Wednesday, October 22, 2014
Budget 2015 has also welcomed improvements for small and medium sized enterprises (SME’s).
While much of the more publicised aspects of the corporate tax regime will continue to benefit SME’s, such as the corporate tax rate, a range of specific initiatives have been enhanced or introduced to stimulate the SME sector.
1. Incorporation and start-ups
Seed Capital Scheme to Start-up Relief for Entrepreneurs, ‘SURE’
The current Seed Capital Scheme is set to be re-launched in the coming months as the Start-up Relief for Entrepreneurs or ‘SURE’. The announcement in the Budget speech follows a public consultation into the existing scheme. The various details are yet to be revealed, however it has been confirmed that the relief will be extended to apply to individuals who have been unemployed for up to 2 years.
The current regime entitles, subject to conditions, employees or unemployed persons who commence a new business, and invest in that business by means of shares in a company, to a refund against income tax already paid. While the exact changes of the re-branded SURE scheme are to follow, an enhancement of the system should encourage and provide relief for those intending to start-up their own enterprise who paid significant tax previously.
Three year relief for start-up companies
Another incentive for the continued incorporation of SME’s in 2015 is the extension of the three year relief from corporation tax on trading income for new companies. The relief was due to expire on 31 December 2014, but has now been extended to include 2015, during which a review of its operation will take place.
The relief relieves a company from corporation tax where its annual liability does not exceed €40,000. It is however capped at the amount of employers PRSI contributed by the company in the period it is claimed.
Employment and Investment Incentive Scheme ‘EII’
Introduced by the Finance Act 2011, to replace BES, the Employment and Investment Scheme or ‘EII’ has now seen improvements in two consecutive budgets.
The scheme allows an investor to obtain income relief on investments of up to a maximum of €150,000 invested in a qualifying company in each tax year. Currently the scheme provides an initial income relief of up to 30% of the qualifying investment in the year of investment. A further 11% relief will then be available where it has been proven that employment levels have increased at the company at the end of the holding period.
The two main changes announced in the Budget are:
Further the remit of qualifying investments has also been extended with the management and operation of nursing homes, medium-sized enterprises in non-assisted areas, and internationally traded financial services certified by Enterprise Ireland, will also qualify. Any changes will be subject to approval by the European Commission under State Aid rules.