Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Amendments Nos. 5 and 6 would have the effect of removing the restriction on a qualifying holding company in respect of the carrying on of a trade or trades. The Finance Bill 2019 provides for significant broadening of the types of companies and structures that may avail of the KEEP and increases the scope of activities that may be carried out by a qualifying holding company, including management functions for the companies within the qualifying group. The intention behind the changes being introduced is to ensure that the types of companies that are provided for under the legislation reflect commercial reality. The amended definition of a holding company, as included in the Bill, was on the basis of policy formed in response to a comprehensive SME public consultation process which took place in May and June of this year. The specific policy of including companies where there is trading activity within the holding company was not presented to my officials as an essential change required by the majority of SMEs as part of this comprehensive stakeholder engagement.

On the point the Deputy raised, the definition we have of a holding company is one that met the needs of the majority of companies that were involved in this process with us and which the Revenue Commissioners and my Department considered appropriate to implement. We are not aware of a policy need or demand to change it further. The Deputy might offer different views on that and between now and Report Stage we can listen to those views. In any event, if a company wishes to grant share options under the KEEP, and this comment is in reference to amendment No. 6, it must ensure that they come within the requirements of the scheme. The amendments I am bringing forward will facilitate greater numbers of companies in this regard.

I do not believe it is an especially onerous imposition on a company which is seeking to avail of a valuable relief such as KEEP. That is the reason I believe, with regard to amendment No. 7, it is appropriate to keep the word "shall". If we are making an expanded scheme available to a greater variety of companies, there should not be any ambiguity regarding the requirements that must be met for the scheme to be made available and for the Revenue Commissioners to be satisfied that those requirements are being met. For that reason, it is important that we retain the word "shall" as opposed to "may". My experience of similar changes in the past is that we can change it to "may" at some point, or one might decide it should be "may", but we find at a later point that there are difficulties with companies that are participating in the scheme and companies which subjectively feel they may be entitled to be in the scheme. We need that to be objectively the case and we rely on the Revenue Commissioners and records that are supplied to the Revenue Commissioners to make that determination.

Amendment No. 7 proposes that a company might continue to be regarded by the Revenue Commissioners as a qualifying company where the company fails to comply with the annual filing requirements. It must be remembered that KEEP operates on a self-assessment basis with no Revenue Commissioners pre-approval required, so the strict filing requirement is key to ensuring timely returns are made to the Revenue Commissioners. I do not believe that is too much to ask, given the valuable nature of the relief. This also ensures that the requirements on us to demonstrate our compliance with state aid obligations can be fulfilled. For this reason I do not intend to accept the amendment. I ask the Deputy to reflect on the rationale I have put forward for that.

With regard to amendment No. 8, the amended definition of a qualifying holding company has been drafted in such a way as to allow certain flexibility in terms of holding company activities. The change was requested by companies and I am happy to oblige. I believe that the "wholly or mainly" test is not in any way an onerous one for KEEP companies to meet. Indeed, it should be noted that this does not reflect any policy change in this regard and it provides ample scope for qualifying holding companies. Revenue Commissioners guidance notes, and the Deputy mentioned this, will be updated setting out further information relating to the amended definition of a qualifying holding company. I am informed by the Revenue Commissioners that they intend to issue this guidance by the end of this year.

As regards the Deputy's request for a report on the practical operability of KEEP in amendment No. 9, I remind him that as part of the preparations for budget 2020 officials from the tax division of my Department undertook a stakeholder consultation process on tax incentives for SMEs. This included the KEEP. We received 17 responses and upon analysis of the submissions, my officials identified common themes and established a shortlist of the key issues for discussion at the follow-up event. The changes we made were based on that process. The Deputy pointed out to me on a number of occasions, and it was a valid point, that not enough companies were accessing this scheme and that, in particular, small and medium sized companies were unable to benefit from it. We carried out two different consultation events on it. Those events and reference to this scheme in the tax strategy group papers motivated us to make the changes we have made here. Our judgment is that once we gain state aid approval for these changes, as we will be required to do, they will have a significant effect on the number of companies that will be able to access this scheme.