” he added.
Mr O’Brien also welcomed the extension of the 9% VAT rate for another six months for the experience economy.
“This policy has been instrumental in helping businesses stay afloat and maintaining many jobs across the country.
“Removal of this buffer at this time would have put many in the Experience Economy, particularly SMEs, in jeopardy, and would only have added to inflationary pressures and undermined international competitiveness,” he said.
Mr O’Brien said while they would have preferred to see the 9% VAT rate made a permanent fixture, today’s announcement will provide “some relief and certainty.”
The Irish Tourism Industry Confederation also welcomed the decision to extend the 9% VAT rate for the sector and the expansion and simplification of the TBESS.
Elaina Fitzgerald Kane, Chair of ITIC, said the 9% VAT rate is a “vital tool” to enable the continued recovery of the tourism industry.
She pointed out that tourism is the country’s largest indigenous industry and biggest regional employer.
“A report commissioned by ITIC last month had found, in the event of an increase in the VAT rate, that there would be an inflationary impact of 4.1% on accommodation and food services and that 24,000 jobs would be at risk,” she added.
Eoghan O’Mara Walsh, CEO of ITIC, welcomed today’s announcement by Government but said the tourism industry was still facing a very challenging time.
“Business costs continue to escalate, there is an acute supply shortage and key source markets are looking vulnerable,” he stated.
He urged Government to maintain pro-tourism policies on an ongoing basis, adding that there are 20,000 businesses in this sector, the majority of which are SMEs, labour-intensive and in regional Ireland.
“The full recovery of tourism to Ireland is not expected until 2026 so there is quite a climb ahead,” he added.
Adrian Cummins, CEO of the Restaurants Association of Ireland, said today’s measures will provide the necessary support to the restaurant and hospitality sector as they continue to recover from the Covid-19 crisis as well as battling high rates of inflation plus increasing pressures on their margins.
“The Restaurants Association of Ireland advocates that the Government will continue to invest in the hospitality sector so it mitigates against a cliff edge for the hospitality sector in September of this year,” he added.
Meanwhile, Donall O’Keeffe, CEO of the Licensed Vintners Association (LVA) said they are glad to see that the VAT rate for hospitality won’t be changing until after the summer.
“While we would have preferred to have seen this measure postponed for 2023, it is positive that the Government has kept the extra tax on consumers off the menu for now.
“Everyone in the hospitality industry will be breathing a sigh of relief with this news,” he added.
Mr O’Keefe also welcomed the extension of the TBESS, and the commitment to simplify the process.
“We hope this will see the benefits of the programme reach those pubs and businesses who need it, following the massive rises in energy prices experienced across the sector over the last 12 months,” he said.
Hoteliers have also welcomed today’s measures from the Government.
Denyse Campbell, President of the Irish Hotels Federation, said that the measures give tourism businesses greater certainty as they grapple with the impact of the cost-of-living crisis on Irish consumers and key overseas markets.
“Today’s announcement is a clear recognition by the Government of the challenges facing tourism and hospitality – Ireland’s largest indigenous employer which currently supports over 250,000 livelihoods,” she said.
“It will go a long way in helping to sustain the recovery of our industry at a time when businesses and consumers are facing significant economic and financial headwinds,” she added.
Ms Campbell also welcomed changes to the TBESS energy support scheme designed to provide greater assistance to businesses experiencing exceptional increases in energy costs.
The Small Firms Association said the measures announced today will benefit small firms.
Director David Broderick welcomed the new level for entry into the TBESS.
“This will allow more businesses apply and will help with cashflow at a time where our smallest employers continue to face cost challenges in every area of business be it labour, transport, insurance, banking, and utility costs,” he said.
“While it is disappointing to see applications to the TBESS have been lower than expected, hopefully this new entry level and a more simplified application process will safeguard small firms most affected by rising energy costs,” he added.
Retail Excellence Ireland’s Duncan Graham said today’s measures will provide a timely boost for retailers during what has been a particularly difficult period.
Mr Graham said that retailers have found TBESS to be a slow-moving process to this point, but they hope to see uptake speed up now that the terms have been improved.
“The temporary extension of the 9% VAT rate for hospitality is also welcome, as retail operates hand in glove with the hospitality industry and this support should have a significant knock-on impact as consumers’ discretionary income is not affected,” he added