This week’s budget wasn’t pretty, but then, unless you’ve been living under a rock for the last few years, you wouldn’t have predicted otherwise. While more austere measures were delivered, it wasn’t all bad, especially for the business community.
Retaining the corporate tax rate was crucial – when Minister Noonan announced it would be held at 12.5%, a collective sigh of relief would have emanated from businesses here. However, events in Europe this week and the strong possibility of tax harmonisation in any new treaty may take the choice of setting the rate in future out of the Government’s hands. But that’s for another blog.
Many have criticised the budget, especially the cuts to social welfare and disability allowance – some said it did nothing to breathe new life into the economy. The Government’s hands are tied somewhat but closer scrutiny of the plans shows that businesses here didn’t do too badly at all.
First off it seems that Minister Noonan understands that the R&D regime in Ireland had to be adapted to support a new wave of Irish companies, especially as such a large bet is being placed on sectors like IT kick-starting a recovery here. The announcement that the first €100,000 of R&D expenditure will be allowed on a volume basis for the purpose of calculating tax credits is a positive step in that regard. Also, the enhancement of the Special Assignment Relief Programme is welcomed. It should go some way to attracting specific talent to Ireland as well as creating more jobs and allowing for the expansion of businesses here.
However, for SMEs, probably the most important aspect of Budget 2012 was the extension of the corporation tax and capital gains tax exemption for start-ups. This will apply to all new ventures starting in business over the next three years.
It wasn’t all good news though. The abolishment of all employer PRSI relief on employee contributions to pension schemes starting from January 1 is estimated to cost businesses around €90m next year. Also, amendments to the Redundancy and Insolvency Scheme will see rebates for redundancy payments drastically reduced to 15% from 60%.
Some concessions had to be made, of course. Despite a resounding negative reaction, it’s important to remember that, insofar as they could, the Government seems to have eased the burden a little for many who had been suffering for some time now.
If you have any specific questions or would like to know more abouthow these changes affect you and your company, contact us for a free consultation. We’ll be happy to talk through how the changes can benefit your business and how you can make the most out of a budget that could well have been a lot worse.
DCA Accountants and Business Advisors