‘The courage required to start a business should not be underestimated’
BRUCE STANLEY
ACTIVITY Having navigated the pandemic and dealt with the challenges of Brexit, we are seeing a lot of business owners looking at succession planning. Building a sustainable business for the future is key for many ambitious SMEs. We are seeing many companies, particularly in the tech, renewables and food and agri sectors, putting in place structures that will facilitate employee participation, expansion, and/or third party investment.
Rising interest rates appear to have slowed down the M&A market, although deals haven’t stalled altogether, and remain prevalent in some sectors where there is a continued appetite for good profitable SME businesses where there is scale and growth opportunity.
The increasing complexity of compliance is leading a lot of our clients to look at outsourcing their tax needs, such as VAT, payroll and RCT. Having a tax firm providing these services rather than operating them in-house ensures continuity of service, mitigates mistakes, provides enhanced security, and ensures compliance with regulations.
TAX POLICY FDI has been hugely important for the country in terms of jobs and tax revenue, and it is important for the Irish economy that we remain a destination of choice for multinationals and continue to be business-friendly. That policy naturally needs to extend to indigenous businesses too. We have one of the most highly educated populations in the world and extending opportunities to Irish start-ups is vital to create the right infrastructure for growth.
If we don’t give space and support for the indigenous sector to build productivity and innovation, we risk losing our best talent.
The Irish economy can’t become over-reliant on MNEs. Local businesses are at the heart of our communities and must be encouraged to grow and ensure that we can continue to scale business in Ireland. We would welcome tax breaks and supports for start-ups that are easy to operate. The R&D tax credit and knowledge box are valuable reliefs, but they are rarely used by indigenous start-ups due to the complexity of making claims. The courage required to start a business from scratch should not be underestimated, and the entrepreneurs in our society should be given every opportunity to succeed.
A removal of the close company surcharge for investment through a private company accompanied by rent control at a reasonable rate could see a lot of Irish private capital flowing back into property investment, where it could be seen again as a viable business opportunity in a secure asset with a reasonable return.
TAX INCENTIVES Tax incentives should be designed to promote activities that are beneficial to society as a whole. The
artist exemption is a classic example of an incentive that supports the Irish arts sector and benefits society. Pensions remain the first choice for most owner managers and professionals in reducing their tax burden and the introduction of new rules in that area has given rise to new opportunities.
For those businesses that can incorporate, this remains the number one way to reduce the tax burden, as the gap between income tax and corporate tax rates is significant. Pension funding through a company is also a lot more tax efficient, providing a 55% tax deduction rather than the 40% available for personal contributions.
Some clients have been considering the Portuguese Non-Habitual Residence scheme as part of their long term planning, but the recent announcement that it is ending has them looking at alternatives. There are some generic tax breaks and incentives that can be widely used, but for owner managers and professional clients, a bespoke tailored plan is required. This will depend on their personal circumstances and their goals. There isn’t a one-size-fits-all solution when it comes to taxation.