Budget 2014 and Small Business
An Article by Patrick Sutton, partner of O’KellySutton in the Sunday Business Post October 2013
Budget 2014 has its pros and cons however it does give a level of income certainty to consumer’s which is to be welcomed. It is hoped that this consumer confidence will be reflected in increased spending on the high street and give a lift to SME’s in general. Some of the 25 pro-business measures unveiled in the budget are looked at here:
Home Renovation Incentive
Tax relief of 13.5% will be available for qualifying expenditure between €5,000 to €30,000 on home renovation and improvement work. Tax credits to be split over two years and only available where work is provided by tax compliant contractors.
Whilst this is a start I have concerns about the effectiveness of the measure. It is widely known that rogue non registered operators can be 20% to 40% cheaper than tax compliant contractors, so the measure would need to be more significant to have the desired effect. The minimum and maximum thresholds should have been more like €500 to €50,000. If this was coupled with obligatory reporting of all renovation works on the LPT Form it would really shake up the black economy.
Cash Receipts Basis Threshold Expansion
Cash receipts threshold increases from €1.25m to €2m with effect from 1 May 2014. Hard pressed SME’s will welcome the cashflow benefit of this measure.
VAT Anti-Fraud Measures
The disallowance of input VAT on purchase invoices that are not paid within six months is good news and should help SME’s to get paid in a more timely fashion. I could see a situation developing in future where suppliers start reporting customers to Revenue that have not paid their bills, interesting times ahead here!
Capital Gains Tax Entrepreneurial Relief
A new relief from CGT has been introduced to encourage serial entrepreneurs to reinvest in trading assets/businesses and hold them for 3 years. The CGT payable on the disposal of the new asset is potentially halved.
It would have made it more meaningful if they gone back further than 1 January 2010 to increase the number of eligible investors. Will there be enough of a take up on the relief to make a difference?
Building Business Capacity
A programme consisting of two days dedicated off site training together with expert mentoring support to enhance SME’s business and financial capacity. The programme will be launched on a pilot basis with 1,000 SME’s expected to take part in 2014.
This potentially could be a real gem of an initiative if delivered in a professional and effective manner by business development experts. Let’s hope that it will be more effective than some of the state mentoring programmes that are currently in existence.
Start Your Business Initiative
An exemption from income tax up to a maximum of €40,000 per annum will be provided for a period of two years to individuals who set up their own qualifying unincorporated business having been unemployed for 15 months.
This is an incentive which looks like a bit of flag waving by the government as most new businesses make very little taxable profit in the first few years until they are established. Considering this measure is estimated to only cost the exchequer €1m in a full year they should have gone much further with this initiative by extending it for example to the first five years.
Credit Review Office Increased Threshold
The threshold for applications that can be reviewed by the Credit Review Office is being increased with immediate effect from €500,000 to €3m. The credit review website www.creditreview.ie provides excellent advice and guidance with regard to applying for credit from banks. I wonder how many promoters actually look at this website before applying for bank credit, I suspect very few!
R&D Tax Credits
Various increases in R&D tax credits were unveiled. However this is an area that much more can be achieved. R&D it could be argued is at the heart of innovation and job creation. The full year cost to the exchequer is estimated to be only €5m for 2014. I’d like to see multiples of this in future years.
The measures announced in the budget although positive overall need to be much more significant and thoughtful. These budgets are missed opportunities to kick start entrepreneurs into action. There’s no big idea, or no real imagination to facilitate SME growth in a meaningful way. Patrick Sutton, O’KellySutton, Chartered Accountants and Business Advisors, Kildare, sutton@okellysutton .com