Budget 2018 – Small Business Perspective

What was possibly the most leaked budget in Irish history was published yesterday.  While it was hardly mold breaking, or earth shattering, there are a few positive things in Budget 2018 for micro and small businesses (and a small rant about stamp duty):

Self-employed tax credit – nearly there

The earned income tax credit (PAYE tax credit for the self-employed) was introduced in 2016 at €550 and increased in 2017 to €950.  It will be increased further in 2018 by  €200 to €1,100.  It’s now quite a valuable tax credit, and while it goes some way to addressing the inequity of taxation between the employed and self-employed, it is still €550 less than the PAYE credit.

Electric Vehicles – BIK exemption

This strikes me as one of those budget measures that looks great, won’t cost anything, and won’t really achieve anything.  Employees will be exempt from benefit in kind (BIK) on electric vehicles in 2018.  Watch out for this one being extended in 2019.

VAT on sunbed services – increased to 23%

Changes in VAT rates are always problematic for business – especially micro and small enterprises.  The question is: do we pass on the increase to our customers, or take a hit on our profits.  I guess the government want you to pass it on in the expectation that the increased price will reduce usage.  Either way it’s not good for the tanning industry.

Brexit

A loan scheme will be introduced to for small and medium enterprises to assist with working capital requirements when expanding in to new overseas markets.  Presumably, the standard of qualification will on a par with that of the main banks.  So, if you qualify for this you’ll probably qualify for a bank loan.

A scheme for financing VAT on imports would have been much more beneficial.

Brexit was also used as excuse to retain the 9% VAT rate on tourism and related services.  I think the 9% rate outlived its usefulness long before Brexit came on the scene.

Key employee engagement programme

This is a share based remuneration scheme for small and medium, unquoted companies.  It will come into effect on 1 January 2018 and will allow tax efficient granting of shares to key employees. When the shares are sold they will be chargeable to capital gains tax, where previously they were subject to PAYE/PRSI/USC.

Stamp duty – commercial property up to 6%

I haven’t quite got my head around this one yet and the interaction it might have with changes to the 7 year capital gains tax exemption.  On the one hand the government wants development land to move so has made changes to the 7 year capital gains tax exemption.  Property covered by the exemption can now be sold early without loss of the exemption.  On the other hand, the stamp duty on the those sales (paid by the purchaser remember) has increased 3 fold.  To counter that, there will a refund (not exemption) scheme for developers that develop the land within 30 months.

Basically, the developer will have to fund the stamp duty until the refund is granted.  Separately, it was cited that 60% of developers claim to have difficulty in raising finance so a new quango is being established – Home Building Finance Ireland – which will apparently draw on the skills and expertise of NAMA.  In other words, create jobs for the NAMA employees that are no longer required as NAMA is wound down.

Stamp duty, in my opinion, is the most unfair, inequitable tax.  Perhaps its total abolition would have the same desired effect, ie movement in development land.

One also wonders if Ireland is hopeful of attracting international corporations currently based in the UK, why increase costs for them?

PAYE Modernisation

The summary of Budget Measure states that in preparation of PAYE Modernisation, a project is required to ensure compliance with employer obligations.  €50m has been allocated in the budget for a range of “compliance interventions”.  Compliance interventions can range from a simple, formal inquiry, to full blown audit.  It might be a good time for employers to do their own internal review to ensure they are meeting all their obligations.

Revenue will also receive additional funding to invest in an extra 100 audit staff, ICT investment in data analytics, and to build on their knowledge of compliance risks posed by e-commerce and online businesses.

National Training Fund Levy

I have to admit I never new this existed.  It seems to be incorporated in to Employer’s PRSI and will be increasing by 0.1%, or €1 for every €1,000 of salary.

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