10 Oct 2018 | 12.20 pm
Budget 2019: Business Taxes And Incentives
The term of several reliefs and incentives has been extended
10 Oct 2018 | 12.20 pm
KPMG partners Paul O’Brien (pictured), Colm Rogers, Tim Lynch, and Gareth Bryan dig into the detail of what’s in it for business
Employment and Investment Incentive
The minister announced that, following a recent review of the EII incentive, he intends to bring forward a priority package of measures in the Finance Bill to address the main problems which were identified with the EII incentive during the review to increase the efficiency and effectiveness of the incentive. We await further details in the upcoming Finance Bill of the proposed changes.
Film corporation tax credit relief
The film corporation tax credit relief was introduced to promote the Irish film industry by encouraging investment in Irish made films which make a significant contribution to the national economy and the Exchequer. The scheme provides relief in the form of a corporation tax credit related to the cost of the production of certain films. The credit was due to expire on 31 December 2020, but the minister has extended this to 31 December 2024 in order to support the continued growth of the industry in Ireland.
The minister also announced that a regional uplift to the film corporation tax credit relief, will also be introduced, for productions made in areas designated under the State Aid regional guidelines. Full details of the relief will be set out in the Finance Bill.
Relief from corporation tax for certain start-up companies
A relief from corporation tax for certain qualifying startup trades was introduced in Finance Act (No. 2) 2008. The relief was due to expire for qualifying trades which commenced after 31 December 2018. The minister announced that the relief is to be extended for a further three years. It will therefore be available to companies which commence qualifying trades in the period up to 31 December 2021, where the relevant conditions are met.
Since 2011, the amount of corporation tax relief available is linked to the amount of employer’s PRSI paid by the company in each accounting period, subject to a maximum of €5,000 per employee and an overall annual corporation tax liability limit of €40,000 on qualifying income and gains (with marginal relief available where the company’s corporation tax liability would otherwise be between €40,000 and €60,000).
A review of the relief was published with Budget 2019. The report sets out that while unemployment rates have significantly decreased since the introduction of the relief, enterprise survival rates from the last five years show that startup companies continue to struggle to survive.
The report concludes that the relief continues to support job creation and employment at a minimal cost to the Exchequer when contrasted with the potential cost of unemployment support for the employees of the companies claiming the relief. It recommended that the relief should be extended for a further three years. The importance of retaining the link to employer’s PRSI was emphasised as this measure serves to encourage start-ups to retain employees. A further evaluation is to be carried out in 2021.
Accelerated capital allowances scheme for gas-propelled vehicles
The minister announced that a new accelerated capital allowances scheme for gas-propelled vehicles and refuelling equipment will be introduced. The purpose of the scheme is to encourage the uptake of gas-propelled commercial vehicles as an alternative to diesel. Currently, capital allowances on such vehicles are available on a straight line basis over an eight year period, where certain conditions are met. Details of the new accelerated scheme will be set out in the Finance Bill.
The minister announced that the Department of Finance and the Central Bank will begin work on the regulation of crowdfunding in Ireland. As part of this process, a review of the withholding tax obligations for peer-to-peer lending activities will be carried out with a view to making appropriate amendments following the introduction of regulations.
Existing legislation requires the deduction of income tax at the standard rate (currently 20%) from yearly interest paid by companies, or by any person to another person whose usual place of abode is outside of Ireland, unless a specific exemption applies. Such exemptions do not extend to yearly interest paid to an Irish tax resident individual.
While recognising the significant contribution that agriculture makes to the economy, the minister acknowledged that the sector is facing a number of threats, with Brexit posing specific challenges. He also recognised that 2018 has been a difficult year for farmers and has extended a number of farming related tax measures.
Stock relief provides for an additional income tax deduction for stock increases during the tax year. This has been extended for a three year period until the end of 2021. This extension applies to the three separate stock relief measures, which are:
• the general 25% stock relief
• the 50% stock relief for registered farm partnerships
• the 100% stock relief for certain young trained farmers
Income averaging allows certain farmers to pay tax based on average profits over a five year period and is intended to assist farmers in dealing with the income volatility associated with the industry. Eligibility for this relief has been extended where the farmer, or their spouse/civil partner, carries on another trade/employment, or holds/controls more than 25% of the share capital in a trading company.
At present, where certain conditions are met, young trained farmers under the age of 35 can avail of a stamp duty exemption on transfers of agricultural land. The exemption was due to expire on 31 December 2018. The minister confirmed that it will be extended for a further three years to 31 December 2021.
The financial resolutions passed on Budget Day announced an increase in the VAT rate from 9% to 13.5% on the sale of bloodstock. However, the sale of bloodstock to farmers should continue to qualify for the 4.8% VAT rate.
These taxation measures were complemented by increases in funding for the Department of Agriculture, Food and the Marine and other Brexit related support, including a new Future Growth Loan Scheme that will be available to the agriculture and food sectors as well as other SMEs.