A missed opportunity: Baker Tilly Ireland’s Brendan Murphy on what Budget 2025 failed to deliver for Irish business

As a tax partner with Baker Tilly Ireland, Brendan Murphy spends much of his time working with indigenous Irish businesses, advising on everything from restructuring to acquisitions to international expansion. A large portion of his clients are medium-sized companies, profitable trading businesses valued at between €10 million and €20 million. “They are the M in SME,” Murphy said.

However, his roster of clients also includes multinationals, with Murphy specialising in funding, employee relocation, and transfer pricing. The FDI side of his work has scaled up in recent times after his practice,  Roberts Nathan, merged with the British accountancy firm MHA and became part of the Baker Tilly international network. 

As a tax specialist with strong connections to businesses, Murphy has always watched budgets with more interest than most. This year, however, as the sheer scale of the package became evident, his interest intensified, with Murphy particularly focused on what package of measures would be unveiled for domestic and international businesses. 

However, the more Jack Chambers and Paschal Donohoe, the two budgetary ministers, spoke on Tuesday, the less enthused Murphy became. While Chambers spoke of wanting businesses “to grow, innovate, and create employment”, Murphy felt that the budget merely tweaked existing enterprise and innovation schemes, many of which he argues are not functioning properly.

The way Murphy sees it, Budget 2025 was an attempt to “please a large electorate while not really doing enough for any one specific area”. “The numbers were big in terms of the spend and the commitment to infrastructure. Overall, the problem is that it is a typical election budget,” he said. 

Murphy says he would have preferred to see a “proper full focus” on issues such as entrepreneurship and CGT. Instead, he says the government opted for easy options such as energy credits. 

“How much will those credits or grants really mean for companies when you factor in rising costs? It will only balance it out. And yet, there was no major overview or overhaul done of anything from a tax policy perspective,” he said.

Murphy points to four major issues impacting industry: Share-based remuneration, the R&D tax credit, interest deductibility for multinationals and the tax climate for the funds sector. In all four cases, he said the government had opted to refer to new and ongoing  reviews rather than introduce any new tax policies.

“It was a case of kicking the can down the road,” he said. “In all four areas, there are real tangible decisions to make. So, when are we going to see something coming out of those reviews?”

Overall, he felt the Budget missed an opportunity to champion the businesses he advises and the entrepreneurs that the government talks so much about. 

“If you are talking about a giveaway budget and trying to give something back and look after businesses, why not encourage those entrepreneurs more?” he said.

Picking through the small print

In advance of Budget 2025, Murphy prepared a budget “wish list” that he circulated to clients. It included detailed proposals on how various schemes could be tailored to aid businesses - both domestic firms and multinational corporations.

One of the items on the top of his list was a change to the Entrepreneur Relief, which gives business owners a reduced CGT rate of 10 per cent on the sale of an asset subject to a lifetime limit of €1 million. Murphy said that a change in Finance Bill  last year had made the relief even more restrictive for groups, and called for it to be overhauled. 

In particular, he proposed linking the relief to the payroll taxes generated by the entrepreneur over the lifetime of the business. He was left disappointed, with the government leaving the current scheme untouched. 

“I know it could be complicated to link it directly to payroll, but surely there should be a mechanism to reward someone for creating employment and putting payroll revenue into the Exchequer,” he said. 

In the absence of overhauling the scheme, Murphy said the government could have increased the €1 million cap, something other industry groups and professionals have also called for. Again, the government opted not to increase the figure. 

“We deal a lot with those medium-sized companies, the one that sells for between €10 and €20 million,” he said.  “So, take  your €1 million at 10 per cent and the remaining consideration  at 33 per cent, and it is an effective tax rate of almost 33%. The Entrepreneur Relief at that rate is not worth much to those business owners who took a gamble and created employment.”

While this relief was not changed, there were a number of enhancements to, and extensions, of various other enterprise supports. 

The amount an investor can claim relief on through the Employment Investment Incentive Scheme (EIIS) was doubled to €1 million, while the lifetime capital gains tax cap (CGT) for angel investors was pushed from €3 million to €10 million.

Murphy, however, believes more could have been done. In relation to the CGT relief for angel investors, he said the legislation was “too restrictive and onerous” to have widespread appeal.

“The Angel Investor relief went from €3 million to €10 million. The problem is I could  sit here until next week and I would still be wondering  how many situations we would see where people would claim the relief because of the anti-avoidance requirements that it includes , and the different criteria and qualifications to access it. It is a minefield. I don’t see how many people will use it in practice.” he said. 

He said similar problems existed with EIIS, a scheme that offers tax breaks for investing in a business, and Sure, an Income Tax refund for people who leave employment to become entrepreneurs and start up their own companies.

“Yes, they have increased the limits. But it is not about just increasing the limits. It is about making these reliefs accessible,” he said. 

“EIIS and Sure have had so many little add-ons over the course of numerous Finance Bills, so many anti-avoidance tweaks, that it is just so onerous now - for both advisers and for people looking to access the schemes. You can end up getting tied up in knots in relation to the availability.

“We need to overhaul the scheme and have a simple investment scheme where people know if they invest in a business that creates employment, they can get tax relief.”

In the Budget, the Retirement Relief was changed to ensure there is no CGT clawback on transfers to a child of a business owner under 70 if the next generation holds on to the business (or farm) for 12 years. Murphy said the introduction of a clawback for businesses not held for 12 years was disappointing as other reliefs tend to have a six-year clawback in these cases. “Twelve years is a long time in business. A lot can happen,” he said.

Overall, he said many of the schemes are currently too complex and “pose significant challenges for potential investors”. 

“Simplifying these schemes would make them more accessible and appealing,” he said, adding that this would stimulate more investment into the business sector.

Share options and infrastructure

Ahead of the budget, Murphy also proposed a string of measures designed to boost Ireland’s attractiveness for foreign direct investment. Some, such as his proposal for a participation exemption for foreign dividends, were included on Budget Day.

However, other proposals, such as enhancements in schemes to give staff share options were not. This omission, according to Murphy, is particularly concerning. 

He said the Keep scheme, intended to facilitate employer granting share options, has yet to meet its goals and is seen as onerous by many businesses.

“A recurring challenge with multinationals on the ground relates to share schemes. These schemes are crucial for allowing businesses to reward their teams effectively,” he said. 

Likewise, he said multinationals were also looking at government investment in infrastructure such as energy, housing, and water. 

In the Budget, the government allocated €3 billion from the sale of shares in AIB, money that will be funnelled to water infrastructure (€1 billion), the Land Development Agency (€1.25 billion) and Eirgrid (€750 million to upgrade the national grid).

“Tax is not the key point any more. It is back to infrastructure. We have set out a roadmap with the AIB €3 billion. Could we have put more into it? We are putting €16 billion by the end of next year into  two funds, in reality, rainy day funds. When you break it down €3 billion is not really a lot for infrastructure when you look at the investment t Irish Water and Eirgrid need right now,” he said.