Taxing Times: Entrepreneurship | KPMG | QA

Taxing Times: Entrepreneurship

Taxing Times: Entrepreneurship

The minister singled out the significant contribution that Irish entrepreneurs and particularly Irish small and medium sized enterprises (SMEs) make to the Irish economy describing it as “critical to our economic well-being”.


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The minister singled out the significant contribution that Irish entrepreneurs and particularly Irish small and medium sized enterprises (SMEs) make to the Irish economy describing it as “critical to our economic well-being”. In numbers 99.7% of all enterprises and 68% of all employment in Ireland are derived from this sector.
Earlier this year the Government launched a public consultation to assess the impact of existing tax measures available to entrepreneurs and to identify options to incentivise entrepreneurship. KPMG’s submission, as part of this consultation process, recommended a number of measures to further encourage entrepreneurship, such as remedying the disparity in taxation between the self-employed and employees, and replacing the existing limited CGT entrepreneurial relief with a more attractive and accessible alternative.
Following this consultation, the Department of Finance published a report ‘Tax and Entrepreneurship Review’ outlining a range of measures to encourage entrepreneurship. It is positive to see that the minister has taken on board a number of the suggestions arising from the public consultation, and has focussed on the following measures as being those identified with the greatest potential to encourage entrepreneurship and support entrepreneurs and SMEs. These Budget measures are part of the Government’s Entrepreneurship Action Plan and are outlined in further detail below and throughout this publication. 

Entrepreneurs CGT relief

The standard rate of capital gains tax (CGT) remains 33% but an enhanced entrepreneur’s CGT relief has been introduced which reduces the CGT rate applicable to disposals of the whole or part of a business to 20%. This relief will be available to entrepreneurs up to a lifetime limit of net chargeable gains of €1 million with effect from 1 January 2016. The relief will be available to the individual owners of a trade or business which they have owned for at least three years and will not be available to companies. Further details will be included in the forthcoming Finance Bill.
This new regime is a significant improvement on the current restricted CGT relief, whereby relief is only available to the entrepreneur on making a gain on a second successful business disposal once certain conditions are met. However, the new relief is still inferior to that currently available to entrepreneurs in the UK, where a 10% CGT rate applies to entrepreneurs on gains from disposals of a business up to a total life time limit of £10 million. In our view, the new relief, while an encouraging start, does not yet sufficiently recognise the extra risks that entrepreneurs take in setting up and investing in Irish business. 

The future

The range of measures introduced by the minister goes some way towards recognising the important contribution that Irish entrepreneurs make to the Irish economy and ensuring that we maintain a strong entrepreneurial culture into the future.
In this regard, it is particularly positive that the minister regards these measures as a first step in supporting this sector and that further measures will be introduced in future budgets as resources permit.

Enhanced entrepreneurs CGT relief  Corporation tax relief for start-ups extended  Motor tax reduction for commercial vehicles 
Introduction of an earned income credit  Promoting electronic payments by reducing interchange fees and stamp duty
Introduction of a knowledge development box (KDB) 
Agri-tax reliefs being extended and new relief for succession planning Enhancing film tax relief by increasing the investment cap Providing tax incentives for constructing aviation services facilities 

© 2017 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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