As mentioned at the outset there was little or nothing for the SME sector in this budget. Why does the government continue to treat this sector as second class citizens? These are the people who create employment and are the same people who won’t leave the country if policy changes. The changes that did come were in the main, negative for small businesses. The minimum wage has been increased to €9.80, however at the very least those on the minimum wage won’t be subject to the higher rate of employers PRSI. While on Employers PRSI, the rate will creep up to 11.05% by 2020. So those in the tourism trade have been hit with an increase to the VAT rate, an increase to minimum wage and an increase to employers PRSI.
On a more positive note the tax relief has been extended for new start up companies up until 2021. This sounds good on paper but it is a difficult relief to avail of as it is based on the number of employees the company has (most start ups don’t have any) and only applies to companies who start a new trade, it doesn’t apply if you take over a trade.
One point that’s worth noting in relation to BIK on company cars is that the 0% for electric cars has been extended for a period of 3 years, so at least we have clarity on that. Note that the original market value of these cars must be below €50,000, so don’t start buying Tesla's for your employees or directors. In relation to investment the SME sector is still struggling to get access to bank finance and therefore the news that the Finance Bill will contain measures to improve the EIIS process are to be welcomed. However we don’t know what these measures entail so we will wait and see before commenting further. At this stage though, any improvement will be welcomed as the current process is now fully broken. There was mention of a future growth loan scheme for SME’s to protect against Brexit but there was minimal details of what this will involve.
There has been slight improvements to the KEEP scheme which is a share option incentive for the employees in the SME sector. New measures essentially mean employees will now be able to receive more shares than previously set out. However for me the mechanics of the scheme need to be improved if the number of companies availing of the scheme are to be increased. For instance, the employee will only really opt to buy the shares when instantly they can sell them to a 3rd party. Under current rules it is very difficult for the company to buy the shares off the employee, therefore it only really works if a 3rd party buyer comes in and buys the whole of the company.
The other corporation tax measures that were introduced will not affect most businesses here in Ireland, for instance film relief has been extended to 2024 (company claims the relief as opposed to the investor) and there is accelerated allowances where an employer provides fitness or childcare facilities. Exit tax (as and from midnight last night) on the transfer of assets out of Ireland is now confirmed at 12.5% and this gives certainty to companies coming into Ireland. Previously the 33% rate could have applied meaning some companies were thinking twice about coming to Ireland as eventually leaving would have been costly. Controlled Foreign Company or CFC rules will come into effect form 1 January 2019. While this is complex legislation the main point of it is to prevent the diversion of profits to offshore entities. As our tax rate is relatively low anyway this shouldn’t be a big issue, especially for the SME sector. The minister will also review the Transfer Pricing rules currently in place, but again this is more aimed at the multi-nationals rather than the SME sector.