SFA recommends significant tax changes to support small business

Thursday, 18 October 2018

    Promote entrepreneurship through reform of existing tax reliefs and new tax policies
    Incremental reduction of the Capital Gains Tax to 20% needed
    Changes necessary to attract and retain key employees and reduce the cost of doing business
Launching the Small Firms Association’s new campaign - A Supportive Tax Environment for Small Firms - in collaboration with PKF O’Connor, Leddy & Holmes, Sven Spollen-Behrens, SFA Director, said: “Tax policy can have a very significant impact on several areas affecting Irish small and indigenous businesses such as: investment, expansion, and attracting new talent. The administration and cost of operating the tax system can also be very onerous on small businesses. To support small businesses, we are recommending changes to our current tax policies under three tax pillars investment, employment and administration.

Mr Spollen-Behrens stated: “The SFA is calling for a whole-of-government national Small Business Strategy, with a roadmap towards significant policy goals: increased productivity, export diversification etc. Despite the recently announced tax changes in Budget 2019, additional changes to our tax policies would support the achievement of these goals.”
Tax Partner Catherine McGovern, PKF O’Connor, Leddy & Holmes said: “We call on the Minister for Finance to develop tax policies that can assist small indigenous businesses. Based on our experience with clients, we believe the key three tax pillars should be investment, employment and administration. Immediate changes to tax policy are required in order to assist these businesses to attract and retain staff, encourage entrepreneurs, promote innovation, attract investors and reduce tax administration. It is vital that positive steps are taken to help support and promote the businesses that are the foundation of the Irish economy.“

Mr Spollen-Behrens concluded: “Taxation is one of the most powerful tools available to government. By implementing the tax policy recommendations within this document, the Government would be improving Ireland’s relative tax competitiveness to create a supportive environment for small businesses.”

Key Recommendations:
    1. Reduce the current CGT rate of 33% immediately to 28% and ultimately to 20%, in line with the OECD average.
    2. Increase the lifetime limit of €1m for Entrepreneur Relief immediately to at least €5m and in the longer term to €15m.
    3. Introduce investor relief at a 10% CGT rate up to lifetime taxable gains of €1m.
    4. Establish an R&D centre of excellence in Revenue whereby the R&D Tax Credit claims could be reviewed more efficiently. Introduce a method for companies to obtain R&D Tax Credit pre-approval from Revenue. Simplify the system of claiming the R&D Tax Credit and the level of records required.
    5. Increase EIIS relief from €150,000 to at least €500,000 per annum. Allow the EIIS tax relief to be claimed in its entirety in year 1 at 40% and apply the relief to PRSI and USC also.
    6. Review the KEEP legislation to make it more widely available and attractive to companies and employees, to ensure that it satisfies the purpose for which it was created to provide tax efficient share options to employees and that they can avail of CGT rates on the disposal of their shares (even to the issuing company).
    7. Make the payment of professional subscriptions by employers tax exempt.
    8. Create a new talent regime for small firms, so that they can attract talented and skilled employees from outside Ireland to enable them to grow their business.
    9. Issue Revenue guidance to clarify the designation of an individual as an employee or self-employed for tax purposes.
    10. Reduce the interest rate for late payment of tax and amend fixed penalties to be more proportionate to the level of the tax liability.

For further queries and interviews, please contact Sven Spollen-Behrens, SFA Director, on sven@sfa.ie or 087 160 9403.
Issued by Elizabeth Bowen, Senior Executive, elizabeth.bowen@sfa.ie, 01 6051626 / 087 188 2951

The SFA proudly represents a diverse membership of businesses with less than 50 employees; homegrown and spanning every sector of our economy. Our members can be found in every town and every city in Ireland.
Its vision is of Ireland being the most vibrant small business community in the world - supporting entrepreneurship, valuing small businesses and rewarding risk takers. Its mission is to be the trusted partner of small businesses in Ireland, to deliver business-focused advice and insights to member companies, influence government policy to the benefit of small businesses and connect its members in a thriving community.