Family businesses seek tax band and credit increases in budget

Vat and CGT cuts also sought in PWC pre-budget submission

The submission also calls for a reduction of the capital gains tax on non-property investments to 20%.

Family and privately owned businesses in Ireland want increases in tax bands and credits in this year's budget that are in line with current inflation.

Reducing employer PRSI, cutting the standard rate of Vat to 21%, and extending the 9% Vat rate for hospitality to the end of 2025 are among the other measures proposed in the submission prepared by PWC in conjunction with the Family Business Network.

The submission also calls for a reduction of the capital gains tax (CGT) on non-property investments from the current rate of 33% to 20% to support investment by private businesses and entrepreneurs into private businesses. They also want the capital acquisitions tax (Cat) threshold raised, including all gifts and inheritances from parents to their children, from €335,000 to €500,000.

Geopolitical crisis

"While the fundamentals of our economy remain strong such as employment, FDI [foreign direct investment] inflows, exports, and fiscal revenues, there is currently a geopolitical crisis with supply chain disruptions and escalating inflation," the submission states.

"Measures aimed at stimulating growth and investment in private businesses need to be monitored and targeted to protect Irish businesses in so far as possible against the significant inflationary and global supply challenges that are likely to endure into 2023."

Business transfers

PWC also says the introduction of mechanisms to facilitate the transfer of businesses to the next generation without incurring upfront punitive tax costs were needed.

The key elements of the submission are:

• Increase tax bands and credits as well as travel and subsistence rates to be at least in line with current inflation; 
• Reduce employer's PRSI so that businesses can partially offset increased salary costs; 
• Introduce incentives in the form of reduced tax costs for Irish businesses to let properties to their staff, either on a short-term or a longer-term basis;
• Improve the share-based incentives to make them fit for the purpose for private businesses;
• Reduce interest on late payment of tax across all tax heads to 3% (currently 8%/10%);
• Reduce the standard rate of Vat from 23% to 21%;
• Extend the 9% Vat rate for the hospitality sector to December 31, 2024;
• Introduction of capital allowances for remote working along with improvements to the employment investment incentive scheme and the R&D tax credit regime;
• A reduction of the CGT rate on non-property investments from 33% to 20% to support investment by private businesses and entrepreneurs into private businesses;
• Measures to incentivise both private individuals and the private business sector to invest in green properties — for example, introduce additional ‘green’ tax reliefs in respect of CGT liabilities arising on the disposal of properties that have been retrofitted;
• Introduction of tax reliefs and incentives in the renewable energy space to encourage investment in this area;
• Raise the Cat band A threshold (including all gifts and inheritances from parents to their children) to €500,000, from €335,000;
• Introduce mechanisms to facilitate the transfer of businesses to the next generation without incurring upfront punitive tax costs (eg an ‘upfront instalment’ of the gift/inheritance tax applying with any balance of tax being spread over a longer term period of at least 10 years);
• Amendment to the revised entrepreneur relief whereby dividends would fall within the remit of being taxed at 10%.