There is a particularly strong SME focus in this year’s pre-Budget submission from Banking & Payments Federation Ireland (BPFI). The submission makes a series of proposals to enhance a number of existing provisions that would greatly benefit small and medium-sized businesses all over the country.
The areas identified include the Employment and Investment Incentive (EII) Scheme, the Key Employee Engagement Programme (KEEP), the Research & Development Tax Credit, the Accelerated Capital Allowance Scheme and the Capital Gains Tax Entrepreneur Relief.
“With so much concern around how Brexit is likely to impact on the economy, it is important that every support possible is provided to the SME sector which, as everyone acknowledges, is the backbone of our economy”, states Brian Hayes, BPFI Chief Executive.
“We recognise that a great deal is already being done by Government and various State agencies to help make our SMEs more resilient in the face of the challenges presented by Brexit, potential trade wars and other factors. At the same time, we also recognise that some SMEs could themselves do more to harness the various supports that are already in place. However, while acknowledging the fiscal constraints under which the Government finds itself, we believe that some adjustments to existing measures would be particularly impactful for businesses – and for our indigenous business sector in particular.”
In summary, BPFI believes that Government should consider addressing the following (details are in the Appendix, available here):
- Employment & Investment Incentive Scheme (EII)
- Increase the annual investment limit to more attractive levels
- Investors should be eligible for full tax relief at the time of the investment
- Gains in the value of shares should be subject to capital gains tax rather than income tax
- Where capital losses are incurred by investors they should be eligible to claim loss relief.
- Capital Gains Tax Entrepreneur Relief
- In order to incentivise entrepreneurial investment, particularly in the context of Brexit and the potential for UK business investment in Ireland, the lifetime limit of €1.0m should be increased; also, the condition for the investor to have worked over 50% of the time in a managerial or technical capacity in the business for three out of the previous five years should be removed.
- Key Employee Engagement Programme (KEEP)
- Provide guidance on the process of share valuation to assist employers in determining accurate share valuations without undue administration
- Amend the scheme such that employees can work across other companies within a group and they would still qualify in meeting the minimum working time requirement
- Reduce the minimum working time requirement to facilitate access for part-time workers
- Research & Development (R&D) Tax Credit
- This important R&D Tax Credit should be reviewed to allow SMEs claim the full 25% tax credit for outsourced R&D. Also, the cashflow aspect of the tax credit should be enhanced so that it’s more attractive for smaller SMEs to undertake R&D.
- Accelerated Capital Allowance (ACA)
- Pending the proposed National Digital Strategy, and to accelerate investment by SMEs in digitalisation, consideration should be given to extending the current ACA in place for energy efficient products and equipment to targeted digitalisation investments such as robotics, computer aided machinery or such other digital projects to enable SMEs to make the necessary investment in digital transformation.
Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland. Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has some 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.
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