The Ukraine Credit Guarantee Scheme (UCGS) will provide €1.2 billion in more affordable funding to Irish businesses who have been impacted by the war in Ukraine.
Eligible borrowers will be able to access funds ranging from €10,000 to €1 million, capped at the greater of either 15% of their recent turnover or 50% of their annual energy expenditure. There is no personal guarantee or collateral required for loans up to €250,000.
Financing will be offered through a range of credit facilities, including term loans, working capital loans and overdrafts.
The scheme offers repayment terms of up to six years with discounted interest rates.
Who is eligible?
This funding is available to Irish SMEs, primary producers and small mid-caps (defined as businesses with up to 499 employees) who have been impacted by economic challenges arising from the war in Ukraine.
To be eligible for this scheme, operating costs must have risen by over 10% since 2020.
The scheme will be available up to the 31 December 2024 or until it has been fully subscribed.
How to apply?
Step 1: Apply for an Eligibility Code from the SBCI through their online hub.
Passing on your business and developing your exit strategy is one of the most important business decisions you will ever have to make.
Many of the tax reliefs one may wish to claim on a transfer of assets can be subject to very stringent conditions, such as minimum periods of ownership or active involvement in the business. Succession planning can often seem like something which should be considered close to retirement. However, the risk of waiting is that many of the key tax reliefs available to business owners are not accessible when the time comes to pass on assets, as the relevant conditions cannot be met.
What can help avoid this problem is advance planning. Through preparation, a business owner can identify some of the key conditions required to avail of certain tax reliefs, allowing them sufficient time to take the necessary steps to qualify for these reliefs. Therefore, it is not unusual to see a succession plan being put in place 5 to 10 years prior to its implementation.
The transfer of a business can trigger several taxes such as:
Capital Gains Tax (CGT) which is a tax payable by the person selling or transferring an asset. The current rate of CGT is 33%.
Capital Acquisitions Tax (CAT) which is a tax payable by the person in receipt of a gift or inheritance. The current rate of CAT is 33%.
This article will focus on the key tax reliefs available to business owners and their family members on the transfer of their business.
In order to mitigate or eliminate the CGT liability on the transfer, there are two main reliefs which may be availed of provided certain conditions are met. These are:
Retirement relief provides for relief from CGT on the disposal of qualifying assets.
To qualify for this relief, the main conditions are that the individual must be aged 55 or over and must be disposing of or transferring qualifying business assets. In addition, the individual must have been a working director of the company for 10 years and a fulltime working director for at least 5 of the years prior to the transfer. The latter condition can be a stumbling block for many individuals seeking to claim this relief. For example, an individual may be a director of more than one company and therefore may not meet the full-time working director requirement. This is why it is so important to prepare a succession plan early in your lifetime.
If retirement relief is not available, the individual may qualify for RevisedEntrepreneur Relief which limits the rate of CGT to 10% on the first €1m of gains on the disposal of certain business assets. In contrast to retirement relief, this relief has no age requirement and the individual can qualify for it at any stage provided the relevant criteria is met. To qualify for the relief, the individual should have owned the shares in the business for a continuous period of 3 of the last 5 years and spent 50% or more of their working time as an employee or director of the company.
An individual can receive gifts/inheritances up to a certain amount tax-free throughout their lifetime. Currently, a child can receive a gift or an inheritance up to €335K from his/her parents.
In the context of a business, a child may, on receipt of a relevant business property, qualify for what’s known as Business Relief. This reduces the value of the gift or inheritance being received to 10% of the market value of the business property, resulting in a significant tax saving. Similar to the reliefs already discussed, there are certain conditions that need to be met around ownership and the level of involvement in the business.
Farmers may qualify for Agricultural Relief on the receipt of a gift or inheritance of agricultural property. Agricultural property includes agricultural land, crops and trees growing thereon and farm buildings appropriate to the property. By qualifying for this relief, the market value of the property being received will be reduced by 90%. This makes it a very valuable relief.
There are two tests that need to be passed before a person can avail of the relief:
The farmer test requires 80% of the beneficiary’s assets to be agricultural property immediately after receipt of the inheritance.
The trading test requires the individual to farm the land themselves for at least 6 years or alternatively lease the land out to a qualifying farmer for 6 years.
If a CAT liability arises with or without claiming any of the CAT reliefs, it may be possible to reduce or eliminate the liability by claiming a credit for the CGT paid by the parent on the transfer of property.
