Picture of Mark Lonergan

Mark Lonergan



Pubs, Covid-19 and Tax

The 2016 report into the Drinks industry by Tony Foley of DCU pointed to over 7,000 pubs in Ireland contributing more than €1bn to the exchequer from excise duty and VAT, while providing employment to over 40,000 people. Yet a recent €16m support package has been regarded as “measly” by publicans all over Ireland. They are correct. The supports include:

  • A 40% top up on the Restart Grant Plus
  • Waiver of court fees and associated excise and stamp duties for the renewal of pub and other liquor licences in 2020

With the industry-specific supports being so modest, maybe now is the time for publicans to review their business to understand the challenges and opportunities that lie ahead.

In this article, I outline the key points which publicans should be considering today.

Business Environment Analysis

The first step for any pub business in Ireland is to conduct an internal and external review of their business to understand the business environment at present and consider the opportunities going forward. Considering the present circumstances for wet pubs, there is an argument that any strategy for a pub owner going forward will have to include a food offering. Another trend which is likely in the industry is the closure of non-economically viable pubs, typically small rural pubs with limited transport links.

With the environment analysis conducted, the pub owner will have a clearer picture of the specific challenges for their business and can consider the options available. It is useful to be aware of the specific supports and access them if possible.

Specific Supports available

Overview of supports currently available to Vintners (pubs/ bars/ nightclubs):

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All publicans should familiarise themselves or take advice to ensure they are maximising the supports available to them.

Loss relief -Trading

An individual can offset a loss from a trade against other income (rents, interest, employment income) in that tax year. There is therefore considerable flexibility in losses utilisation across the various income streams in the tax year.

The recent legislation enacted in July 2020 allows for an acceleration of losses incurred in 2020 in respect of business whether they are conducted by sole traders or companies. This will result in repayments of tax previously paid for earlier years. This will improve cash-flow for previously profitable pub businesses.

For a business closing down, be it a sole trader or company, there is terminal loss relief. This can be particularly useful in terms of a business which closes down with a loss on last 12 months trading; this terminal loss can then be set back against the previous 3 years. The utilisation of this loss can provide refunds of tax paid in the previous 3 years to the extent that the loss allows.

Succession Planning

The values of many family pub businesses have plummeted over the past few months, particularly in the hospitality sector. The main taxes that arise in a succession plan are CGT, CAT and Stamp duty which are all based on the current market value of the asset at time of transfer. Transferring assets at low value to the next generation lessens tax burdens, threshold erosion and also allows future uplift to grow in the successor’s /children’s hands.

Thinking outside the box/restructuring options

There are considerable opportunities for tax planning as the various reliefs (in terms of scale/limits) are tailor-made for the scale of the typical Irish pub business. For example Retirement relief, if applied to a cash extraction from a pub company, can facilitate €750,000 being extracted tax free in the owner’s hands. Alternatively, Entrepreneur relief can allow for €1 million to be extracted from the company at 10% tax rate.

By way of illustration, a pub company could sell its assets (including pub licence) and then liquidate the company, and avail of Retirement relief on the liquidation proceeds to achieve a very tax efficient outcome.

Therefore, it would be useful for a publican to review his/her options. If the pub is carried on through a corporate vehicle, should liquidation be considered? Has the company cash in its balance sheet? Is there an opportunity for tax free cash extraction from the company by utilising Capital Gains Reliefs such as Retirement Relief /Entrepreneur Relief? Does the premises have an alternative use?

Director’s Duties

For pubs that operate their business through companies, it is very important that the directors take cognisance of their duties as directors. It is an unfortunate reality that many publicans trading in a corporate entity are insolvent at this point in time but the question is whether the company has a reasonable prospect of survival.

If the answer is no, the directors should seek professional advice immediately.

However, if the answer is yes, the directors should record the advice and actions taken to pursue survival, without significantly compromising their creditor position. Whilst the Office of the Director of Corporate Enforcement has offered clarity on assessing directors of insolvent companies – they will recognise external factors such as Covid-19 are outside the Director’s control – this does not extinguish the director’s responsibility to act honestly and responsibly.

If a director is of the opinion that his/her company is facing insolvency, they should seek professional advice. This advice will go a long way to protecting the director’s position.


The precarious nature of a pub as a business can be clearly seen in the lending policy of the banks whereby finance is not forthcoming in respect of a pub business with a turnover of less than €500,000.

This leads to the very relevant question for every publican: is this pub commercially viable? And this question of viability must be looked at through the prism of the “new normal” – advance bookings, social distancing, lower capacity etc.

But don’t just think about your business one dimensionally, think bigger and see the options available and even the opportunities to be exploited.. then structure a plan to safeguard your future

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