MAIREAD HARBRON

PwC

‘It is important that tax incentives are fit for purpose’

MAIREAD HARBRON Director Private Client Services, PwC

TAX ISSUES For certain clients, particularly those in public-facing sectors, the various Covid supports and debt warehousing schemes have been to the fore over the last year. For other clients, such as private business owners, Covid has provided an opportunity to reflect on the longer term, such as planning their own succession from their business.

Brexit has also put significant pressure on businesses that were already reeling from the effects of Covid.

TAX WAREHOUSING The key concern with having an abrupt end to warehousing is that we’ll see a lot of businesses that are on their recovery journey being plunged into financial difficulty, before they have had an opportunity to trade their way out of debt.

For clients that have large warehoused debt outstanding, we are helping them to forecast and model repayment into their cashflow plans. However, for some, repayment in the short term is not realistic.

I would applaud a budget (if not a sooner announcement) that extends the warehousing until at least 31 December 2022, in order to facilitate businesses to deal with other creditors, many of whom will be interdependent and inter-linked SMEs within their local communities.

TAX INCENTIVES It is important that tax incentives aimed at SMEs are fit for purpose. KEEP is a fantastic scheme that provides a tool to SMEs to attract key talent. I would like to see clearer measures relating to the valuation of the shares, to make the grant of KEEP options more certain and, given there are limited opportunities for exit, share buybacks should be taxed under CGT.

FAMILY BUSINESS Even when you factor in the current reliefs available, there are several blockers to the efficient transfer of family-owned businesses. As a simple measure, I would recommend the removal of the arbitrary €3m cap on the value that can qualify for Retirement Relief on the transfer of shares for those aged 66 and over. In practice, this cap means that business owners who have missed this window delay transfer until their death, long after the appropriate time to transfer has passed. More creative measures could also be introduced, like those in the UK, that allow an ‘upfront instalment’ of gift/inheritance tax, with any balance of tax being spread over a longer term period of at least 10 years.

Ireland’s CGT rate is among the highest in the world and has long been a cause of frustration for entrepreneurs. The intention of Entrepreneur Relief is to encourage serial entrepreneurs to establish new companies. The current lifetime limit of €1m is too low. I would encourage an increase to €5m at the very least, to back Irish entrepreneurs to do more of what they do best.