In summary a little bit for everyone, a conservative steady budget in many ways with lots more that could have been done. We highlight a number of positives and negatives from Budget 2018.
- ‘Key Employee Engagement Programme’ (KEEP) provides for additional tax breaks for employees of SME’s receiving share options. This looks like a scheme that could take off and provide real benefits to SME’s that were not there previously.
- A package of announcements valued at €1.83bn to stimulate the housing market. Will the Industry have the wherewithal to deliver in a timely manner? Will the increase in commercial stamp duty from 2% to 6% have the desired effect of returning €376m next year to assist in the house building programme?
- The reduction in the 7-year term for the Capital Gains Exemption scheme to 4-years is welcome and should see an increase in property transactions subject to there been no hidden clauses in the Finance Act.
- Brexit Package of €300m in short term competitive loans for SME’s and Farmers is welcome. However, the devil is in the details and will these funds make their way to those in need or will they be caught up in red tape and regulations.
- Agri Food support package of €50m and additional €25m Brexit loan supports is most welcome.
- For the purpose of CAT agriculture relief and CGT retirement relief, agriculture land placed under solar infrastructure will continue to be classified as agriculture land, subject to a maximum of 50% solar infrastructure of total acreage.
- VAT refunds for Charities is a long overdue announcement.
- 0% BIK on electric cars is an interesting development. What will that mean for BIK on petrol and diesel cars in the future?
- Accelerated capital allowances for energy efficient equipment extended to 2020 is a progressive measure. Whereby 100% capital allowances for the cost of qualifying energy efficient equipment is allowed in the year of the asset is acquired.
- Pre-letting expenses to be allowed as a tax deduction up to €5,000 per property to encourage vacant residential properties back into the rental market place
- The 9% VAT rate remains for tourism related activities is welcomed.
- Increases in the capital expenditure to €5.3bn is to be welcomed and can only benefit the country long term, plus additional €4.3bn over the next four years promised on capital expenditure.
- The USC surcharge of 3.0% remains on self-employed income over €100,000. This remains a penalty on successful self-employed business people.
- The self-employed Earned Income Credit only increased to €1,150 from €950. It had been indicated that this would increase to €1,650 in line with PAYE workers.
- The opportunity to increase the Entrepreneurial Relief threshold from €1m was missed. It remains at £10m in the UK making Ireland significantly less attractive for making investments in.
- The Capital Acquisitions Tax (CAT) thresholds did not increase. This continues to penalise families transferring assets to one another.
- The Capital Gains Tax Rate remains at 33%. This continues to remain a deterrent to business and capital transactions and is uncompetitive.
- Reduction in Capital allowances available for capital expenditure on IP to 80% on new expenditure incurred on or after 11 October 2017. Full relief is still available on the cost of acquiring the IP. This measure maybe the beginning of a reducing in capital allowances in intangibles going forward and could make Ireland appear uncompetitive, this measure has the effect of increasing corporation tax by 2.5% in a year.
- More resources required in Revenue to assist tax payers such as VAT registrations, processing EIIS scheme, processing Tax Appeals Cases etc. Yet benefits of €100m have been targeted to be raised from Revenue in Compliance Projects.
- Increase in minimum wage rate to €9.55 from €9.25, is bad news for Retailers where they rely on minimum wage workers in many cases. This is on the back of a 7% increase in the previous two years.
- Employer’s PRSI rates to increase from the current 10.75% to 11.05% over the next three years. This is an unfortunate development as it makes the cost of doing business in Ireland even higher and should not be borne by employers alone.
- The Rainy Day Fund of €1.5bn seems to be an odd development as certain areas of our country are already in crisis. Much more could have been done with this initiative to help SME’s to stimulate employment.