Minister for Finance Paschal Donohoe says the Government will improve two flagship support schemes for entrepreneurs and company owners.
Financial advisers to the business sector have expressed disappointment, however, at the failure in Budget 2019 to expand a third flagship scheme that provides capital gains tax relief for entrepreneurs.
The schemes facing changes include the Key Employee Engagement Programme (Keep), which gives tax incentives for staff share options; and the Employment and Investment Incentive Scheme (EIIS), which gives tax breaks to investors in start-ups and succeeded the Business Expansion Scheme.
Keep came into effect in January to help businesses hold on to their best staff, but accountants have said the take-up among targeted small and medium enterprises has been non-existent due to various restrictions on the scheme.
“I am aware that take-up has been less than expected and I have decided to take early action now,” said the Minister in his budget speech.
Doubled the cap
He doubled the cap on the value of of share options to 100 per cent of annual salary. He also scrapped a three-year limit on the scheme, and raised the overall value of awards to individual employees from €250,000 to €300,000.
"Overall, there is not a huge amount for entrepreneurs in this budget. But these are welcome changes to the Keep scheme," said Mairead Connolly, a tax partner at Pricewaterhouse Coopers in Limerick.
Mr Donohoe also promised to bring forward a “priority package” of measures in the Finance Bill to buttress EIIS, which remains popular but has been criticised following the recent tightening of eligibility criteria.
The scheme was recently reviewed by State officials, while private investors have urged the State to up the investment limits. The Minister said he would propose as-yet unspecified changes to increase “its efficiency and effectiveness”.
He was criticised, however, for failing to expand a provision known as entrepreneur relief, which essentially allows for capital gains tax relief for entrepreneurs if and when they choose to sell down their stake.
There is a €1 million lifetime limit on the scheme, which financial advisers say compares unfavourably with a similar scheme in the UK where the limit of £10 million.
Scheme for start-ups Fianna Fáil said pushed for an increase, but the Government refused. Ms Connolly also said many investors were hoping for the scheme to be expanded.
Mr Donohoe did, however, extended until 2021 a three-year corporation tax relief scheme for start-ups. He also promised to regulate crowdfunding to “broaden competition in the SME financing market”, and to review tax laws on peer-to-peer lending activities.
He announced a 9 per cent increase in next year’s funding for the Department of Business, Enterprise and Innovation to support the business sector, with Brexit due to take place in March.
“SMEs provide most of our employment and additional Government support for this sector is crucial in light of Brexit,” he said.
Mr Donohoe also announced a €300 million loan scheme for agriculture and food SMEs, and a €100 million in Brexit-fighting supports for businesses across several departments.
“As part of the National Development Plan, I have [also] established a Disruptive Technologies Innovation Fund, which makes €500 million available for co-funded projects involving enterprise and research partners over the period to 2027,” he said.
