What’s in Budget 2024 for small businesses and start-ups?

Businesses are set to benefit from a range of measures announced in the Budget, including a boost to the research and development tax credit.

Finance Minister Micheal McGrath announced that the research and development tax credit will rise from 25pc to 30pc of qualifying expenditure, with the year-one payment threshold increasing from €25,000 to €50,000.

“The Research and Development (R&D) tax credit is a crucial feature of Ireland’s corporation tax offering and enables us to remain competitive in attracting quality employment and investment in R&D,” said Mr McGrath in his Budget speech.

He said the increase in the credit “will maintain the net value of the existing credit for those businesses subject to the new 15pc minimum effective [corporate] tax rate”. Mr McGrath insisted it will also be an important change for smaller companies.

He said that the doubling of the year-one payment threshold would provide “valuable cash-flow” support to companies engaged in smaller R&D projects.

“The decision to increase the R&D tax credit from 25pc to 30pc in today’s Budget is very welcome and will preserve and boost the attractiveness of Ireland as a global hub for R&D in a competitive international environment,” according to Ian Collins, partner and head of innovation incentives at EY Ireland. “The increase will be viewed very positively right across business.”

Mr McGrath also revealed a new capital gains tax relief scheme for angel investors backing innovative small start-ups.

“This aims to assist SMEs in attracting investment, and make Ireland a more attractive location for angel investment,” he said. “It will allow angel investors to benefit from a reduced rate of capital gains tax [CGT] when they dispose of a qualifying investment, for gains up to twice the value of their investment.”

The relief will be available to an individual who invests in an innovative start-up small and medium-sized business for a period of at least three years. The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €10,000 and constituting between 5pc and 49pc of the ordinary issued share capital of the company.

Qualifying investors can avail of an effective reduced rate of CGT of 16pc or 18pc if through a partnership, on a gain up to twice the value of their initial investment. There is a lifetime limit of €3m on gains to which the reduced CGT rate will apply.

The scheme will include a certification process that will be carried out by Enterprise Ireland to ensure the relief is targeted at businesses that can demonstrate financial viability and compliance with relevant EU rules.

The Employment Investment Incentive scheme is also being changed. It provides tax relief for risk capital investments in qualifying SMEs.

From 1 January 2024, the minimum holding period required to obtain relief is being standardised to four years for all investments, and the limit on the amount that an investor can claim relief on for such investments is being raised to €500,000.

Mr McGrath also announced that the Accelerated Capital Allowances programme for energy efficient equipment us being extended for an additional two years, to the end of 2025. The scheme provides a tax incentive for companies and unincorporated businesses that invest in such equipment.

From January, the existing VAT registration thresholds are also being increased from €37,500 for services and €75,000 for goods, to €40,000 and €80,000 respectively.

Reporting on: www.independent.ie