Budget 2021 tax and entrepreneurship

Perspectives

Tax and Entrepreneurship 

Budget 2021

Key measures

  • A report is to be prepared on the establishment of a fund with a mandate to invest in high innovation domestic enterprises.
  • CGT entrepreneur relief is to be amended such that an individual who has owned at least 5% of the shares in the company for a continuous period of any three years can qualify. Prior to this change it was necessary to hold the shares for 3 years in the 5 years immediately preceding the disposal.
  • For the self-employed, the earned income tax credit has been increased to €1,650, in line with the provisions in the Programme for Government.
  • The Employer Investment and Incentive Scheme is to be reviewed to ensure it continues to be relevant and allow SMEs to avail of funding to grow their businesses and create employment in light of the impact of Covid 19 on the sector.
  • Targeted supports are being introduced for those sectors hardest hit by the Covid crisis. This is to include the hospitality sector and the entertainment sectors.

Who will be affected?

Entrepreneurs who have sought outside investment to grow their business but whose shareholdings are diluted as a result will benefit.

Our view

The announcement of an investment fund to support high innovation enterprises is a welcome measure and while little detail has been provided so far, it is hoped that such fund can have a material impact in supporting innovation within the domestic economy by providing much needed funding.

The changes to CGT entrepreneur relief are also welcome and reflect the often differing circumstances of entrepreneurs. Those whose shareholdings might be diluted due to the introduction of outside investors, but who continue to work in the business could otherwise see their ambition to grow and expand being unduly penalised. As such this element of flexibility in the shareholding requirement is most welcome.

The proposed review of the EII scheme to ensure its relevance and to identify ways to enhance the scheme in the current Covid crisis is welcome. Many companies that are engaged in the scheme could be at risk due to circumstances outside their control. Any improvement is a welcome development and we await the outcome of the review.

The proposed targeted supports for businesses most impacted by Covid restrictions (in particular hospitality and entertainment businesses) will certainly be welcomed by those companies. However, it remains to be seen if these measures will be sufficient or if further supports will be required in due course.

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