Minister for Finance, Michael Noonan, delivered what he has called his last austerity budget on October 15th 2013. In this summary, we discuss the main points of Budget 2014 as they relate to SMEs.
The Start Your Own Business scheme will offer a tax incentive to long term unemployed (15 months) setting up their own business where they will not have to pay income tax for their first two years, to a maximum of €40,000 tax liability. You will still need to complete a return but this relief will ease the pressure on new businesses.
There were no changes to the rate of CGT however a new, albeit limited CGT scheme for investors was introduced. Under this scheme an entrepreneur who sold assets and paid CGT in the past (since 1st of Jan 2010) will receive relief from CGT on future activities (up to 2018).
The Home Renovation Tax Incentive Scheme will give home owners a 13.5% tax relief on qualifying home improvements in their principal private residence in 2014 and 2015, for expenditure between €5,000 and €30,000.
Tax relief on medical insurance
The tax relief you receive against private healthcare insurance policies is now limited to €1,000 per adult and €500 per child. This may well have an impact on the cost of health insurance.
One parent family tax credit
Previously, in a situation where parents were living apart and both caring for their children they were each entitled to a tax credit worth €1,650. Under new rules, this credit will only go to the ‘primary’ carer of the child. This will be the same person who currently receives the child benefit.
The rate of tax relief on pensions will stay the same. However the amount you can build up in a pension fund has been reduced from 2.3 million to 2 million. This is actually less of a decrease than expected. Ultimately, it still makes sense from a tax saving point of view to contribute to your pension.
Employees who are on sick leave will not be entitled to illness benefit for the first six days. Until now, illness benefit kicked in after three days.
Small business owners will be breathing a sigh of relief that PRSI has not been increased as this had been touted in the lead up to the budget.
There was also no increase on VAT or USC, and no extra charge on petrol, diesel or home heating oil or gas.
In some good news for the tourism and hospitality sector, Minister Noonan decided to retain the 9% VAT rate in the tourism and hospitality industries with no mention of an upper time limit.
Free GP Care for under 5’s
In a move towards universal healthcare coverage the government has opted to introduce free GP care for all children under the age of 5 from January 2014.
- If you are in line for a redundancy payment you should note that Top slicing relief will be removed from January 2014. This relief ultimately reduced the amount of income tax you had to pay on lump sum termination payments.
- Businesses turning over up to €2million can now avail of the cash receipts basis of VAT (previously it was consigned to €1.25 million). This won't take affect until May 2014.
- They have extended the 7 year CGT relief on investments in commercial properties to purchases made in 2014
There have been improvements in the CGT reliefs available to farmers who want to sell their farm to people other than their children.