Budget 2020: Government urged to focus on enhancing existing supports to SMEs
Increase limit on EII and extend tax relief for entrepreneurs, says banking association
Rather than bring in new measures, Minister for Finance Paschal Donohoe should focus on enhancing existing ones in this year’s budget, the BPFI have said. Photograph: Alan Betson
More needs to be done to help small and medium-sized businesses in this year’s budget, according to Banking & Payments Federation Ireland (BPFI).
In its pre-budget submission, the association, which represents the banking sector in Ireland, is calling for a range of existing measures, such as the Employment and Investment Incentive and the Capital Gains Tax Entrepreneur relief, to be enhanced to help small and medium-sized businesses across the State.
Against the uncertain background of Brexit, BPFI chief executive Brian Hayes said it was important that “every support possible is provided to the SME sector which, as everyone acknowledges, is the backbone of our economy”.
More specifically, given the financial constraints facing the Government in this year’s budget, Mr Hayes said some adjustments to existing measures “would be particularly impactful for businesses – and for our indigenous business sector in particular”.
These measures include the Employment and Investment Incentive (EII) scheme, which allows small businesses to raise money by offering investors income tax relief on investments up to a maximum of €150,000 a year. The banking group wants to see this limit increased, pointing to the example of the UK, where the limit on the equivalent scheme is £1 million (€1.1 million). It also wants to see investors eligible for full tax relief at the time of the investment.
On Capital Gains Tax Entrepreneur relief, which allows entrepreneurs to pay a lower rate of CGT on business gains, the BPFI also wants Government to look across the Irish Sea. The UK has a lifetime limit of £10 million (€11.1 million) in this area; in Ireland, it is just €1 million.
The lobby group also wants the condition under which the entrepreneur must have worked in the business over 50 per cent of the time in a managerial or technical capacity for three out of the previous five years removed.
The Key Employee Engagement Programme (Keep) was introduced back in 2017 to allow key staff pay a lower rate of tax on company shares. In principle, Keep should be a useful tool for businesses to offer share options in a tax-efficient manner to retain key employees. However, despite changes in last year’s Finance Act, its take-up has been very low.
“Key issues are around the valuation of the shares for private companies, [the stipulation that] employees can only work for a single company and the fact that only full-time employees can avail of the scheme,” the BPFI said.