BUDGET 2016: Vitally important role of SMEs is finally being recognised

SMEs account for 99% of all business enterprises in Ireland, employ 68% of the workforce and generate over half the State’s turnover.

They are vital to Ireland’s continuing recovery and SME owners deserve a fair and transparent tax treatment. It was great to hear the minister support the area of entrepreneurship and SMEs and recognise the importance of this sector following on from the CPA Ireland reports on Entrepreneurship.

The self-employed, which includes farmers, have been discriminated against in the tax system. This budget starts a process of ending this discrimination through the phased introduction of a self-employed tax credit of €550 for 2016 which will increase in future years as resources permit.

Unfortunately, self-employed people who are successful are penalised further as they pay a USC surcharge of 3% on earnings over €100,000. In the interest of fairness in the tax system this issue could and should have been addressed.

Changes to USC in general will make work more attractive and together with the additional childcare supports, encourage skilled workers, especially stay-at-home parents, to re-enter the workplace.

This is particularly good news for SMEs as they are heavily reliant on a pool of available talent to support growth in business.

The reduction in the capital gains tax for the self-employed and entrepreneurs from 33% to 20% is also very welcome. However, the equivalent rate in the UK and the North is 10% on a gain of up to £10m (€13.4m) so we have quite a long way to go to become competitive in this regard.

There was some good news for SMEs and entrepreneurs such as the news on the microbrewery relief. This will now be available upfront which will help. Lower marginal rates of tax should make Ireland more attractive to inbound mobile talent.

Specific supports for the farming sector are a welcome acknowledgement of the importance of the agri-business sector. Like all businesses, succession planning is very important for farming and new measures will help in this regard for which the minister for agriculture has done good work in bringing about.

SMEs benefit greatly from a shop-local mentality and the partial restoration of the Christmas bonus will release almost €200m in the local economy. This is not only good news for those on pensions or social welfare but also for SMEs which stand to gain from that spending power.

Within the limits available to the finance minister this has been a relatively good budget for self-employed and farmers.

Obviously, not all of the wishlists have been delivered upon but we are seeing an end to discrimination against the self-employed, measures to improve the supply of labour, USC reductions to reward workers and important changes to capital gains tax.

As an SME adviser, I believe that this budget will help SMEs on many levels and support our continuing recovery.

Cormac Fitzgerald is a consultant and adviser to SMEs and entrepreneurs. twitter: @cormacfitzg www.fitzgeraldandpartners.com