Susan Cullen CPA AITI outlines some of the tax policies that can help businesses including jobs initiative programme, existing schemes, exemptions and reliefs.
The Irish economy has seen three successive years of declining economic activity – between 2007 and 2010 the volume of goods and services produced in Ireland fell by about 12%. The recently published Stability Programme Update forecasts positive GDP growth this year which is a welcome development following the last three years.
For 2012, The Department of Finance projects that GDP will grow by 2.5%, with average growth of 3% per annum possible over the period 2013 to 2015.
In this article I intend to set out how some taxation policies are helping businesses in the context of the jobs initiative programme and some existing schemes, exemptions and reliefs. I have not gone into the finer details but instead just outlined the benefits. In the current economic climate I think it is worth visiting some of the very basic tax policies, schemes and incentives in place which can mitigate the tax burden for businesses.
Jobs Initiative Programme
I will start with the Governments most recent initiatives introduced. “The Jobs Initiative Programme”. The Government brought in the initiatives in an effort to stimulate growth and boost job creation. In summary, the tax reduction measures announced in the programme are:-
- Reduction in the lower rate of employers PRSI from 8.5% to 4.25% on weekly earnings up to €356 from 1st July 2011 to 31st December 2013.
- Share-Based Remuneration - Abolition of employer’s PRSI.
- Lowering of the reduced VAT rate in relation to certain goods and services.
- This reduction is primarily designed to support services relating to the tourism sector. From 1st July 11 to 31 Dec 2013 the Vat rate will be reduced from 13.5% to 9%. The new 9% rate will apply mainly to restaurant and catering services, hotel and holiday accommodation and various entertainment services such as admissions to cinemas, theatres, museums, fairgrounds, amusement parks and sporting facilities. In addition, hairdressing and printed matter such as brochures, maps, programmes and newspapers will also be charged at the new rate.
- Air Travel Tax is to be reduced to 0%. The commencement of the new rate is to be fixed by ministerial order.
- The Government has re-iterated its commitment to the 12.5% Corporation Tax Rate.
- The Research & Development tax credit legislation to be amended to enhance its accounting treatment flexibility.
Tax Exemptions and Reliefs
There are other areas that companies and individuals in business could revisit in order to reduce their tax burden.
Employer Schemes
In relation to employment one should not forget the following provisions:-
The Employer Job (PRSI) Incentive Scheme
This scheme provides for an exemption to employer PRSI for 12 months providing certain conditions are met. The scheme will remain in place until the end of this year so that enterprises and businesses that had planned to take on staff under this scheme in that period may continue to avail of the exemption.
Revenue Job Assist
This scheme allows employers to take a double deduction for wages and employers PRSI paid in respect of a “qualifying employee” for a “qualifying employment.” The definition of a qualifying employee is quite broad and is worth taking a look at. Two examples of qualifying employees are (1) someone that has been on the live register for 12 months; and (2) someone in receipt of the loan parent’s allowance. The procedure for claiming the deduction is very simple. A qualifying employee may also be entitled to claim additional tax credits.
Further information on these schemes can be found on the Department of Social Protection website (www.welfare.ie) and Revenues website (www.revenue.ie) (leaflet IT59 and IT58).
Corporation Tax
Start-Up Exemption
The Finance Act 2011 extended the 3-year Corporation Tax relief for start-up companies to those companies which commence a trade in 2011.
The relief was modified so that the value of the relief will be linked to the amount of employers’ PRSI paid by a company in an accounting period, subject to a maximum of €5,000 per employee and an overall limit of €40,000. Credit is also given for any employers’ PRSI exempted under the Employer Job (PRSI) Incentive Scheme in respect of a company’s employees in determining the amount of corporation tax relief available to the company. The purpose of these changes is to better target the relief at start-up companies generating employment.
The Finance Act changes mean that where the total corporation tax payable by a qualifying start-up company for an accounting period does not exceed €40,000, the aggregate amount of corporation tax referable to income and gains of the qualifying trade in that period will be reduced to nil or, if greater, to that aggregate as reduced by the amount of qualifying Employers’ PRSI. There is marginal relief available if the CT charge is between €40,000 and €60,000.
Further information can be found on the Revenue website (www.revenue.ie).
Income Tax
Employment and Investment Incentives (EII)
This scheme replaces the Business Expansion Scheme (BES). The qualifying trades’ limitations will be removed and the scheme will become available to the majority of small and medium sized trading companies.
This scheme will be easier for companies carrying on green energy activities to qualify and certification requirements will be simplified, such that they will be handled, in the main, by the Revenue Commissioners.
The maximum amount that can be raised by a company in 12 months will be increased from €1.5 million to €2.5 million and there will be a lifetime limit of €10 million. The EII is being introduced to try and increase the amount of equity available to companies in the current economic climate.
The type of trades that qualify under the new incentive scheme is much broader than that which qualified under the BES.
The investor can invest €250 to €150,000 for shares and must hold the shares for a minimum period of 3 years. Tax relief is 30% or an additional 11% providing the company can show that the level of employment has increased.
The scheme will continue to run until 2013 and is currently waiting for approval from the European Commissioners.
For a more detailed explanation of the above EII scheme please refer to the “Employment and Investment Incentives Scheme” article in Accountancy Plus June 2011, written by Padraig O’Feinneadha.
Susan Cullen CPA AITI is a member of the CPA Taxation Sub-committee and a Tax Manager in McInerney Saunders, Chartered Accountants, Swords, Co. Dublin.
