Despite some early teething problems, it now appears that the Temporary Business Energy Support Scheme (TBESS) will make a real difference to businesses that have been struggling with increased energy costs. “The changes proposed in recent months are very significant,” says Mazars tax director Nóirín Cahalane. “The Government wanted to respond to the concerns businesses have in relation to energy costs and the changes will help to achieve that goal.”
The scheme, originally introduced in Budget 2023, was aimed at assisting businesses that face increased energy costs arising from the Russian invasion of Ukraine. “It is open to all businesses carrying on a trade or profession,” Cahalane explains. “That includes companies, sole traders and partnerships. To be eligible, all taxes must be up to date, but the business can have agreed tax warehousing arrangements in place with Revenue.”
It operates by providing cash payments to qualifying businesses that have experienced a specified increase in the monthly unit price of gas or electricity during the period covered by the scheme – originally from September 2022 to February 2023. Businesses make a claim for each separate month, based on a comparison between the energy prices paid that month and the corresponding period 12 months previously.
Initially, businesses had to have experienced an increase of at least 50 per cent in energy prices while the payment rate was set at 40 per cent of that cost, subject to a monthly cap of €10,000 for a business in a single location. That cap rose to €30,000 for businesses with multiple locations, such as a chain of shops.
Generous State supports for R&D available as Enterprise Ireland grants and tax credits
Passing on a family business can be hazardous for even the smallest of businesses
Business energy supports ‘very significant’ for firms struggling with costs, say Mazars
Transfer pricing can be an easy target for tax authorities
Cahalane points out that these caps are related to businesses with a single set of financial statements and corporation tax returns. Where multiple sets of accounts and returns are prepared for a number of separate entities within a group, each entity is assessed on its own for eligibility, must make its own claims, and is entitled to the separate cap amounts.
This can mean that a group of companies can receive more than the cap for businesses with multiple locations, but this is subject to an overall €2 million limit. This is set under the EU Temporary Transition and Crisis Framework brought in as a result of the Russian invasion of Ukraine.
A Revenue review published in February found a total of €33 million had been paid out of the €1.3 billion set aside for the scheme
“The scheme is administered by Revenue and businesses can register for it through the ROS website,” she adds. Once registered, they can have payments made through the e-repayments facility on the site. “To remain eligible, businesses must keep their tax affairs up to date.”
While the scheme was broadly welcomed when it was introduced in September 2022, there were some criticisms, with the requirement for a 50 per cent increase in costs being a particular area of focus. “Wholesale energy prices had already gone up between September and December 2021 as the world began to emerge from the Covid pandemic. Also, the cap of €30,000 was seen as too restrictive for certain companies operating from a large number of locations, for example within the retail and hospitality sector.”
A Department of Finance review of the scheme noted the relatively low uptake while a Revenue review published in February found a total of €33 million had been paid out of the €1.3 billion set aside for it in the budget. This only related to the first few months of the scheme, but it still pointed to a much lower uptake than originally anticipated.
Another criticism was that the scheme only related to electricity and gas and not to LPG and kerosene.
“In February, the Taoiseach announced a review by the Minister for Finance and the Minister for Enterprise, Trade and Employment,” says Cahalane. “Those reviews resulted in a number of proposed changes, some of which are subject to approval under EU state aid rules.”
The scheme was initially extended until April 30th, 2023, and that was subsequently extended again to the end of May. The 50 per cent threshold was reduced to 30 per cent, with effect from September 1st, 2022, and, with effect from March 1st, 2023, the caps were increased to €15,000 for single-location businesses and €45,000 for multiple location businesses. Furthermore, the payment has been increased to 50 per cent of the additional cost, also with effect from March 1st last.
It was also announced that a separate scheme would be developed for LPG and kerosene, but it is not known when that will happen.
“The Government listened to what was coming back from the business community alongside their own assessments and made a number of important changes,” she concludes. “Once approved, these changes should result in the scheme making a meaningful difference to the large number of businesses which have been contending with dramatically increased energy costs.”
For further information on or support with the Temporary Business Energy Support Scheme, contact the Mazars tax team.