Red tape:Small business will benefit to the tune of €53 million a year from Budget 2007 measures designed to cut red tape and streamline tax compliance, writes Barry O'Halloran
Minister for Finance Brian Cowen is proposing that small companies whose Revenue bills are currently less than €50,000 can pay preliminary tax based on their previous year's liabilities. This will cut the need for them to predict their 12-month performance before the end of the year.
Mr Cowen will also increase the small company liability threshold to €150,000 from €50,000.
Start-up companies will not be required to pay preliminary tax in their first year of operation, and can instead pay their actual liability the following year.
The Irish Taxation Institute (ITI) predicted yesterday that the move would aid companies at a critical time in their development. Chief executive Mark Redmond said Revenue had recently indicated that this incentive, which is in place for the last number of years, would end in 2006.
"The ITI are particularly pleased that, following its intervention, the Minister has reversed the decision," he said. "The announcement that the preliminary tax incentive for start-ups is set to continue, with the trebling of the threshold to €150,000, is highly appropriate," he added.
From March 1st, Mr Cowen intends to raise the yearly VAT accounting threshold for small firms to €1 million from €635,000. This will allow them to pay the tax when they are paid rather than when they make a sale. It will also ease administration and cut working capital requirements.
Mr Cowen plans to increase VAT registration turnover thresholds to €35,000 from €27,500 for services, and to €70,000 from €55,000 for goods from March 1st.
He estimates this will take 8,000 small businesses out of the VAT net, a move that will reduce administrative costs.
From 2007, small firms will only have to make two or three VAT returns a year, not six.
Mr Cowen also intends increasing the threshold at which tax clearance certificates are needed to €10,000 from €6,500. This means that if a small company is bidding for a contract with a State or public body worth less than €10,000, or if it is seeking a grant of less than that amount, it will not need a tax clearance certificate.
