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Minster for Finance, Jack Chambers, last week published the report of the independent examination of the Standard Fund Threshold (SFT). Following this review, the Government will implement phased increases in the SFT of €200,000 per year beginning in 2026 until 2029; after which the level of SFT will move with the applicable level of wage growth.    The SFT is the limit on the total capital value of an individual’s pension pot before unfavourable tax consequences are realised and has remained at €2 million for the past 10 years.   The Institute, under the auspices of the CCAB-I, responded to the public consultation on the SFT regime in December 2023 and recommended that the SFT should be increased in line with inflation as well as harmonising the treatment of public and private sector pensions when the SFT is breached.   The Minister also confirmed that there would be no change to the rate of chargeable excess tax (CET), currently 40 percent, but that this would be reviewed in 2030.  In relation to lump sums, the threshold for the higher rate of taxation to apply to a pension lump sum will be limited to €500,000 rather than a proportion of the SFT and this change will be introduced in Budget 2025.   Read the Minister's statement announcing the changes.  

  A survey commissioned by Uisce Éireann which published this week has found that costs remain both the primary driver and obstacle in SMEs taking sustainability action. The survey, which interviewed the owners of more than 350 small- and medium-sized businesses, sought their opinion on the importance of investing in sustainability for their businesses and customers. It also examined the barriers that currently exist to investment in the area.  The survey found that for seven in 10 SMEs said cost savings is the primary driver in decision-making on sustainable investment, but cost concerns remain the primary obstacle for almost 70% of SMEs. The survey also revealed that 9 in 10 businesses still intend to maintain or increase their investment in sustainable practices in the coming year, but there has been a slowdown overall in the number of businesses planning sustainability investments, falling from 20% in 2023 to 15% in Q2 2024.  75% of companies surveyed intend to maintain levels of investment, with 15% planning to increase it, but only 11% have accessed external expertise in the past 12 months. Speaking about the survey findings, David Broderick, Director of the Small Firms Association (SFA), said: “it is worth noting that small businesses are still operating in a high inflation economy with 68% of SMEs claiming that costs remain a primary barrier to investment.” The top three areas where SMEs are most actively tackling environmental issues are reducing their energy use, waste, and plastics. The proportion of businesses taking measures to conserve water is at its highest level in three years, with more than seven SMEs in 10 say they are conserving water, and a 10% decrease over the same period in the number who say it is ‘not on their radar’ (31% in 2022 to 28% in Q2 2024.)

In this month’s public policy update, our policy team outlines its ongoing lobbying efforts on the issue of childcare, its representations to Government on how a change in process is impacting Critical Skills Employment Permit holders and the Institute’s recent submission to the Department of Social Protection on pensions auto enrolment. Advocating for improved childcare in the Republic of Ireland and Northern Ireland Following the publication of our recent policy paper Supporting Working Parents – The case for better childcare policy in the Republic of Ireland and Northern Ireland, efforts have been ongoing to engage with policymakers across the island of Ireland on this important issue. Last week, our public policy team met with officials from the Department of Children, Equality, Disability, Integration and Youth to discuss our members feedback on the issue and in particular to emphasise the need to improve capacity across the sector. Meetings have also been held with opposition parties on the issue including Sinn Fein so as to ensure our members voice is heard across the political spectrum. Following the restoration of the Northern Ireland Assembly, meetings have also been held with legislators from all political parties as work toward developing a new childcare strategy for the region advances. As part of these discussions, our policy team have emphasised the cost pressures our Northern Ireland members are facing with respect to obtaining adequate childcare and in particular the need to abolish the £10,000 cap on tax-free childcare. Our policy team will continue to advocate on the issue of childcare throughout the year and welcome members feedback on the issue which can be sent to publicpolicy@charteredaccountants.ie. Changes with Critical Skills Employment Permit / Stamp 4 process causing issues for member firms Following recent changes announced by the Department of Enterprise, Trade and Employment (DETE) on November 15 2023, holders of Critical Skills Employment Permits (CSEP) must now apply directly to the Department of Justice or their local immigration office (if living outside Dublin) for a Stamp 4 permission to continue to reside and work in Ireland following the expiration of their CSEP. To obtain a Stamp 4 on or after the 30 November 2023, CSEP holders must complete a minimum of 21-months' work following the issuance of a Stamp 1. In effect, this means that the eligibility to meet the 21-month test does not start from the day the worker started to work physically in Ireland (which was the case under the previous system); instead, the clock starts from the date the Stamp 1 is issued (which could be several weeks later). These changes have had an enormous impact on CSEP holders and their employers, who in many cases bear the financial cost of the visa application process on behalf of their employees. Specifically, given that the 21-month period required to apply for a Stamp 4 is now only deemed to have commenced after the CSEP holder obtains a Stamp 1, many CSEP holders are finding that their 2-year CSEP expires before they have met the 21-month period needed to obtain a Stamp 4. This is the result of extensive processing times, with some employees reporting up to 18 weeks wait for Stamp 1 applications, particularly in regional areas. Such employees cannot possibly meet the 21-month period before their CSEP expires, as they are not able to obtain their Stamp 1 within the parameters of their CSEP. As a result,  many member firms have reported the need to apply for a ‘bridging’ CSEP to cover these employees until they can meet the necessary 21-month residency period, which in turn has created additional financial and administration costs.   Our policy team have written to officials in both the Department of Justice and DETE to highlight this issue and to request a meeting to discuss how the new system may be adjusted to reduce the financial and administrative burden it has placed on our members. Representations to Government on Pensions Auto Enrolment The Institute’s policy team have also recently written to the Department of Social Protection on the need to allow businesses adequate time to plan for the introduction of pensions auto-enrolment. While the Institute has long been clear in our support for the introduction of auto-enrolment as a mechanism for increasing private pension coverage in the State, payroll services providers tell us that a lead-in time of at least 18 months would be required to properly adapt to this significant change. In order for auto enrolment to be a success, we are calling on the Government to adopt the recommendation of the Joint Committee on Social Protection (in its pre-legislative scrutiny report) that there be a two-year lead-in period, following the relevant legislation being signed into law, that allows businesses time to adequately prepare for the implementation of auto enrolment. In addition to the above, the policy team re-emphasised the Institute’s position that any new scheme of auto-enrolment should facilitate the existing and well established model of tax relief at both standard and marginal rates for pension contributions, rather than introduce a new scheme of tax relief, as proposed.