Was Budget 2025 a win for the small Irish SME or was it merely an election budget? Dave O’Brien, head of Tax at Xeinadin Ireland, assesses the situation.
As the dust settles on Budget 2025, analysts across the country are now dissecting the impact of the measures announced. In our eyes, it was a clear indication that we’ll be hitting the polls sooner rather than later.
This was a budget for the worker, the majority of the voting population. An increase in tax bands by €2,000 and tax credits by €125 means that the average single worker will benefit.
“With an election around the corner, we urge political parties to relook at their SME policies ahead of the Finance Bill”
Those earning less than €20,000 will not pay any tax, so our tax base is narrowing as opposed to widening.
If you are young working adult, who is buying a house and having children – this budget is for you! The help to buy scheme is being extended, as is maternity and paternity benefits. A newborn additional children’s allowance of €420 is also being introduced. Despite the positive measures, the additional taxes on fuel may dampen some joy.
On the other side of the coin, for the small business owner, Budget 2025 will be met with mixed reactions. Yes, more money in people’s pockets may entice a young workforce to keep their skills here. Promised expenditure on infrastructure projects is a plus for businesses around the country and hopefully these monies can be spent wisely. But some challenges that SMEs are facing right now, failed to be addressed.
The measures that matter
The glaring omission to reinstate the VAT rate to 9% for hospitality businesses was not a surprise as it was dismissed by the government some time ago. This decision has not gone down well, with industry bodies such as the Vintners’ Federation of Ireland describing the decision as a ‘disaster’. It certainly won’t help the help the 77% of hospitality businesses that reported a negative outlook for the next 12 months.
Whatever the make-up of the next Government is, we urge them to relook at this policy if we want to keep Ireland as a tourist destination. We’re seeing on a daily basis too many hospitality business shutting down, some are institutions in local areas. We must keep Ireland open for business.
Cost of living pressures remain for many in society, we only have to look at the cost our grocery basket to know that. The Government has reacted with an increase in the minimum wage by 80 cent. Welcome for workers, but another cost to bare for SME owners. On top of PRSI increases and the auto-enrolment scheme, rising staff costs will mean tough decisions in the weeks and months ahead.
For family businesses, who we are the cornerstone of the Irish economy, effective succession planning is key to keep the family name on the door. Last year’s Budget brought in legislation which effectively meant that large family companies could not pass businesses to the next generation without a significant tax bill. This was due to come into force on 1 January 2025.
Happily, the Government have rowed back on this, and families can go back to planning for their succession in a timely manner. What Budget 2025 did do though was bring in a stipulation that where the value of the business is over €10m and has been passed to the children without a CGT liability, then if the child disposes of the business within 12 years of receiving it there will be a clawback of any tax saved by the parent on the initial transfer. While this 12 year period is incredibly long and will be difficult to monitor it does do what it’s meant to do – that is if you keep the business in the family then the tax will not become due, so taxpayers can’t have too many complaints with this.
It’s not all doom and gloom. Investment in new or nearly new companies got a lift with improvements to the Angel Relief scheme, EIIS allowable contributions going from €500k to €1m per individual and the SURE scheme seeing a small improvement. Cashflows for small R&D companies got a boost through an increased year one cash refund, going from €50k to €75k. the corporation tax relief for start-up companies did improve albeit not by much. We need to be seen as an innovative economy, willing to back ideas and our entrepreneurs, so these measures should be seen as positive steps forward.
The verdict
In summary, was this an SME budget? We see it as a missed opportunity for the government to cater for the majority of SMEs in Ireland.
Yes, there are some good measures, especially for start-ups, which we welcome. However, if your existing business is a shop, restaurant, bar or any other established business without the need for outside investment you didn’t really get a look in.
With an election around the corner, we urge political parties to relook at their SME policies ahead of the Finance Bill.
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