PwC presents key tax initiatives to restart the Irish SME sector – ahead of July Stimulus

Today PwC, in conjunction with the DCU National Centre for Family Business and the Family Business Network, launches its ‘Pre-Budget Submission for the Irish SME Sector’ setting out key tax initiatives to support “home-grown” Irish businesses.  With close to 900,000 people on Government income supports, the sharp impact of COVID-19 on jobs has been most severely felt in the Irish SME sector.

These proposals, which have already been submitted to Government ahead of the expected July Stimulus, set out new and creative measures targeting four main policy objectives where tax policy can make the most impact: to stimulate demand and protect jobs, to maintain cash circulation within the domestic economy, to help achieve the current national health priorities such as remote working and to support businesses in adapting to the new digital economy which has emerged with the advent of the crisis.

PwC presents key tax initiatives to restart the Irish SME sector

Ronan Furlong, Tax Partner, PwC Entrepreneurial & Private Business Practice, speaking about the report, said: “We welcome the new Government’s focus on supporting and prioritising the Irish SME sector. We would urge it to continue to show imagination and consider a range of practical and achievable measures that can help to stimulate demand, protect employment and restart jobs led growth in our domestic economy.”

“Although Irish businesses have shown themselves to be incredibly resilient and adaptable so far, they will need more support to survive the next phase of the crises. Our economy needs jobs and growth and the suite of actionable tax policy measures we are proposing are aimed at stimulating demand, helping companies adapt to the digital economy and incentivising Irish companies and their employees to support our National Health priorities.”

Key measures include:

Getting cash supports to companies

Introduce a “borrow back tax paid’ scheme allowing companies to borrow up to 25% of  tax paid in 2019 e.g. PAYE/PRSI/USC

Encourage lending from the private sector direct to SME businesses by providing tax relief on loans provided to small and medium-sized businesses.

Being more creative on what companies can do with trading losses – permit the carry back of  trading losses for a period of three years

Colm O’Callaghan, Tax Partner, PwC Entrepreneurial & Private Business Practice, said: “The loss of hundreds of jobs in the SME sector requires creative and heretofore unimagined responses to help restore and maintain this vital sector of the Irish economy. While the recent announcement of forbearance measures related to the payment of taxes have been of great assistance in preserving cash, it is cash injections that so many SMEs currently need. We, therefore, recommend the introduction of a “borrow back tax paid” scheme, as has been successful in other countries like Denmark.”

Stimulating  demand  in the economy in key sectors of high employment ensuring the retention and creation of jobs where possible

Reduce the current 9% rate of VAT to 5% and include hospitality and tourism

Tax deduction for Client Entertainment Expenditure by Irish SMEs to specifically support Irish hospitality

Reduce VRT by 20% in the motor trade

Re-introduce and enhance the Home Renovation Incentive for energy efficient improvements and supporting innovation – applied retrospectively for 2020

Reduced rate of Employers PRSI of 0.5% to continue

Temporary increase in personal tax credit by €1,000 for employees of businesses transitioning from the Wage Subsidy Scheme or Pandemic Unemployment Payment

Nicola Quinn, Tax Partner, PwC Cork, concluded: “The situation is so serious, and the threats so large, that some very decisive measures need to be taken to help Ireland’s SME sector. We have identified a suite of measures, including for sectors badly hit such as hospitality, tourism, retail and motor, along with various accelerated tax deductions aimed at preserving cash, encouraging investment and injecting demand which should ultimately save and create jobs.”

Incentivising behaviour that supports COVID-19 national public health priorities (in particular remote working)

Additional tax credit of €250 for individuals working from home at least 3 days a week to incentivise remote working, taking pressure off public transport and helping the environment

Enhanced allowances on home offices – 100% accelerated capital allowances on IT equipment for employees to facilitate employees working from home

Help for screening and other protections – 100% accelerated capital allowances on COVID-19 protective equipment and related fit-out costs

Helping companies adapt the new business models that will be required in the new digital economy

Introduce a double deduction for costs incurred on developing a well functioning online sales platform

Enhancing digital skills – 50% credit for the cost of training and upskilling employees

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