4 Ways Budget 2015 Will Affect SMEs

Woman with pen and paper with a calculator and coffee.

14th October 2014 saw Ireland’s first “non austerity” Budget since 2007. So what will it mean for businesses in Ireland? Mike Gaffney, Tax Partner at KPMG in Ireland, outlines some of the elements affecting SMEs.

1. Employment and Investment Incentive Scheme (EIIS)

This was previously known as the “Business Expansion Scheme” and was rebranded some years ago. It allows for a deduction for investors for up to €150,000 per annum on investment in shares in businesses.

The take-up has not been great because the Scheme is complicated and there was a limit on how much money firms could raise per annum under this Scheme.

The limits are now being raised to €5m (per annum, previously €2.5m) and €15m (lifetime, previously €10m). Hopefully this will generate some projects with sufficient scale to justify the costs of attracting EIIS investments.

2. Research and Development Credits

Companies (both large and small) are entitled to a tax credit for 25% of the excess of their R&D spend compared to the “base year” of 2003.

This has been a very popular relief for both SMEs and larger companies.

However, for many companies the base year of 2003 was a problem because either they had high R&D expenditure in that year or difficulties in determining what the level was.

The 2003 base year has now been removed so that companies simply get a 25% credit for their R&D expenditure. This is a very favourable development and will be welcomed by large and small companies alike.

3. VAT on Tourism Activities

The reduced 9% VAT rate for tourism activities will continue to apply for the foreseeable future. The relevant activities include restaurant and catering services, hotel accommodation, cinemas, theatres and museums. Other services such as hairdressing and certain printed services will also benefit.

4. SMEs in the Construction Sector

- The 80% windfall tax, which was to apply to profits made from the increase in land (which is rezoned), has been eliminated. Very little or no tax was actually raised by this measure but it was inhibiting the progression of proposals for developing housing land.

- The home renovation incentive, which was brought in last year to give a tax credit to homeowners who carry out renovations and improvement on their principal private residence, is now extended to landlords of rental properties. The limit on expenditure is €30,000 so, at 13.5%, the maximum credit is about €4,000. A big point for landlords, which needs to be clarified, is whether this is €4,000 for landlord or per property.

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