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Budget 2020: ISME Commentary.

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Few suprises in Budget 2020 with nominally small adjustments across small tax package.
Welcome changes announced to the Key Employee Engagement Program.
Also welcome are the changes to the R&D tax credit regime for SMEs.
Self-employed earned income credit increased but still €150 below the PAYE credit.
ISME find the increase in non-residential stamp duty to 7.5% surprising.
We are pleased to note the Minister did not take the regressive step of applying VAT to food supplements

Budget 2020 had been substantially flagged ahead of the minister’s speech, so there were few surprises.

This was very much a steady-as-she-goes, incremental budget, with nominally small adjustments across a very small tax package.

The changes announced to the Key Employee Engagement Program (KEEP) are welcome- but we must await the fine detail of the proposed changes in the Finance Bill to see if they make the scheme workable. KEEP has failed to take off in the last two budgets.

The changes to the R&D tax credit regime for small and micro businesses are welcome.

The credit increases to 30%, which will be extended to qualifying pre-trading expenditure. For all claimants, the current limit available for university spend rises from 5% to 15%. Again, we will need to see the detail in the Finance Bill.

Entrepreneurial reliefs remain unchanged. Some small adjustments to these could have produced disproportionately positive outcomes, for nominal cost to the Exchequer.

There are no adjustments to income taxes. As a result of this non-indexation, PAYE yield will likely increase next year as a result of rising wages in the economy.

There are no adjustments to CGT. A small reduction in CGT would almost certainly have resulted in an increased CGT yield for the Exchequer.

The earned income credit for self-employed is raised to €1,500, still €150 below the PAYE credit. There is no justification for this continued discrimination. If Exchequer revenue is the issue, the PAYE credit could be lowered to €1,500.

The USC surcharge for high-earning self-employed is maintained at 3% without any justification. If exchequer revenue is the issue preventing the ending of this discrimination, the 3% surcharge could be applied to PAYE workers earning more than €100,000.

The increase in non-residential stamp duty to 7.5% is surprising. The ‘long-standing reliefs’ the Minister referred to in his budget speech apply mostly to foreign owned property funds. It is therefore ironic, given the Minister’s reference to tax avoidance by REITs, that they will avoid most stamp duty liability on non-commercial property.

We are pleased to note the Minister did not take the regressive step of applying VAT to food supplements, but we will check to ensure this measure does not appear in the Finance Bill.