Although there are many commercial considerations to be made when passing on wealth as well as discussions with family members as to suitable successors, tax plays a key role in informing the business owner as to the extent of any tax liability. Knowing this information prior to implementing a succession plan enables the owner to make more informed decisions and allows for maximising the amount of reliefs that may be claimed. This will reduce the overall tax costs of the transfer.
For more information on tax reliefs related to your exit strategy, please contact us.
https://www.crowleysdfk.ie/wp-content/uploads/Succession-Planning-1-scaled.jpg16512560Alison Bourkehttps://www.crowleysdfk.ie/wp-content/uploads/crowleysdf-chartered-accountants-1.pngAlison Bourke2022-05-31 08:05:522023-06-29 09:52:51Exit Strategy: How to Pass your Business on to the Next Generation
Edward Murphy, Head of Tax, was featured in Cork Chamber’s 200th anniversary magazine. He discusses Cork, the local Cork SME sector and it’s success on the domestic and global stage.
You can read the full interview below.
Q: What’s it like to do business in Ireland’s fastest growing city region?
A: It’s hard not to be excited by the hive of activity in Cork in recent years – from the myriad of new developments, a growing workforce and a thriving third-level education sector to the region’s continued success in attracting high-value overseas investment. However, it’s the global success of our indigenous Cork SME sector that is, perhaps the most exciting.
Q: Why have indigenous Cork SMEs been so successful locally and globally?
A:While Cork has a well-earned reputation in attracting and retaining foreign direct investment, the support it offers homegrown entrepreneurs and SMEs is second to none. Innovation and the ambition to think globally is nurtured through an excellent support ecosystem of start-up incubators, accelerator programmes and research, development and innovation hubs; backed by local business organisations, third-level institutions, and public and private investors.
Q: What are the key challenges facing SMEs looking to expand overseas?
A: The continued uncertainty surrounding Brexit is currently the biggest challenge facing SMEs that trade with the UK. However, a constant challenge relevant to all markets is access to local, trusted and reliable professional connections and advice overseas. This is a key step in any global expansion strategy and is often a major stumbling block for many businesses. Understanding how to do business in a new jurisdiction can be time consuming and expensive when you don’t have a local relationship or know where to go to get the proper advice.
Q: Can you describe how Crowleys DFK can help SMEs with theirinternational growth strategies?
A: At Crowleys DFK, we understand the challenges faced by our SME and owner-managed business clients. We are proud of the reputation and long-term relationships we have built with them over the years. They represent a diverse range of today’s most innovative and high-performing industries and sectors, including information and communications technology, life sciences, manufacturing and consumer products.
We have been a member of DFK International since 1993. This worldwide association of independent accounting, tax and business advisory firms has over 220 member firms covering 92 countries. We have a long history of working with other DFK Firms. It’s through these strong relationships that we can deliver a complete international service to clients.
Whether it’s getting advice on taking on two employees in Germany, accessing capital markets in London or New York or helping technology companies expand into San Francisco, we connect our clients with trusted professionals throughout the world. In many cases our clients prefer to deal with us and in these instances, we instruct the other DFK firms. This means clients can concentrate on their business and don’t need to spend time developing new relationships abroad.
We have all the right connections to help businesses achieve their ambitions – locally and globally.
Choosing an appropriate location for a company’s registered office arises under the Companies Act 2014. It is the duty of each director and secretary of a company to ensure the requirements for a Company’s registered office are complied with.
Ireland is home to many of the world’s most successful companies. Sixteen of the top twenty global technology firms are located here as are twenty-four of the twenty-five top biotech and pharma companies.
However, it is not just global giants that reap the benefits of doing business in Ireland. Many smaller companies also take advantage of the pro-business culture and ease of access to EU markets.
In the software sector alone, more than 900 multinational and indigenous firms employ 24,000 people generating €16 billion of exports annually, according to IDA Ireland, the state agency responsible for promoting foreign direct investment.
Ireland’s Foreign Direct Investment Success
One reason for Ireland’s foreign direct investment (FDI) success is the favourable tax regime. There are double tax treaty agreements in place with 72 other countries and the 12.5 percent corporate tax rate is one of the lowest in the EU.
Other advantages include an attractive holding company regime and tax incentives for certain types of investment. For example, Irish-resident companies carrying out qualifying research and development activity can avail of a ‘Knowledge Development Box’ where eligible profits are taxed at a rate of just 6.25 percent.
Tax not the only reason to locate in Ireland
While tax is undoubtedly an important consideration, it is not the only reason foreign businesses choose to locate in Ireland. Other influences include:
Ease of doing business.
