BUDGET 2024: MAIN POINTS FOR BUSINESS

New Capital Gains Tax relief for angel investors in qualifying startups will provide for a CGT rate of 16% on gains up to a value of two times the initial investment. Minimum investment period will be three years and lifetime relief limit will be €3m.

Increase of the Research & Development tax credit from 25% to 30% for claims filed in 2025 and increase in the first-year payment threshold to €50,000. No changes are being made to the quantum of credit.

The Employment Investment Incentive scheme relief will standardise the minimum holding period to four years. The amount on which relief may be claimed will be doubled to €500,000.

The upper age limit for claiming CGT Retirement Relief will be extended from 65 to 70 from 1 January 2025. From that date a limit of €10m on the relief available on transfer to a child is to be introduced.

Key Employee Engagement Programme (KEEP) is being extended until 31 December 2025. It is also being modified to provide for the buy-back of KEEP shares by a company from employee. Lifetime company limit for KEEP shares doubled to €6m.

Special Assignee Relief Programme (SARP) is being extended to 31 December 2025. The threshold income to avail of the scheme is being increased from €75,000 to €100,000.

The BIK relief of €10,000 on the OMV of vehicles in categories A to D has been extended to 31 December 2024. The amendment lowering the limit of the highest mileage has also been extended the end of 2024. VRT relief for BEVs is extended to the end of 2025.

Landlords’ rental income will be disregarded for income tax at the standard rate (20%) in the amounts of €3,000 in 2024, €4,000 for tax year 2025 and €5,000 for 2026 and 2027.

From 1 October 2024 all PRSI contribution rates will increase by 0.1%.

Increase in VAT registration thresholds to €40k (services) and €80k (goods) from 1 January 2024.

Maximum qualifying expenditure for s.481 Film Relief will be increased from €70m to €125m, subject to state aid approval. The credit is granted at a rate of 32% of qualifying expenditure.

Extension of Accelerated Energy Efficient Equipment Capital Allowances.

0% VAT rate to apply to audio books and eBooks from 1 January 2024.

Improved excise relief for small cider producers and microbreweries.

Knowledge Development Box,

which provides for an effective 6.25% rate of corporation tax on certain income from qualifying IP assets, extended for four years.

15% minimum effective tax rate for in-scope corporate taxpayers as provided for under the OECD Pillar 2 agreement.

EMPLOYMENT INVESTMENT INCENTIVE

One of the main Budget 2024 reforms relates to the Employment Investment Incentive scheme. Previously, income tax relief for EII investment was granted at the marginal income tax rate of 40%. From 1 January 2024 the rate of relief will range from 50% to 20%. 50% for businesses that ‘have not operated in any market’.

35% for a business in its first EIIS fundraise within seven years of its first sale.

20% for a business in its second or subsequent EIIS fundraise. 20% for a business expanding into new markets or regions.

30% for investments via a ‘Qualifying Investment Fund’, of which there is only one in Ireland. The new rules will disappoint companies with a business plan that assumed their follow-on EII fundraising would have 40% tax relief attached. As with all budget measures contained in the Finance Bill, this follow-on EII funding issue is sure to come under scrutiny from politicians before the Finance Act is finalised.

Finance minister McGrath has also raised the maximum EII funds a company can raise from €15m to €16.5m, with a €5.5m per annum limit, while the investor annual investment maximum has doubled to €500,000. Accountant Andrew Guerin commented that EII simplification will be welcome. “The mechanics of the scheme have become extremely complicated, resulting in considerable delays in the issuance of appropriate certificates to procure the tax relief for the individual investor,” he said.

RETIREMENT RELIEF

Retirement relief is a reduced rate of Capital Gains Tax for disposals of businesses and farms. For disposals to third-party purchasers, Budget 2024 proposes to raise the age limit for the upper threshold from 65 to 69, from 1 January 2025. A new limit of €10m is also being introduced for disposals to a child up until the age of 70.

PwC tax expert Nicola Quinn commented: “The introduction of the €10m cap will likely prompt many business owners to consider succession before January 2025. We would be concerned that chasing a tax deadline might bring with it the risk of business owners losing sight of the often far more important questions about what’s best for the family, the business or the people who work in the business.”

Bruce Stanley, partner in HLB Ireland, said that the €10m limit for transfers may result in family businesses being carried to the grave. “A business may be property rich but not have the cashflow to allow the owner to transfer it to the next generation,” he explained. “Succession planning is key to the long-term stability of family businesses, so anything that blocks timely family transfers should be avoided.

“For owners aged between 55 to 66 with a family business they intend to transfer valued in excess of €10m, then it may be necessary to look at this in 2024 if a CGT liability is to be avoided.”

R&D TAX CREDIT

Budget 2024 has increased the Research and Development tax credit to 30%, largely to offset the impact of the Pillar Two minimum effective tax rate on large multinational companies, who benefit most from the incentive.

Damien Flanagan, tax partner in KPMG, commented: “Ireland’s R&D tax credit is truly best in class, and as innovation incentives are going to be more important in a post-BEPS world, the government is making sure that Ireland is well placed to continue to attract investment in Research, Development & Innovation.”

EY’s Ian Collins noted a sting in the tail in the Finance Bill. There is a new pre-notification requirement for companies intending to claim the R&D tax credit for either the first time or for those which have not claimed in the past three years. Required details include a description of the company’s R&D activities, and the number of employees carrying on R&D activities.

‘The €10m limit for transfers may result in family businesses being carried to the grave’