SME supports must be retained into 2022, urges PwC

PwC has called on the Irish Government to retain Covid supports such as the wage subsidy scheme until 2022 to prevent shocks for recovering businesses.

PwC Ireland has called for new and innovative tax measures to support Irish businesses through to the next stage of recovery.

In its pre-Budget submission developed in conjunction with the Family Business Network  entitled ‘Recovery and Renewal – Supporting private business and SMEs in Budget 2022’, PwC calls supports for the Irish private business and SME sector to be extended into next year.

“Particular attention will still be needed to continue to support our private businesses, employing some 45pc of people working in Ireland”

The submission proposes extension of the Employment Wage Subsidy Scheme to June 2022, waiving the Temporary Covid-19 Wage Subsidy Scheme (TWSS) and Pandemic Unemployment Payment (PUP) tax clawbacks for employees in certain situations and additional tax credits for people working from home.

It calls for an increase in the small benefits exemption by €1,000 for hospitality spend, extending tax debt warehousing to the end of 2022 and reduce the interest rate on the late payment of taxes.

Room to breathe for SMEs

Other suggested measures include relaxing employers’ PRSI for new hires previously unemployed, extending the 9pc VAT rate for the hospitality sector and accelerated tax write-offs for the development of regional hubs to create shared offices spaces.

The suggested measures also include a “super deduction” until 31 December 2023 for plant and machinery, including IT equipment for remote working, and capital expenditure n buildings/factories that receive recognised accreditation for energy performance.

As well as a temporary reduction in capital gains and capital acquisitions tax rates, similar to the UK the measures propose facilitating the transfer of businesses to the next generation without incurring upfront punitive tax costs i.e. pay an ‘upfront installment’ of the gift/inheritance tax with the balance being spread over a longer term period.

They also call for extending capital gains tax exemption to early stage renewable energy projects to encourage release of assets to renewable developers and encourage the wider adoption of electric vehicles via a general scheme of tax incentives.

“The Government should be commended for the various supports that it has given to businesses from the very start of the pandemic, particularly in the sectors hardest hit including Ireland’s SMEs and private businesses,” said Nicola Quinn, tax partner at PwC Ireland’s Entrepreneurial & Private Business Practice, PwC Ireland.

“Despite concerns about new virus strains and the very recent further delay in the reopening of the hospitality sector, there is optimism that economic activity will bounce back. However, this will be unevenly spread with a growing fear amongst private businesses that the contingency funds and support measures will be largely exhausted as we head into 2022 and beyond.

“Therefore, particular attention will still be needed to continue to support our private businesses, employing some 45pc of people working in Ireland.  It would be very disappointing to see successful businesses fail just before they have had the chance to trade again.  Now more than ever we need to continue to support businesses through a new stage of recovery and renewal.

“Our 2022 Pre-Budget Submission sets out proposed measures to foster growth and create employment in the Irish Private Business and SME sector while restoring business confidence. The strategic priority areas we have targeted for support are: employment maintenance and business restoration; growth and investment; building a sustainable Ireland and business succession,” Quinn said,

Succession

Succession planning and planning for future exit strategies are high on the agenda for many business owners and particularly at a time when many businesses need new energy and drive for growth post pandemic.

“The survival of many businesses in these highly uncertain times will be dependent on a successful transition of the business”

However, according to Colm O’Callaghan, tax partner at PwC Ireland, a key challenge for Irish private and family businesses is the efficient and affordable transfer of business assets.

“The survival of many businesses in these highly uncertain times will be dependent on a successful transition of the business.

“The retention of these businesses by their Irish founders is important not only for the future growth of the domestic economy but also for many these businesses are central to the survival of the local and rural areas in which they are situated.

“We propose a consultation process with relevant stakeholders and the Department of Finance to explore possible measures to facilitate a burdensome free transition to the next custodian,” O’Callaghan said.

By John Kennedy (john.kennedy3@boi.com)

Published: 6 July 2021