Key Recommendations for Budget 2025

Brendan Murphy, Tax Partner at Baker Tilly Ireland, has outlined his key recommendations for Budget 2025, focusing on enhancing Ireland’s attractiveness for both owner-managed businesses (OMB) and foreign direct investment (FDI). 

With an emphasis on supporting ambitious owner-managers at various stages of their business lifecycle and making Ireland a more favourable destination for FDI, Brendan’s proposals aim to create a more dynamic and competitive business environment.

Support for Ambitious Owner-Managers

Brendan highlights the importance of targeted tax reliefs and incentives to foster growth and sustainability for owner-managed businesses at different stages, from start-ups to retirement.

1. Entrepreneurs’ Relief: Last year’s technical adjustments made Entrepreneurs’ Relief more restrictive in certain group situations accessible, but further enhancements are needed to support ambitious entrepreneurs. A review of this change and the definition of a group should be reviewed. 

   Simplifying the criteria can ensure more entrepreneurs benefit from this relief, promoting further innovation and growth.

2. KEEP Scheme: The KEEP (Key Employee Engagement Programme) scheme, designed to incentivise staff, needs some significant improvements to become more user friendly. can be improved.

   Comprehensive reform is required to improve employee incentives, helping businesses attract and retain top talent.

3.  Retirement Relief: The cap on retirement relief, currently set introduced in the last Finance Bill of at €10 million, restricts the ability to pass on businesses to the next generation without financial penalties.

   Removing or increasing this cap would make it easier for owner-managed businesses to stay within families and transition to the next generation. transition smoothly to new leadership

4. Capital Acquisitions Tax (CAT): The current gift-free threshold of €335,000 has been in existence since 2019 and is challenging given recent inflation and, especially for passing on family homes in certain areas of the country.

   Increasing the threshold would provide much-needed relief for families transferring assets, ensuring financial stability for future generations.

Enhancing Ireland's Attractiveness for FDI

Brendan also addresses critical areas to bolster Ireland’s position as a prime destination for foreign direct investment, focusing on reducing administrative burdens and creating a more favourable tax environment.

1. Participation Dividends: Clarifying and simplifying the taxation of participation dividends would reduce the administrative burden and make Ireland more competitive than other jurisdictions. Feedback from clients indicates the administrative process around same is burdensome. 

   Introducing a dividend participation exemption for EU trading companies could eliminate unnecessary tax complications.

2. VAT Registration: The current process for VAT registration is overly stringent and poses significant challenges for FDIs, with a waiting period of up to six weeks on occasion.

   Streamlining the VAT registration process would improve Ireland’s commercial viability and attractiveness for foreign businesses.

3. SARP (Special Assignee Relief Programme): Extending the SARP beyond 2025 is crucial to attracting high-income earners and key staff from foreign companies.

   Addressing the high income tax rates would make Ireland a more attractive destination for top talent.

4. Technology and AI Incentives: Expanding share schemes and rewards for all employees and introducing tax reliefs or incentives for organisations focusing on AI could spur technological innovation.

   Providing double deductions for AI-related investments could position Ireland as a leader in the tech sector, especially helpful for Ireland is to remain a destination of choice for Technology innovation. 

5. Research & Development (R&D) Incentives: Recent improvements and increasing of the R&D rate have been welcome to encourage innovation in the country. 

   Consideration should be given to preclearance options to make compliance less costly and more efficient.

6. Investment Reliefs: Simplifying the legislation and rules around Employment Investment Incentive Scheme (EIIS) and angel investor reliefs, which are currently too onerous, could encourage more investments into Irish businesses.

Supporting Irish Businesses and Boosting Foreign Direct Investment

Brendan Murphy’s recommendations for Budget 2025 aim to provide robust support for owner-managed businesses and enhance Ireland’s attractiveness for foreign direct investment. By addressing these key areas, Ireland can ensure a more vibrant and competitive business environment, fostering growth and sustainability for years to come.