Baby steps for business rather than big strides forward
Published 12/10/2016 | 02:30
The Budget gave some positive signals to the business community but actually delivered very little practical support for SMEs and entrepreneurs. The Government appears to know what businesses want, touching on many of the live issues, but did not have the means do much about it.
One of the biggest disappointments was the limited improvement to the relief on capital gains tax (CGT) for entrepreneurs. This perk is a key consideration for entrepreneurs and innovators, who take huge risks only for the Exchequer to rake in a windfall of 33pc on most of the upside.
Yesterday's Budget reduced CGT from 20pc to 10pc on the first €1m of gains. The reduced limit matches the UK's lower rate of 10pc where it is applied to the first £10m (€11m), so a sizeable disadvantage to entrepreneurs based here remains.
Renatus Capital is a fund dedicated to SME buyouts, targeting companies worth up to €5m. Typically, its takeover targets are owned by founders of a company who no doubt have CGT high on the agenda when they are considering a sale.
Mark Flood of Renatus said yesterday's change was "a baby step in the right direction", and took no comfort from Minister Noonan's commitment to reviewing the €1m lifetime limit in further budgets.
"If you are a guy selling, you might hold off until next year's Budget," said Flood.
While there is support for further improvements to CGT in the business community, it is worth noting that the higher cap is expensive. It cost the UK exchequer £3bn in 2013/2014, significantly more than had been envisaged. This concern was flagged to the Government by the high level Tax Strategy Group ahead of the Budget. So Noonan's caution is understandable.
Other disappointments include self-employed people remaining disadvantaged when compared with PAYE workers, and also the lack of change to the taxation of employee share reward schemes.
Those breathing a sigh of relief yesterday were in the hospitality and retail sectors.
Brexit concerns meant Noonan was slow to remove the special 9pc VAT rate for hotels or increase the minimum wage beyond 10c.
It is a shame that some of the best news for business yesterday was that little had changed. Those hoping for big strides forward for business will have to be content with baby steps for now.