The government has launched its Stay and Spend scheme to help the hospitality sector during the Covid-19 crisis.

The scheme will give taxpayers who spend up to €650 in restaurants, pubs, hotels, B&Bs and other qualifying businesses an Income tax credit of €125, as long as they spend the cash between this autumn and spring 2021.

Where a taxpayer has insufficient income tax liability to fully benefit from the measure, they set off the relief against their USC contributions.

Taoiseach Micheál Martin said: "We recognise the strain that restaurant owners, hoteliers, bar and café owners are under and have taken steps to help them through this difficult period. The Stay and Spend scheme will encourage people to go out for a meal or take a staycation and support the Irish hospitality sector by enabling them to claim back 20% of their spend. I’m encouraging all eligible businesses to register with Revenue so that they can participate in the scheme from next month."

The Stay and Spend Scheme runs from 1 October to 30 April. Registration for the scheme is now open for tourism accommodation and food and beverage businesses through Revenue’s Online Service, ROS. 

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Taxpayers will be able to claim against all spending in a registered business other than on alcohol, and any food must be consumed on the premises. Revenue has created the Revenue Receipts Tracker app for people to upload receipts, available from Google Play and the App Store. To use the app, people must have a registered myAccount with Revenue.

• Step by step guide on how to upload a receipt and submit a claim for the Stay and Spend tax credit

Jointly assessed married couple can combine the individual spending allowances to a maximum spend total of €1,250. The minimum spend per individual on each occasion is €25 — so your quick burger for lunch won’t qualify. 

Businesses must be VAT-registered, have a current tax clearance certificate, be accredited or registered with relevant official bodies as appropriate (Fáilte Ireland and the HSE Environmental Health Service) and of course must register with Revenue.

Full details of the scheme are available on the Revenue website here.

What tax experts think of ‘Stay & Spend’ tax credit

Joe Cunnane, Managing Partner, TRA Professional Services Many of the reliefs, while beneficial, do seem overly bureaucratic. However, we appreciate it is an unprecedented situation and everyone is doing their best. Claimants will need to submit details of spending and receipts and claim the tax credit by a newly developed app so there does seem to a whole new system being created here. You would think it would easier to use systems in place already.

Tom Woods, Head of Tax & Legal Services, KPMG  The process places most of the administration on the customer who has an incentive to claim and hopefully this approach will drive demand for further domestic tourism in the winter and spring months and lead to a potential extension of the scheme in the future.

An alternative approach may have been to provide a targeted reduction in the VAT rate. However that would still involve administration for business who would need to adjust internal controls to account for different VAT rates on specific expenditure.

Pat Sutton, Managing Partner, O’Kelly Sutton  The hospitality sector needed real tangible support from the government, in the form of cash vouchers or a VAT reduction to 9.0%. Unfortunately this scheme is poorly thought out and over bureaucratic. The main problem is that the very people that might have availed of this scheme simply will not be able to avail of it.

Individuals and families struggling to meet their bills might have availed of the scheme if it came in the form of a cash voucher. As it is, they have to spend now and get tax relief in the future. In addition, there are just too many components in this scheme to get €125 for the taxpayer.

Who will ask the service providers are they registered for the scheme before booking, and how many will forget to upload the receipts before losing them? We can’t see there being a massive uptake on this scheme but I guess it ticks a box for government.

Michael Rooney, Tax Partner, EY Ireland  The hospitality sector has been hardest hit by the pandemic, so it is good to see targeted measures introduced to help this sector through the difficult winter months. The UK introduced a similar measure whereby the consumer only paid 50% of the cost at the point of payment so that is obviously a simpler method than what Ireland has introduced.

However, the UK scheme was only available for the month of August. So overall despite the hassle of keeping receipts and claiming this through your tax return, the Irish system will hopefully have a positive longer term impact on the hospitality sector.

Mairead O’Grady, Tax Partner, RBK  A tax credit up to a maximum of €125 and not receiving such until perhaps much later is just not enough. There are lots of other means which might have simplified it for people such as vouchers to cover a percentage of the spend, which would give an immediate benefit and avoid the unnecessary administrative burden of the rebate scheme.

Ciarán Medlar, Head of Tax, BDO  I believe this is a very positive initiative and a beneficial credit. It was a recommendation previously proposed by my colleague, Austin Hickey, BDO Director, in a document he produced – ‘12 Point Plan for Recovery in the Tourism Sector’. As we are all aware, the hospitality and tourism industries have been hit badly, therefore these initiatives to assist with tourism is greatly welcomed.

Cormac Doyle, Partner, Crowe Ireland  Ideally, hotels and restaurants should state on the receipt that this expenditure qualifies for tax relief as a prompt to the taxpayer to make the claim.

Shane O’Donovan, Tax Partner, PKF O'Connor, Leddy & Holmes  It would have been beneficial if the credit had been brought in immediately to cover summer holidays. The success of this credit will be in the administration of the credit. I think a snap and send or real time claim system would have been more efficient than a cumbersome retrospective system that requires input on both sides.

Michael Byrne, Partner, DBASS Chartered Accountants The UK scheme offered an immediate discount which I would suggest encourages people out more than a tax rebate! A VAT rate reduction may have done more for the hospitality industry than this.

Bruce Stanley, Tax Consulting Partner, HLB Sheehan Quinn Whilst any tax credit is to be welcomed, I think it is unlikely to be a significant factor driving the recovery of the sector. Those that were going to staycation may be encouraged to spend a little more when they do, knowing there’s a 20% rebate, but it is unlikely to sway someone into taking a break where there wasn’t one already planned.

A flaw in the measure is that it is a tax credit and as such only of benefit to those paying tax. Many pensioners are outside the tax net for example, so there is no benefit to them. Similarly, a lot of self-employed people have had a disastrous year and may be have no liability to offset against the credit.

The government dismissed a voucher scheme on the grounds it was too difficult to administer. However a 20% refund to vouched costs in place of a tax credit would have been fairer in my view and should have taken the same administration as the system now in place.

Frank Greene, Tax Partner, Mazars  The Stay and Spend tax credit on the face of it is interesting but when you look at the practicalities it is likely to have a modest impact. It is worth comparing the scheme to the position in Northern Ireland where VAT was reduced to 5%.

Aidan Byrne, Head of Tax, RSM Ireland  I think that anything that encourages people to spend in an industry that has been severely impacted by the pandemic makes sense. The scheme is somewhat bureaucratic but still should encourage people to plan trips away. We all like a deal and assuming the hospitality industry does not seek to recoup losses by increasing prices I believe it will have a positive impact.

I note that in the UK they have simply reduced their VAT rate to 5% for a period to encourage spending, similar to a previous measure introduced following the financial collapse here.

Mark Lonergan, Partner, SABIOS While any incentive to help the tourism industry is welcome, the Stay and Spend tax credit will have minimal impact. The UK’s Eat Out to Help Out scheme was much simpler, with a quicker payback time for the consumer. It also benefited people who don’t pay Income Tax. It should not be forgotten that this cohort forms an important part of domestic expenditure for Irish businesses.

Bryan Farrell, Tax Director, Walsh O’Brien Harnett  Many will argue that it should have been implemented sooner. Service providers (i.e. hotels, restaurants, cafes etc.) must register with the Revenue to qualify for the scheme. This has the potential to cause confusion and may result in credit claims not being processed.

Photo: Taoiseach Micheal Martin, ministers Paschal Donohoe and Catherine Martin, and Failte Ireland CEO Paul Kelly, with Fire Restaurant chef Richie Wilson.