Small and medium enterprises (SMEs) should be supported in becoming more resilient and agile, as they emerge from the pandemic, according to Chartered Accountants Ireland. The largest accountancy body on the island of Ireland today published a position paper informed by extensive engagement with members in business, practice, and the public sector. The focus is on improving government policy for businesses all around Ireland without demanding additional exchequer funding or support.
The Institute, which represents 30,000 chartered accountants, states that while greater government intervention in the economy may be necessary in the wake of the pandemic, it does not need to result in increased complexity or red tape which constrains business growth. Rather, The Next Financial Year promotes recovery through sustainable government approaches to business needs.
Commenting, Dr Brian Keegan, Director of Public Policy, Chartered Accountants Ireland said
“Government in the future will be bigger. There will be more regulation, more direct government intervention, greater accountability. Government and its agencies collaborated with business better in the last 18 months than before. As supports are withdrawn, a continuation of this partnership-based approach would position Ireland’s SMEs strongly for growth.
“As well as emerging from the restrictions, businesses will be dealing with increased compliance from developments such as the proposals for an auto-enrolment pensions system and statutory sick pay. The timing of these initiatives and their immediate impact on SMEs as they re-open has to be managed.”
The Institute’s proposals to support businesses include:
- Improvements to the digital facilities of business regulators such as the Company Registration Office and the Revenue Commissioners
- Greater use of verifiable electronic signatures for official purposes
- Overhaul of Companies Act provisions to permanently reduce the need for physical meetings and events
- Extension of commercial rates waiver for businesses impacted by the public health restrictions.
Tax rules for new ways of working
While remote working has been one of the biggest recent shifts in working lives, the pandemic has shone a harsh spotlight on the taxation system. Payroll tax amounted to €18.83 billion in 2020, a reliable source of Exchequer revenue made possible by flexibility in where an employee could work during the pandemic. The current tax system is inadequate however for the purposes of fairly reflecting the costs for businesses and employees of working from home. Tax supports should be put in place for businesses to upskill employees and upgrade their technology, while the tax system must be reformed to allow employees off-set the cost of working from home against tax liabilities.
Norah Collender, Professional Tax leader, Chartered Accountants Ireland said:
“Currently, employers can contribute up to €3.20 per day to cover an employee’s additional costs of working from home, without triggering benefit-in-kind. However, many employers cannot afford such a contribution. The UK’s ’express claim’ tax relief measure, while more modest, is easier to claim. A similar measure should be considered by the Irish Government if working from home continues to be required.
“At present tax relief can only be claimed on expenses incurred for equipment used “wholly, exclusively and necessarily” in the performance of the duties of employment. Revenue applies a strict interpretation of this, resulting in complex rules and slim odds of making a successful claim. Fairer and more accessible tax rules must be developed as part of an effective strategy for remote working.”
In the area of taxation, in The Next Financial Year the Institute also calls for the rules to establish a normal place of work to be reconsidered considering the move to hybrid or blended working. An employee’s normal place of work should be based on where the employee carries out most of their work, whether their home or their employer’s office or another workspace.
Green taxes and sustainable reporting
Businesses, particularly SMEs, will play a crucial rule in meeting the Government’s net-zero carbon emissions targets by 2050. However, businesses will only be able to deliver if they are supported by the right policy frameworks and encouraged by Government to commit to carbon-reduction targets.
Chief among the Institute’s proposals in this area are:
- Aligning tax policy with decarbonisation objectives to steer business investment and consumer choice towards low carbon alternatives
- Allocating all revenues from increasing carbon taxes to climate action initiatives
- An enhanced R&D Tax Credit to fast track the development of technology making renewable energy cheaper and more readily available
- Extending the tax breaks for energy efficient equipment scheme beyond the current expiration date of 31 December 2023 and giving the scheme a permanent basis.
Other key proposals in the wider position paper include:
- Tax policies to tackle the blockage to housing supply by reducing development costs, including tax payment holidays for developer PAYE and VAT, offsetting the costs of training construction workers and enhanced tax deductions for safety equipment
- A new ‘super-deduction’ capital allowance regime for a limited period (two years), providing companies a 130% capital allowance deduction for investments in plant and machinery
- Application of the current tax relief model to the proposed pension auto-enrolment system
- A cost/benefit analysis to consider the reduced interest rate of 3% on unpaid tax debt available under the Tax Debt Warehousing Scheme being applied on a permanent basis.
The Next Financial Year can be downloaded in full here
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