EMMA ARLOW

Deloitte Ireland LLP

Tax Director Deloitte Ireland LLP

TAX ISSUES Overall, clients and businesses are looking to the end of the Covid-19 pandemic with a focus on recovery and future growth opportunities. With this renewed focus has come increased attention on a number of key tax issues, including the upcoming Interest Limitation Rules, to be introduced in this year’s Finance Bill.

The rules will act to limit the tax deductions available to a taxpayer on interest incurred on borrowings by reference to a fixed percentage of the taxpayer’s EBITDA. As these restrictions will be the first time that such rules are introduced into Irish law, corporate taxpayers will likely watch these developments with interest.

DEBT WAREHOUSING Despite the scheme’s good intentions, it does not apply to corporation tax balances. While some businesses may have made a small profit, rolling restrictions may have impacted on their cash flow to discharge any corporation tax liability. As such, these balances cannot avail of the debt-warehousing scheme, placing companies under further pressure.

The end of the debt-warehousing scheme also needs to be looked at in greater detail, to avoid a cliff-edge effect, where balances cease to be warehoused. It is essential that any recovery of tax due does not come with unduly high interest rates on overdue taxes. The Irish Tax Institute has made the welcome suggestion that the interest rate charged on overdue taxes should be aligned with the cost of borrowing, at c.3%.

With respect to clients repaying this tax debt, the advice — as always — is to engage with Revenue where difficulties are expected.

For the first time, some businesses may be experiencing payment difficulties. With early and meaningful engagement, it may be possible to agree a payment arrangement with Revenue.

TAX REFORM There are definite areas for improvement when we look to schemes such as the Employment Investment Incentive. The need for improvement becomes more apparent when we compare the existing regime to more favourable competitor regimes, such as the UK’s Enterprise Investment Scheme, which allow for higher levels of annual investment, as well as more favourable aspects from a capital gains perspective.

The KEEP scheme is intended to help SMEs attract and retain key employees, but the scheme has experienced a low takeup in recent years. A number of amendments could be considered to enhance the scheme to ensure its effectiveness, including allowing the buy-back of KEEP shares to create liquidity and allowing the continuance of the relief in the event of a reorganisation.

The R&D tax credit is one of Ireland’s most important levers for encouraging investment in the knowledge economy. While changes in prior years looked to increase the rate of the credit from 25% to 30% for SMEs, the regime would benefit from clarity as to the treatment of rental expenses. This would ensure parity between those renting property in which qualifying activity takes place, and those who own property outright.

‘Clients’ focus is on recovery and future growth opportunities’