Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

In the November 2012 medium-term fiscal statement, my Department published a paper on the importance of small business to the Irish economy. The paper highlighted that small and medium-sized businesses, SMEs, make up more than 99% of businesses in Ireland and account for almost 70% of people employed. To that end, as part of budget 2013, I included a ten-point tax reform plan containing measures to assist small business in a number of ways, including in regard to their cash flow position, access to funding, reducing the costs associated with the administrative burden of tax compliance, boosting demand for their products in new markets, and incentivising them to create jobs.

The ten measures are not subject to any geographic restrictions and will be applicable on the north side of Dublin or anywhere else where the SMEs concerned meet the relevant criteria. The first measure involves reforming the three-year corporation tax relief for start-up companies to allow unused credits to be carried forward, thus helping to create jobs and improve cash flow. The second measure is to amend the close company surcharge by increasing the de minimis level to €2,000 in order to reduce the administrative burden and assist cash flow.

Measure 3 involves increasing the amount of expenditure eligible for the research and development tax credit on a full volume basis, without reference to the 2003 base year, to €200,000 to encourage innovation and help cash flow. Measure 4 is to increase the VAT cash receipts basis accounting threshold from €l million to €1.25 million to help cash flow. Measure 5 extends the foreign earnings deduction for work related travel to Algeria, the Democratic Republic of Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania to help boost demand for Irish goods and services abroad, while measure 6 extends the employment and investment incentive scheme to 2020 to help companies access funding. Measures 7 and 8 would not perhaps be relevant to the Deputy's specific question, but I will include them for the sake of completeness. They concern extending the general rate and young trained farmers' rate of stock relief, amendments to the definition of registered partnerships for stock relief to give targeted assistance to the farming sector and introducing a capital gains tax relief for farmers for land restructuring to give targeted assistance to the farming sector. Measure 9 involves reviewing the "carried interest" provision in the tax code to help small businesses to access funding. Measure 10 involves the announcing of a joint Revenue and Department of Finance public consultation, Taxation of Micro Enterprises: Reduction in Compliance Costs, to identify ways to ease the administrative burden.

Additional information not given on the floor of the House.

The Finance Act 2013 added two further provisions to this plan: amendment of the "key employee" provision of the research and development tax credit regime by reducing, from 75% to 50%, the proportion of time such an employee must spend solely on research and development activities in order to qualify for the credit - this should assist small and medium enterprises to avail of the provision; and amendment of the EII scheme to permit the operating or managing of hotels, guesthouses, self-catering accommodation or comparable establishments to qualify for the incentives.

These measures are in addition to existing taxation-based measures which are aimed at SMEs. These include the seed capital scheme, SCS, which is available to certain individuals who start a new business venture - income tax paid over the previous six years can be refunded, subject to certain conditions; the Revenue job assist scheme, RJA, which continues to be available to employers who employ an individual who has been unemployed for the previous 12 months. Employers may claim a double deduction when computing the profits of the trade or profession in respect of the first three years wages paid to qualifying employees. This double deduction may also be claimed in respect of the employers' PRSI contribution on such wages. Qualifying employees, in addition to their normal tax credits, can claim certain income deductions, including additional deductions for qualifying children for the three year period after taking up employment.

Other incentives focused on PRSI would primarily be the responsibility of my colleague, the Minister for Social Protection.

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