The IIA (Irish Internet Association) held their First post budget briefing yesterday, to bring together the Tech Industry with the aim of picking apart the impact of the 2013 budget and assess winners or losers. No surprise, the budget was difficult as warned. The glimmer of hope comes in the form of the Job strategy for 2013 but we are waiting to see how they implement this strategy.
The guest author Jason Roe is on the board of the IIA and is the founder of ParkYa a startup that is marking the busniess of parking easier. Please be warned, I’m not a tax expert or an accountant! Here are a few things that I picked up:
Startup exemption, credits can be carried forward.
The three-year exemption for start-up companies is being changed to allow any unused credits be carried forward. The credits are subject to the max relief in one year and cannot exceed the amount of employers’ PRSI that is normally eligible.
R&D Tax Credits increased to €200,000
The R&D tax credit is normally applied to the first €200,000 of spend on r&d. This will benefit from the 25% R&D tax credit on a volume basis. They have removed a strange reference to 2003 and that’s good news for companies who have been operating since 2002 or before. A full review of the R&D Tax Credit regime will be carried out in 2013.
This increased by €100,000 since the 2012 budget. There was a lot of discussion that this credit is underused and there is a belief that it really benefits companies who invest heavily in research, as you really need to know how the system works and the criteria.
EIIS extended to 2020.
This scheme is a new version of the old BES scheme and will continue to run until 2020.. The issue with EIIS over BES is that EIIS is for a shorter period of three years so there is more pressure on a startup to make enough of a return for the investment. Uptake has been slow, but there is expected to be additional interest in 2013 because of the changes to Pensions
Reduced Admin burden on Micro Enterprises
Revenue and the Department of Finance are going to do a consultation to identify measures to ease the admin burden of tax compliance for Micro Enterprises. Micro Enterprises are businesses with an annual turnover of less than €75,000. Good news for startups and online retailers who are starting out.
VC’s & Carried Intrest
Carried interest is the return received by venture capital managers for managing investments in certain venture capital funds. Under relieving provisions introduced in 2008, these returns are treated as a capital gain rather than income and are taxed at a lower rate of 15% for individuals holding interest through a partnership or 12.5% for corporates. The relief is to be reviewed to ensure that it operates as intended, in particular to assist small business in accessing funding
Key comments from the panel:
Michael McGivern – “R&D tax credit review next year could be positive. We need to see the department firm up on guidelines.”
Constantin Gurdgiev – “Frustrating budget, Its boring and unabitions!”
Brian Caulfield –
“The budget had a few good things, but small things. R&D positive. rest of the plan really nothing there yet.”
“Ireland is a terrible place to be an entrepreneur. No recognition in the tax system of an entrepreneur vs speculative gains.”
What should have been included in the budget ?
- Prioritise digital economy instead of farming.
- How do you fight for key staff for multinationals? The government could have given leeway for shares to employees. Most employees/employers can’t afford to pay the added cost of BIK tax.
- First flight supports not there at all. The government should focus on and enable first time exporters to encourage the sale of good and services to international regions.
- We need more recognition of an entrepreneur in the tax system. This could take the form of a special rate of CGT of entrepreneurial gains.
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Some of the content within this post was based, in-part on a 2013 budget summary publication from McFEELY & McKIERNAN Accountants & Registered Auditors.
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