The 2023 Irish budget was announced in September jointly by Paschal Donohoe, the Minister for Finance, and Michael McGrath, the Minister for Public Expenditure. Numerous cost of living measures were outlined including a €4.1 billion package which the government said would help to tackle the surge in global energy prices and other associated rises in living costs. On top of their countrywide measures, the Irish government devoted large sections of the 2023 budget to businesses, in particular small and medium-sized enterprises, or SMEs. What were the measures most likely to affect SMEs in the budget and what financial plans should entrepreneurs and business owners be making ahead of the forthcoming financial year? Read on to find out.
The Business Energy Support Scheme
To begin with, the Irish government will introduce not one scheme designed to tackle the cost of living and energy crises affecting the West but five. The idea is that each one will be a targeted measure designed to offer the support where it is needed most in the most cost-effective manner. Firstly, SMEs will be able to take advantage of the Temporary Business Energy Support Scheme, otherwise known as TBESS. Under TBESS, monthly awards of up to €10,000 can be obtained but only by qualifying businesses. Expected to cost some €1.25 billion, TBESS is for Case 1 enterprises that are tax compliant. Retailers, hotel owners, pub landlords, restaurateurs, cinema and other entertainment venue owners, food and drinks suppliers and agricultural businesses will be able to apply. TBESS will be a self-assessed support scheme which means being able to prove energy bills have gone up will be the responsibility of business owners.
The Ukraine Enterprise Crisis Scheme will also come into existence next year. It is designed for other types of enterprises which are economically viable in the mid-term but affected by the economic conditions caused by the war in Eastern Europe. Direct grants and business loans will be available under this scheme while a proportion of energy overheads will be met by the government for qualifying businesses. This support offering will go hand in hand with the Ukraine Credit Support Scheme, to be run by the Strategic Banking Corporation of Ireland. Under this scheme, SMEs will be able to access loans of up to €1 million so long as they have fewer than 500 employees.
In addition, the Growth and Sustainability Loan Scheme, as well as the Small Firms Investment in Energy Efficiency Scheme, are both primarily aimed at smaller businesses. The first comprises a €500 million pot which SMEs can access for improving productivity or more sustainable business practices. The other is only accessible among SMEs with 10 or fewer employees and seeks to help them with measures that will make them more energy efficient, such as providing loans for improved insulation, for example.
Pandemic Employment Supports
No mention was made during the 2023 budget of further pandemic support schemes. Recently, there were two principal schemes that SMEs could turn to for Covid-related support. The first of these was Employment Wage Subsidy Scheme and the other was the Pandemic Unemployment Payment scheme. Both ended in 2022 and there had been some speculation of an extension for certain SMEs. Indeed, it was not impossible to imagine that the Irish government might have considered an entirely new scheme to replace the previous two. However, no such announcement has been forthcoming and all pandemic-related economic support from the Irish government is at an end. As such, both sole traders and employers will need to make the necessary adjustments to their payroll processing at the end of the current fiscal period in December.
Taxation – Increases and Reliefs
Overall, the tone of the budget announcement was one that meant increased taxes were somewhat inevitable given the economic position of the country – and much of the rest of the world – right now. As such, owners of SMEs who employ staff can expect an increased employee tax burden starting in January. Helpfully Snow’s outsourced payroll solution is already ready to go with the new tax rates so payroll managers can rest easy with the changes if they use it. That said, the changes are noteworthy in their own right.
To begin with, the current two rates of income tax will remain the same, set as they have been for some time at 20 per cent and 40 per cent respectively. What the government has done is to up the 20 per cent threshold to €40,000 per annum from its current level of €36,800 for single people. Married couples and those in civil partnerships will see a similar increase from €45,800 a year to €49,000. Furthermore, the personal tax credit level will also go up by €75 next year. This will bring the total credits allowed up to €3,550. PAYE employees and self-employed people who gain Earned Income will also see a €75 rise in income tax credit next year. In such cases, the total allowed credits will go up to €1,775.
It is worth noting that the budget included a number of measures that would alter VAT rates and certain excise levies in the country. The standard rates will still apply at the same level but the government wanted to take action in particular sectors. For example, in 2023, newspaper sales will be free from VAT in a move that is designed to help promote printed media. Hospitality sector businesses will see an upturn in their VAT rate, however. Like print media firms, the current rate of VAT in hospitality and tourism is 9 per cent. This will rise to 13.5 per cent at the start of March next year, reflecting – the government says – its pre-pandemic tax rate.
Other industries affected by new levies are those – primarily in the construction sector – that use concrete. Both blocks of concrete and poured concrete will be subject to a 10 per cent levy from April next year in a bid to penalise their use given their associated carbon footprint.
Other Support Schemes for SMEs
SME owners and people who work in business leadership roles, such as chief financial officers and human resources directors, should know that some key business support packages will remain on offer from the Irish government into 2023. Firstly, the Key Employee Engagement Programme, or KEEP for short, will be guaranteed to run until the end of 2025. Under KEEP, both company directors and full-time employees are allowed to take share options at a fixed price without them becoming liable for tax even if the share value goes up between when the offer is made and the shares become available.
In addition, the Design and Crafts Council of Ireland has been offered additional funding, something worth seeking out if your SME operates in this sector. Another announcement confirmed that Enterprise Ireland would receive a boost to its budget next year. Valued at €12 million, this fund will support national resilience, climate change adaptations and digital transition, ideal for companies that are starting to digitise their current business process, such as turning to online payroll, for example.
In Summary
In a changing economic world, Ireland’s government has attempted to steer a course that is broadly pro-business. How their measures will pan out over the course of 2023 remains to be seen, of course. However, in an evolving global economy and a potentially changing trade position between the EU and the UK – something that would affect Ireland perhaps more than any other Eurozone country – there are steps all SMEs can take to reduce costs and improve human resources efficiency. Not least, Snow‘s highly customisable payroll solution is something that can benefit all Irish businesses, from those with a few employees right up to large corporations. Get in touch or book a demonstration to find out more.