Majority of family firms concerned over tax implications of handovers — KPMG
ALMOST two in three family businesses are concerned about the tax implications of handing over the ownership of their firm, according to new research.
The KPMG Irish Family Business Baromoter found 23pc of respondents plan to pass ownership of their business to the next generation, while 42pc plan to pass on management responsibilities as well.
But 87pc of respondents feel that dealing with the emotional fallout of relinquishing ownership is one of the greatest challenges they face in handing over the reins.
Only 37pc of European respondents saw this as the major challenge, with KPMG speculating this could reflect that many of the Irish respondents are founders with a very strong attachment to their businesses.
The research, which surveyed more than 1,600 family businesses online between May and June this year, was undertaken across Europe and was supported by the
Spring team, which is an EU-funded project.
On the concern regarding the tax implications of handing on ownership of family businesses, the report said it highlighted the need for reform of the Irish tax system, in order to “facilitate the handover of family businesses from generation to generation”. The main concerns identified by family businesses included increased competition (95pc), the war for talent (79pc) and increased tax rates (72pc).
The survey also found that
Irish businesses were feeling very positive about the future, with 91pc stating they were confident or very confident about their company’s outlook for the next 12 months.
Ireland was well ahead of the next most confident country in Europe, Portugal, which was on 78pc.
On financing options for funding business growth, just over half of Irish respondents stated that the retention of profits was an attractive option for their firm.
Only 13pc of Irish respondents considered bank financing and debt as attractive, compared with 41pc in Europe.
Camilla Cullinane, partner with KPMG Private Enterprise, said the call for a review of the taxation of the transfer of family business ownership in Ireland was a key takeaway.
“The value of family businesses to our economy cannot be understated, and it is vital that the capital gains tax regime accommodates phased transitions at the right time for the family and the business,” Cullinane said. Olivia Lynch, partner with KPMG Private Enterprise, said the high level of optimism compared with European peers was surprising, but a reflection of the resilience of the business community in Ireland.
“It is extremely encouraging to see such strong commitment to innovation and investment in skills — both of which are essential for businesses to thrive in a rapidly changing work environment where technology and data are pervasive, and competition is increasingly global,” Lynch said.