‘EIIS is too complex for many SMEs’

MICHAEL McGIVERN Head of Tax Evelyn Partners Ireland

CAPITAL TAXES The current SME tax regime requires reform to support start-ups and incentivise entrepreneurs to stay the course and build to scale. At Evelyn Partners, we recommend various measures, including the following: ■ Taxing certain dividends at the 20% income tax rate (instead of up to possibly 55%). ■ Introduce a form of tapering CGT rate relief to encourage entrepreneurs to stay involved for longer in enterprises.

■ Reintroduce a form of CGT rollover relief to encourage reinvestment by entrepreneurs.

■ The CGT Entrepreneur Relief limit of €1m should be increased, and the relief should also be open to passive investors. CORPORATION TAX Ireland’s 2021 corporation tax yield was €15.3bn, which was almost one quarter of the entire tax yield, and 80% of this came from foreign owned multinationals. In July of this year, the Department of Finance’s Tax Strategy Group advised that such concentration is a ‘matter of concern in considering longerterm sustainability and will require ongoing careful monitoring’. This has been echoed by the Irish Fiscal Advisory Council, which has warned against an over-reliance on potentially volatile and vulnerable corporate tax receipts.

These warnings are being made in the context of significant changes arising in the global tax landscape. Therefore, government policy should include a sustained focus on growing the SME sector. Irish SMEs account for 99.8% of the total number of business enterprises in the country and almost 70% of total private business employment.

EIIS This scheme, when working correctly, should be an important tool for SMEs to utilise to enable them to raise finance to scale their businesses. However, the problem is that EIIS is too complex for many SMEs. As we see it, among the required reforms for the EIIS are the following:

■ The introduction of allowable CGT losses

for loss-making EIIS investments.

■ The simplification of the rules in general to enable SMEs to understand the scheme better.

■ Penalties should be less severe for SMEs getting it wrong in their attempts to be EIIS compliant.

■ And lastly, the relaxation of certain aspects of the holding company structures and of connected party rules.

EXIT RELIEFS We work with a lot of business owners where these reliefs are critical, particularly when it comes to planning a succession strategy. At Evelyn Partners, we have experience with business owners who tend to have a general awareness of these key reliefs. However, their insight into the actual workings of Entrepreneur Relief and Retirement Relief is limited, but this is where we can provide advice and guidance. Business owners need to engage with a specialist tax adviser early in their planning, which in some cases should be undertaken years in advance to ensure you maximise the benefits of the reliefs.