During a period of rising inflation that has had a negative impact on basic living costs for many working people, Budget 2023 set out aiming to help both business owners and their regular employee’s cope. It did this with a mixture of temporary measures and long-term permanent goals. The first set of these measures will kick in before Christmas 2022.
For owners of small and medium sized businesses, there are certain aspects of the multi-billion euro budget to be especially aware of heading into 2023 and beyond. This includes energy support schemes and important changes to taxation. Here’s a brief rundown of what changes to expect from the main Budget 2023 announcements:
Temporary Business Energy Support Scheme
One of the major headlines of the budget, TBESS takes into account a sudden rise in energy costs and will cover 40% of the increase in gas or electricity bills for businesses. A maximum of 10,000 euros a month per business can be covered, with it currently being planned as at least a six month scheme running up until February 2023, with businesses able to backdate this to September 2022.
To be eligible, businesses must be tax compliant and show a 50% or more increase in gas and electricity costs this year compared with 2021.
Growth & Sustainability Loan Scheme
This is a measure aiming to provide low-cost investment loans for small to medium sized enterprises covering up to ten years, in particular those involved in farming, fishing and other sectors for which sustainability is an ongoing priority.
Collateral won’t be required for loans up to half a million euros for eligible business, with 30% of the loan targeting environmental sustainability and 70% prioritising growth through productivity. This scheme is set to open in early 2023.
Ukraine Enterprise Crisis Scheme
While the ongoing crisis in Ukraine is something many are emotional about, this scheme also aims to help those closer to home. A strand of the scheme provides grant aid specifically for those companies impacted most by the severe gas and electricity costs exacerbated by the crisis. To take advantage of the scheme, eligible businesses must produce an energy efficiency plan to show how they are going to reduce their costs.
Other targeted measures
Many sectors are affected by the wider knock on effect from rising energy costs and aspects of the budget reflect this. For example, there is to be a alcohol excise relief scheme put in place to help out small cider and perry producers. This 50% relief is available on a maximum of 8,000 hectolitres produced, and with a maximum annual threshold of 10,000 hectolitres.
Adding to this, the qualifying production threshold for microbreweries is also being increased to allow more space for the industry to grow and thrive, with the current production ceiling increasing from 50,000 to 75,000 hectolitres.
Nightclubs and other night-time venues have been recognised as an important part of Ireland’s economy, with application fees for an exemption order being reduced by 50%. During a cost of living crisis, aiming to keep nights out affordable for consumers is arguably more important than ever.
In addition, the VAT rate for newspapers, including digital editions of publications, will be reduced from the current 9% rate to zero. These are just some of the further specific measures designed to help different sectors through this difficult period.
Changes to Taxation
Naturally, rising living costs and inflation present an extra challenge to maintain a level of disposable income among workers. The budget set out to achieve this with tax changes that are due to take effect on 1 January 2023, aiming to give small business owners and employees a sense of confidence in the economic outlook.
Pending changes to income tax will benefit higher income earners. The most important change looks to be an increase to 40,000 euro for the 20% tax rate band for single individuals, while for couples it increases to 49,000.
Income and personal tax credits are also increasing. The National Minimum Wage, meanwhile, will increase on 1 January 2023 to meet the increasing demands of inflation. Businesses should prepare now in advance of the increase if they currently have any employees on the minimum rate, by ensuring payroll is updated accordingly.
Corporation Tax Schemes
A four-year extension until January 2027 for the Knowledge Development Box was confirmed in this budget, originally set to end in January 2023. The KDB is a regime that provides for a rate of 6.25% corporation tax for some income from certain IP assets, though uptake has been relatively low.
Other schemes include the Research & Development tax credit, which offers 25% tax credit for R&D expenditure. While there will be no changes to the amount of tax credit a company can earn, timing adjustments for the payment are expected to align with new international tax rules. Now there will be a fixed system covering three years of payments, with companies able to call for direct payment of their credits or use them to offset tax liabilities in other areas.
Also remaining in place is a notable scheme for the arts sector. Section 418 tax relief allows films, television and documentaries produced in Ireland to claim 35% in tax credit. It is seen as having a key role in attracting outside investment for Irish productions, as well as helping to create many jobs in this creative industry. Budget 2023 has extended this scheme for another four years until December 2028.
While it’s impossible to please everyone during a time of financial crisis, there were many satisfactory elements to take away from this budget, especially in light of seeing how bad things can go when looking at certain neighbours to Ireland.
There is no avoiding the fact that Europe faces an ongoing squeeze in energy costs due to the war in Ukraine as well as contending with global inflation; this means many businesses may continue to struggle even with government support. Budget 2023 has at least however alleviated some concerns in the short term and shows a strong commitment to helping small businesses and jobs survive through this tumultuous period.