Supportive state agencies.
EU membership and proximity to EU markets.
Strong legal framework for the development, exploitation and protection of intellectual property rights.
English-speaking population (When the UK leaves the EU, Ireland will be the only English-speaking EU member state).
Strong talent pipeline with around 30 percent of Irish third level students enrolled in science, technology, engineering and maths (STEM).
Collaborative ecosystem where industry and academics work together to the benefit of society and the economy.
Growing economy. GDP growth of 4.4 percent is forecast for 2018 and 3.9 percent for
US and Canadian Companies in Ireland
Around 700 US companies are located in Ireland, employing more than 150,000 people. Anecdotally, US technology companies report that they can hire two engineers in Ireland for the price of one in Silicon Valley, with higher multiples for some engineering specialties.
Notwithstanding the Trump administration’s recent tax reform package which will see US corporation tax rates fall from 35 percent to 20 percent, Ireland’s corporate tax rate is still only around half the US rate when federal taxes are taken into account.
Canadian interest in Ireland is also growing. The EU-Canada trade deal which provisionally came into force in September 2017 will create further opportunities for Canadian businesses seeking to set up in Ireland.
At a time of global economic and political uncertainty, Ireland offers a stable, pro-business environment and is an excellent location from which companies seeking to establish a base in the EU can develop and expand their businesses.
Crowleys DFK assists many foreign owned companies to set up operations in Ireland. For more information and to discuss your specific requirements, please get in touch.
https://www.crowleysdfk.ie/wp-content/uploads/Foreign-Investment.jpg6001600Alison Bourkehttps://www.crowleysdfk.ie/wp-content/uploads/crowleysdf-chartered-accountants-1.pngAlison Bourke2018-02-21 14:16:432019-10-16 12:08:09Benefits of locating your business in Ireland
The Finance Bill 2017 has introduced a tax efficient share option scheme for employees of SMEs. The Finance Bill provides that from 1 January 2018, SMEs in Ireland will be able to grant KEEP (Key Employee Engagement Programme) share options to their employees.
The change in a tax treatment of these share options means an employee may exercise a “qualifying” share option without incurring the liability to income tax, PRSI and USC that he would have under the current rules. Currently, gains arising on the exercise of a share option at a discount on market value are subject to income tax, PRSI and USC. However, KEEP provides that tax on such shares will be deferred until the shares are disposed of and the employee will pay only capital gains tax at 33% on his profit when the shares are sold.
The KEEP Scheme was introduced to facilitate the use of share-based remuneration to attract and retain key employees in unquoted companies.
A number of conditions must be satisfied in order to avail this tax advantageous KEEP Share Option incentive, which are briefly set out below:
Qualifying share options
Shares must be new, ordinary fully paid up with no preferential, current or future rights to dividends or assets on a winding up or redemption
Share options must have an exercise price that is not less than the market value of the underlying shares on the date the option is granted
There must be a written contract in place setting out number and type of shares, option price and exercise period
Share options cannot be exercised within 12 months of grant other than in limited circumstances and options cannot be exercised more than 10 years after date of grant
Share options must be granted for bona fide commercial purposes the main purpose of which is to recruit or retain employees in the company and not part of a tax avoidance scheme or arrangement.
For the purpose of the relief the company must be a “qualifying” company i.e. must have been Ireland/EEA incorporated and Irish resident or carrying on a business in Ireland through a branch or agency
Qualifying company must be carrying on trading activities with the exception of certain excluded activities set out in legislation. The most notable of these excluded activities include professional service companies, companies dealing in or developing land, financial activities and the building and construction industry
The company must be unquoted and remain within the definition of an SME i.e. a company with less than 250 employees and with turnover less than €50m or less than €43m balance sheet
The company can only have a maximum of €3m value of share options in issue and unexercised at any one time.
Must be a fulltime employee/director working at least 30 hours per week
The employment held must be capable of being held for at least a further 12 months from the date the option is granted
The employee must not acquire or be connected to a person who controls more than 15% of the ordinary share capital of the company during option period
Market value of all shares which can be granted in any year of assessment to an employee cannot exceed €100k in any one tax year, €250k in any three consecutive years or 50% of the employee’s annual emoluments for the year in which the option is granted.
KEEP will be available for qualifying share options granted between 1 January 2018 and 31 December 2023. As State Aid approval will be required to introduce this scheme, the scheme is subject to a Ministerial Order.
Contact our Tax Department if you have any questions about KEEP share options or other employee share scheme matters.
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