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Dublin Chamber Calls For Tax Breaks For Share Schemes

by Jason Gorringe,, London

27 July 2017

The Dublin Chamber of Commerce has called on the Irish Government to introduce a tax-efficient share-based remuneration scheme for SMEs and improve the capital gains tax (CGT) regime.

In its pre-Budget submission, the Chamber argued that the Government should allow an employee who is granted share options in their employer's business to only be subject to income tax on the discount between the option exercise price and the market value of the shares on the date of the grant. The income tax liability would arise on the date of the exercise of the share option.

The Chamber said that, currently, "many businesses cannot target key employees with share-based remuneration as it is not tax-efficient and puts them at a disadvantage to larger, older businesses."

The Government's Programme for Partnership Government committed it to exploring how SMEs could reward employees with shares in a tax efficient manner, and Budget 2017 confirmed that the Government would develop an SME share-based remuneration scheme.

In addition, the Chamber called on the Government to improve the Entrepreneur Relief by increasing the cap to EUR10m (USD11.7m). The relief cuts the applicable rate of CGT from 20 percent to 10 percent for qualifying entrepreneurs, but sets a lifetime cap at EUR1m. The Chamber said that while not all businesses will avail of the full EUR10m limit the first time they sell a business, a larger limit would allow them to establish another business, with the same incentives.

The Chamber warned that, because the UK's CGT offering is more competitive, there remains an incentive to locate a business in Northern Ireland. It said that if the Government increases the cap at merely an incremental rate, few will wait for the relief to become competitive, and will choose to locate in Northern Ireland instead.

The Chamber's submission also urged the Government to remove the three percent Universal Social Charge (USC) surcharge on self-employed people with incomes over EUR100,000. It noted that while the Government has sought to lower the USC for lower income earners in recent budgets, entrepreneurs should also "be rewarded and encouraged for being risk takers and driving growth." It said removing the surcharge would stimulate the self-employed sector and put it on a level playing field with the PAYE sector.

In a similar vein, the Chamber would like to see the Earned Income Credit, available to the self-employed, raised to match the PAYE credit.

TAGS: capital gains tax (CGT) | tax | business | Ireland | tax incentives | commerce | entrepreneurs | employees | budget | tax thresholds | tax rates | social security | tax reform | chamber of commerce | individual income tax

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