BPFI calls for enhanced tax measures for SMEs in Budget 2020

The Banking & Payments Federation Ireland (BPFI) has published its pre-Budget 2020 submission, calling on the Minister for Finance to enhance existing measures for small and medium-sized enterprises (SMEs) rather than focusing on introducing new ones.

The BPFI, which represents Ireland’s banking sector, believes improvements to the Capital Gains Tax Entrepreneur relief and the Employment and Investment Incentive (EII) would be enough to assist SMEs across the country.

Brian Hayes, chief executives, BPFI, said that Budget 2020 was more important than ever amid the backdrop of the UK’s impending exit from the European Union (EU). Hayes said that the government should ensure “every support possible is provided to the SME sector which, as everyone acknowledges, is the backbone of our economy”.

The BPFI wants particular attention paid towards the EII scheme, which permits small businesses to raise funds by offering outside investors income tax relief on investments up to €150,000 per annum.

The federation believes the EII limits should rise, pointing to the UK’s equivalent scheme which gives investors income tax relief up to €1.1 million.

Meanwhile the BPFI is also calling on the government to consider improvements to Capital Gains Tax (CGT) Entrepreneur relief. Again, it believes the government should take a leaf out of the UK’s book. The UK offers a lifetime limit of €11.1 million of reduced CGT rates for entrepreneurs, compared with just €1 million in Ireland.

The BPFI also believes the Key Employee Engagement Programme (Keep) should be revised. The federation’s pre-Budget submission suggests removing the condition under which an entrepreneur must have worked in a business for more than 50% of the time in a managerial or technical role for three of the previous five years, in order to pay a reduced rate of tax on company shares.

The federation claims that take-up of the Keep initiative has been somewhat low, blaming the existing conditions for thwarting businesses from being able to offer share options and retain key staff members in a tax-efficient manner.

“Key issues are around the valuation of the shares for private companies. [This includes the conditions that state] employees can only work for a single company and the fact that only full-time employees can avail of the scheme”, said the BPFI
 

Date published 18 Sep 2019 | Last updated 18 Sep 2019