Tax relief schemes likely to be spared

The Budget is expected to contain some good news for business, with the Business Expansion Scheme likely to be extended beyond its existing termination date at the end of this year.

Speculation is also rising that the Minister for Finance, Mr McCreevy, will retain the section 481 film tax relief, while a new tax credit to encourage research and development is also featuring in late discussions on the final shape of next Wednesday's package.

The Business Expansion Scheme (BES) gives tax relief to investors who put funds into qualifying businesses, mainly small and medium companies in manufacturing and traded services. In place since 1984, it allows investors to obtain relief on up to €31,750 per annum at their highest income tax rate.

The scheme had been due to end on December 31st this year, but the Minister is now expected to further extend its term as part of a policy to encourage investment in enterprise.

Another scheme - the Seed Capital Scheme which gives similar tax relief for those who invest in setting up their own business - is also likely to be extended beyond the end of this year.

The cost of the schemes is relatively minor. Together they cost almost €18 million in the 2000/01 tax year and €31 million the previous year.

Separately, the Tánaiste, Ms Harney, IBEC and the industrial agencies have been lobbying for a new tax credit that would allow companies write off their research and development spending against corporation tax.

While the current tax regime encourages companies to locate considerable profit activities here, it is not seen as favourable to R&D, which is typically located in higher tax areas where the related expense write-off can be more valuable.

The introduction of a tax credit would increase the attraction of Ireland as a centre for research, a key part of Government policy and one attracting considerable Exchequer funding in other areas.

The other key area of interest for business will be the future of the section 481 film relief, due to end on December 31st next year. The scheme, which provides tax relief for investment in qualifying films, has been the subject of intense lobbying from the film industry, which says it is essential to the continuation of the industry here. The scheme cost the Exchequer €30 million in the latest year for which figures are available and there is speculation that the limited cost may encourage the Minister to spare the relief.

No change is expected in plans to end a range of other property-related tax reliefs - including the urban and rural renewal and the car-park schemes - at the end of next year. Revenue statistics show that these property schemes are the main vehicles used by wealthy individuals to reduce their tax liability.

What is likely to happen to your spending power? pages 8 & 9