Camilla Cullinane Tax Partner at KPMG and member of the Board of Guaranteed Irish rounds up the main points for businesses
Tax Measures
There was a welcome announcement on Retirement Relief, which provides relief from capital gains tax to individuals on the inter-generational transfers of businesses and farms where certain conditions are met. Finance Act 2023 extended the upper age limit of the relief from 65 until the age of 70 and introduced a limit of €10 million which was due to take effect from 1 January 2025. It was announced in the budget that the increased upper age limit will be retained. The Minister’s speech also indicated that the €10 million limit will not come into effect. Instead relief will apply subject to a 12 year clawback period (increased from the existing 6 year clawback period), in respect of assets transferred to a child with a value in excess of €10 million.
Another welcome measure is the amendment to the small benefit exemption where an employer will now be able to provide tax free non-cash benefits of €1,500 a year (increased from €1,000) and up to five benefits per year (increased from two). This will provide more flexibility for employers when providing benefits to employees.
It was encouraging to see measures to support young entrepreneurial companies in accessing capital, through amendments to the relevant limits under the Employment Investment Incentive and the newly introduced Angel Investor Relief. There are also enhancements to Start-Up Relief for Entrepreneurs (SURE) and the Start-Up Capital Incentive (SCI) which have been extended for a further two years to 31 December 2026. However, a number of these reliefs have complex and onerous conditions and a further review of them is required to make them more accessible.
Another Start Up Relief currently provides a corporation tax relief for new small companies in the first five years of trading with an annual corporation tax liability of €40,000 or less. The relief is currently calculated by reference to employer PRSI paid of up to €5,000 per employee. This does not encompass PRSI paid by owner-directors. A new measure proposes to extend the qualifying criteria to allow up to €1,000 of Class S PRSI per individual to count toward this cap. This will provide targeted support for small, owner-managed start-up companies.
The R&D tax credit first year payment threshold will increase from €50,000 to €75,000. This
threshold is the amount up to which a claim can be paid in full in the first year, rather than being paid in instalments over three years. The increase will provide valuable cash-flow support to companies undertaking smaller R&D projects or engaging with the credit for the first time.
It is proposed to increase the VAT thresholds to €42,500 for services and €85,000 for goods to assist small businesses outside of the VAT threshold to remain there.
While the Minister confirmed that the 9% VAT rate will continue to apply to supplies of gas and electricity for a further six months until 30 April 2025, it appears that the hospitality sector will not benefit from this temporary VAT rate. While yesterday’s budget provided some positive tax developments for Irish businesses, there was significant disappointment among the hospitality industry at the government’s decision to retain the 13.5% VAT rate for the sector.
The temporary universal relief of €10,000 for calculating BIK on company cars will be extended to 31 December 2025 and a BIK exemption is being introduced for the provision by employers of electric vehicle chargers at the home of a director or employee.
There was no mention of the increase of 0.1% across all PRSI rates that came into effect yesterday. Businesses will also have to comply with pension Auto Enrolment that is due to come into effect from September 2025, further adding to the costs of employment.
For further commentary and insights on Budget 2025 & Current Tax Developments please visit:
https://kpmg.com/ie/en/home/insights/2024/10/budget-2025-tax/taxing-times.html
Camilla Cullinane
Tax Partner, KPMG
Board Member, Guaranteed Irish
