Irish businesses to receive €250m in temporary supports to deal with inflation

The Government has announced a €250 million allocation for temporary supports for businesses as they deal with rampant cost inflation, and an extra €35 million for the Department of Enterprise, Trade and Employment for 2024 to support State agencies.

Among other measures the Coalition will also increase the research and development (R&D) tax credit. It will allow businesses claim back 30 per cent of their R&D expenditure in the form of a tax credit or in cash, subject to certain conditions, up from a previous level of 25 per cent.

Minister for Finance Michael McGrath confirmed the Republic’s corporation tax rate for large companies would increase from 12.5 per cent to 15 per cent in line with international reform agreed upon by the members of the Organisation of Economic Co-Operation and Development (OECD).

He said the increase in the R&D credit would “maintain the net value of the existing credit for those businesses subject to the new 15 per cent minimum effective tax rate, while also delivering a real increase in the credit to those smaller companies” outside the scope of the reforms.

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The Government will also double the first-year payment threshold from €25,000 to €50,000, “to provide valuable cash-flow support to companies engaged in smaller R&D projects”, the Fianna Fáil TD said.

Commenting on the announcement, Ian Collins, partner and head of innovation incentives at EY Ireland, welcomed the decision. “The increase will be viewed very positively right across business, from the SME sector who can now avail of an additional benefit for performing R&D, through to the multinational sector where it will help to keep pace with forthcoming changes in the international tax environment for large corporations.”

Mr McGrath also announced a doubling of the amount an investor can claim relief against for a four-year investment under the Employment Investment Incentive scheme to €500,000. Introduced in 2011, the scheme allows small investors to claim relief on investments in early-stage companies.

The Coalition will also roll out a new targeted capital gains tax relief for angel investors to incentivise investment in innovative early-stage companies.

David Shanahan, partner in the tax and legal division of Deloitte Ireland, said the package of incentives would benefit indigenous businesses. However, he said: “While the above measures are very welcome there is a need for a further comprehensive suite of measures to support entrepreneurship and to encourage founders to retain ownership and to scale their businesses.”

Minister for Public Expenditure and Reform Paschal Donohoe confirmed a €250 million allocation for a package of temporary, inflation-related supports for businesses being developed by his department.

The Coalition will also allocate an extra €35 million to the Department of Enterprise, bringing its total funding package to €975 million for next year.

Some €9 million of the total will be allocated to Local Enterprise Offices and €3 million to the Digital Services Coordinator to support enforcement of the European Union’s Digital Services Act, which comes into force in January.

IDA Ireland’s capital funding allocation will also increase from €14.8 million this year to €27 million in 2024 to support its regional property grants programme.