SMEs need trove of tax breaks to cope – PwC

STRUGGLING small firms should be allowed to ‘borrow back’ 2019 tax payments, offset current losses against profits through 2024 and gain a trove of fast-track tax deductions, according to a team of PwC tax consultants.

Their submission to Government, published today, describes many of their scores of proposals as “heretofore unimagined” – but effective to boost small firms’ perilous cash positions.

“The situation is so serious, and the threats so large,” said Nicola Quinn, tax partner at PwC Cork. “Decisive measures need to be taken to help Ireland’s SME sector.”

She said PwC’s ideas involve “a suite of measures, including for sectors badly hit such as hospitality, tourism, retail and motor, along with accelerated tax deductions aimed at preserving cash, encouraging investment and injecting demand. This should ultimately save and create jobs.”

Among PwC’s proposals are:

:: Firms could set 2020 losses against profits for three years, up from one year – so long as that firm traded profitably before the crisis. This would “ensure that the measure supports viable businesses”.

:: Workers on reduced hours or salaries would gain a €1,000 tax credit to protect net pay.

:: VRT on motor sales would be cut by 20pc and VAT on hospitality and tourism to 5pc.

:: The 0.5pc rate for employer PRSI – introduced alongside emergency wage subsidies – would run through the end of the year. Firms normally pay PRSI equivalent to at least 8.8pc of employee pay.

:: A “borrow back tax” scheme would let companies borrow up to a quarter of their 2019 tax payments.

:: Firms would receive 100pc advance capital allowances for spending on employees’ home-office equipment and for all investments in plant, equipment and vehicle fleet. These allowances – currently available only for certain energy-efficiency purchases – would promote home working, aid SMEs’ cash flow and drive sales to trading partners.

:: To spur online sales skills, retail and hospitality firms would get a tax break worth twice the value of their investment in new or improved online sales channels.

Tax partner Colm O’Callaghan said SMEs “require creative and heretofore unimagined responses”.

While forbearance measures on tax payments were helping to preserve their cash, he said, many SMEs now need “cash injections” even more.