Budget 2014 – The impact on the SME sector .

Budget 2014 - Michael Noonan It was positive to see that the budget recognised the SME sector .While there is a lot to be done yet in terms of helping SMEs , Entrepreneurs and Start Ups there were some positive initiatives in the budget.

Ireland has come a long way since 2008. The 2014 Budget saw the Government announce a €2.5bn fiscal consolidation and achieve 95% of the original EU/IMF savings target of €32bn.

Budget 2014 looks to continue the progress Ireland has made and to create an environment which will stimulate growth in the economy as we exit the EU/IMF programme at the end of the year.

Within the constraints in which the Minister was operating this budget is a deliberate attempt to support entrepreneurs and stimulate innovation with the purpose of protecting and growing employment which is a positive for the SME community .

Particular measures of note include:

The Home Renovation Incentive which will provide an income tax credit to home owners who carry out renovation and improvement works on their homes in 2014 and 2015. CPA Ireland have called for such an incentive previously, which challenges the fiscal damage meted out by those operating in the black economy, acts as a stimulus for self-employed trades people and will release money into the domestic economy.

The Start Your Own Business Scheme (SYOB) which is a positive signal of intent to support entrepreneurs, particularly those that have been out of work for a period of 15 months.

– The removal of the Employment and Investment Incentive (EII) from the high earners’ restriction is a practical measure to stimulate investment

Capital Gains Tax Entrepreneurship Relief encourages reinvestment in business and will stimulate entrepreneurship.

Additional welcome measures include improvements to R&D Tax Credit and the increase in the VAT cash accounting threshold. These measures constitute significant support for small and medium enterprises by improving cash flow, fostering innovation and supporting entrepreneurship.

Corporation tax rate internationally

The Minister reaffirmed the Government’s continued commitment to maintaining Ireland’s 12.5pc corporation tax rate.


We welcome the positive endorsement of the R&D tax credit contained in the Department of Finance’s published review of the regime. The endorsement is significant as it is a clear statement to the FDI community that Ireland remains open for R&D business and will support innovation through its tax policy. This clarity was needed to counteract the uncertainty created by the review process itself and the recent negative media commentary regarding perceived abuse.

The Minister has increased confidence in Ireland’s ability to retain and attract R&D mobile investment.

The key findings of the review are positive. The scheme has been acknowledged as a significant driver in attracting FDI and stimulating increased domestic R&D activity. On foot of the review, the Minister has introduced a number of favourable amendments to enhance the scheme.

CGT exemption

The CGT relief for property owned for seven years and purchased between 7 December 2011 and 31 December 2013 introduced in Finance Act 2012 is being extended by one year to include properties bought before 31 December 2014. This extension will be welcomed by investors, both in Ireland and abroad, and will help bring further stability to the investment property market.

Retention of the 9pc reduced VAT rate
As part of the Jobs Initiative launched in 2011, a temporary reduced rate of VAT (which was due to revert to 13.5pc on 31 December 2013) was introduced to certain supplies, mainly within the tourism and hospitality sector. However the rate reduction has proved to be very successful having played a key role in both job creation and job retention in the sector and as part of the Government’s pro-business budget, the Minister has confirmed that the 9pc rate will be retained.

Micro and small enterprises are a central part of our economy, and their ability to succeed and grow underpins our future potential for jobs, growth and prosperity. 98.5% of all firms are small and employ over 650,000 people throughout the country.

What were the positive measures for business ?

  • Retention of the 9% VAT rate for the hospitality sector – to support and encourage growth in small businesses in the tourism sector;
  • Air Travel Tax reduced to 0% from 1st April – to encourage the development of new routes and therefore lead to more passengers and the creation of additional jobs in the tourism sector;
  • VAT anti-fraud measures – to protect compliant business from unfair competition by tackling the shadow economy.

As well as the reliefs already mentioned Minister Noonan also announced a package of measures aimed at supporting start-ups and growing businesses, including the following:

  •  Start Your Own Business Scheme (SYOB): This measure is being introduced to encourage individuals who are long-term unemployed to start their own unincorporated business. A two year exemption from income tax up to a maximum of €40,000 per annum is being provided for individuals who have been unemployed for at least 15 months prior to starting their own business;
  •  Increasing the threshold for the Credit Review Office from €500,000 to €3 Million;
  •  Supporting cash-flow in the small business sector by increasing the VAT cash threshold from €1.25 Million to €2 Million;
  •  Building Business Capacity – A training and mentoring programme consisting of 2 days dedicated off site training tougher with export mentoring support, to enhance SMEs business and financial capacity in relation to understanding and utilising a broader range of financial products, as well as equipping them with the necessary tools to make a strong business case when applying for credit. The programme will be launched on a pilot basis with 1,000 SMEs taking part next year;
  •  SME Communications Strategy – to increase awareness of State supports amongst SMEs. This strategy will also ensure that there is a greater awareness amongst businesses of the soon to be re-launched credit guarantee scheme;
  •  A package of improvements in the R&D tax credit aimed particularly at small Irish companies.

entrepreneur text

Hopefully more can be done to support the SME sector and encourage Business start ups to create employment , innovate their business , and grow their exports in International markets . SMEs need more support having come through a tough five years in business those how have survived are our new business heroes and should be supported and encouraged to grow , innovate and employ

Cormac Fitzgerald FCPA is Chairman of the SMP/SME Committee and Vice President of CPA Ireland . He is also the owner of Fitzgerald & Partners Accountancy Firm in Kinsale , Co. Cork .