07 Jul 2020 | 09.19 am
PwC Outlines SME Tax Initiatives
Borrow back 25% of tax paid in 2019
07 Jul 2020 | 09.19 am
PwC and the Family Business Network have outlined a number of tax initiatives to support home-grown Irish businesses.
Ronan Furlong (pictured), tax partner in PwC’s Entrepreneurial & Private Business practice, commented: “We welcome the new government’s focus on supporting and prioritising the Irish SME sector. We would urge it to continue to show imagination and consider a range of practical and achievable measures that can help to stimulate demand, protect employment and restart jobs led growth in our domestic economy.”
PwC says the proposals set out new measures targeting four main policy objectives where tax policy can make the most impact:
• to stimulate demand and protect jobs.
• to maintain cash circulation within the domestic economy.
• to help achieve the current national health priorities such as remote working.
• to support businesses in adapting to the new digital economy which has emerged with the advent of the crisis.
The proposals to government include getting cash supports to companies through these measures:
• Introduce a ‘borrow back tax paid’ scheme allowing companies to borrow up to 25% of PAYE/PRSI/USC tax paid in 2019.
• Encourage lending from the private sector direct to SME businesses by providing tax relief on loans provided to small and medium sized businesses.
• Being more creative on what companies can do with trading losses – permit the carry back of trading losses for a period of three years.
The ‘borrow back tax paid’ idea, where the state steps into the role of lender instead of banks, has been rolled out in Denmark. PwC’s view is that while forbearance measures related to the payment of taxes have been of great assistance in preserving cash, many SMEs currently require cash injections.
In relation to stimulating demand, PwC and the Family Business Network are also calling for:
• Reduce the current 9% rate of VAT to 5% and include hospitality and tourism.
• Tax deduction for Client Entertainment expenditure by Irish SMEs to specifically support Irish hospitality.
• Reduce VRT by 20% in the motor trade.
• Re-introduce and enhance the Home Renovation Incentive for energy efficient improvements and supporting innovation – applied retrospectively for 2020.
• Reduced rate of Employers PRSI of 0.5% to continue.
• Temporary increase in personal tax credit by €1,000 for employees of businesses transitioning from the Wage Subsidy Scheme or Pandemic Unemployment Payment.
To incentivise behaviour that supports national public health priorities, in particular remote working, the document proposes:
• Additional tax credit of €250 for individuals working from home at least three days a week to incentivise remote working, taking pressure off public transport and helping the environment.
• Enhanced allowances on home offices – 100% accelerated capital allowances on IT equipment for employees to facilitate employees working from home.
• Help for screening and other protections – 100% accelerated capital allowances on COVID-19 protective equipment and related fit-out costs.
• Double deduction for costs incurred on developing a well functioning online sales platform.
• Enhancing digital skills – 50% credit for the cost of training and upskilling employees.