Small businesses boon
Big boost for entrepreneurs in start-up phase as R&D tax credit increased from 25% to 30%
SMALL businesses are in line for a major budget boost with a significant increase to their tax credits.
The Research and Development (R&D) Tax Credit is being increased 25% to 30%.
Finance Minister Michael McGrath said: ‘This will maintain the net value of the existing credit for those businesses subject to the new 15% minimum effective tax rate, while also delivering a real increase in the credit to those smaller companies who will not be in scope of Pillar Two.
‘I am doubling the first-year payment threshold from €25,000 to €50,000, to provide cashflow support to companies engaged in smaller R&D projects. I hope this will encourage more businesses to engage with the regime.’
Mr McGrath also said the Department of Finance has undertaken a Cost Benefit Analysis of Revised Entrepreneur Relief.
‘I have asked my officials to examine opportunities to refocus the relief with a view to further improving the incentives for founders and entrepreneurs in the innovative start-up phase, and to ensure it is contributing to employment creation,’ the Fianna Fáil TD said.
Included in the Budget 2024 announcement is a targeted capital gains tax relief for angel investors in innovative start-up SMEs. This will be detailed in Finance Bill 2024.
Mr McGrath said the aim is to assist SMEs in attracting investment, and make Ireland a more attractive location for angel investment.
‘It will allow angel investors to benefit from a reduced rate of CGT when they dispose of a qualifying investment, for gains up to twice the value of their investment,’ the minister told the Dáil.
The Employment Investment Incentive scheme (EII) is being enhanced by standardising the investment period to four years for all investments, and doubling the amount an investor can claim relief on for four-year investments to €500,000.
‘These enhancements will help unlock more equity investment in smaller, early stage, businesses which are typically most in need of funding,’ said the minister.
‘My officials will also undertake a further review of EII in early 2024
€50,000 First-year payment threshold has doubled
which will focus on the potential for further simplification of the scheme, while taking account of the conditionality imposed by the EU General Block Exemption Regulation.’
The minister’s budget speech signalled a major change in CGT Retirement Relief. The upper age limit for the relief is being extended from 65 until the age of 70. There will be a limit on disposals to a child up to the age of 70.
These changes will come into effect from 1 January 2025.
In relation to the Key Employee Engagement Programme, minister McGrath said he has secured EU state aid approval to commence the outstanding 2022 amendments to the programme.
The amendments include the extension of the scheme to the end of 2025 and a doubling of limit for the total market value of issued but unexercised qualifying share options from €3m to €6m.
In a boost to the audio-visual sector, McGrath announced an increase in the current project cap on qualifying expenditure in the Section 481 Film Tax Credit from €70m to €125m, subject to state aid approval.
‘In addition, my officials will shortly begin engagement with the European Commission with a view to developing an incentive for the unscripted production sector, in line with state aid rules,’ McGrath stated.
For sole traders and micro firms, McGrath announced an increase in the existing VAT registration threshold for businesses from €37,500 for services and €75,000 for goods to €40,000 for services and €80,000 for goods respectively.
The finance minister also announced that in the coming weeks Revenue will establish a dedicated Tax Administration Liaison Committee subgroup, focused on identifying opportunities to simplify and modernise the administration of business supports.
The Terms of Reference of this subgroup will be agreed at TALC and a report on the recommendations of the subgroup will be delivered during the course of 2024, McGrath promised.
He also signalled that the Revenue Commissioners will shortly launch a public consultation on how digital advances can modernise Ireland’s VAT Invoicing and Reporting System.