Ahead of Budget 2022, Mairead Harbron, Director, Private Client Services at PwC, outlines blockers to the efficient transfer of family-owned businesses.

What tax issues have been top of mind with clients to date?

For certain clients, the various Covid supports and debt-warehousing schemes have been front of mind. For others, Covid has provided an opportunity to reflect on the long term. For traders dealing with the UK, the initial panic is largely over. Most are moving on to strategies to manage efficiently in the long term.

What concerns do you have about the tax debt warehousing arrangement?

The key concern is that we’ll see a lot of businesses on their recovery journey being plunged into financial difficulty before they have had an opportunity to trade their way out of debt. Ultimately, this will lead to a greater number of business failures.

Which of KEEP, EII and the R&D Tax Credit should be top of the finance minister’s reform agenda for SMEs?

The low-hanging fruit for me is KEEP, a fantastic scheme for SMEs to attract key talent. I would like to see clearer measures relating to the valuation of the shares to make KEEP options more certain, and – given that there are limited opportunities for exit – share buy-backs should be taxed under CGT.

What tax measures do you suggest to accelerate the greening of the economy?

Relief for investment in renewable energy – also the extension of CGT exemption to early-stage renewable-energy projects. A well-designed retrofitting scheme for modernising Ireland’s housing stock would help provide healthy, ergonomic and energy-efficient workspaces for the new wave of e-worker.

In Association with

The Family Business Network contends that high tax is delaying the efficient transfer of family firms. What changes would you recommend?

I recommend the removal of the arbitrary €3m cap, which can qualify for Retirement Relief. More creative measures could also be introduced, like those in the UK, which allow an ‘upfront instalment’ of gift/inheritance tax, with any balance being spread over a period of at least 10 years.

Does Entrepreneur Relief require reform?

Entrepreneur Relief is a simple and effective way of giving someone with an entrepreneurial spirit more after-tax proceeds to reinvest in a new business and more jobs. I would encourage an increase to €5m, at the very least, to back Irish entrepreneurs to do more of what they do best.

At what age should business owners start planning an exit strategy regarding Retirement Relief?

Owners need a succession plan now, rather than waiting for a particular age, and not necessarily focused on a single relief. One step that is not always fully considered is the need for the child receiving the business to hold it for six years. The practicalities of the post-transfer holding should be considered in full.

Professional advice by Zoom or Teams – how has it worked for you?

There is something about true human connection that cannot be replicated online, however, the trend towards video calls has enabled richer conversations with clients overseas. In-person time needs to be balanced against the objective of ensuring that we do not return to a rigid, five-day-a-week office model.