Budget 2023: What’s in it for businesses in Ireland?

27 Sep 2022

Minister Paschal Donohoe, TD. Image: Julien Behal Photography

From crisis response schemes and increased agency funding to tax credits, here’s what you need to know about Budget 2023.

In what has been described as a “pro-SME Budget”, the Government has revealed a host of supports for businesses of all sizes – from start-ups to established companies.

Top of the agenda were the cost of living and energy crises that are currently gripping most European countries – Ireland no exception – following the invasion of Ukraine earlier this year and ongoing market challenges.

Presented by Minister for Finance Paschal Donohoe, TD, and Minister for Public Expenditure and Reform Michael McGrath, TD, Budget 2023 aims to help businesses survive a tough winter with interest rates going up and consumer confidence waning.

“This Budget is about putting more money in people’s pockets and reducing the bills that people and businesses have to pay,” said Tánaiste and Minister for Enterprise Leo Varadkar, TD.

Cost of living and energy crises

Perhaps the headline figure in terms of supports for business is a €1.25bn Temporary Business Energy Support Scheme (TBESS) that aims to provide qualifying businesses with up to 40pc of the increase in electricity or gas bills – up to a maximum of €10,000 per month.

While expected to benefit start-ups and small businesses the most, TBESS will also help larger business cover some of the skyrocketing costs of energy. The scheme will run until at least February 2023.

For businesses that deal in manufacturing and other international traded services, a €200m Ukraine Enterprise Crisis Scheme is set to help alleviate some of the costs associated with the crisis, including energy costs.

The scheme will provide up to €2m in grant aid for energy-intensive companies affected by the rising energy costs. The grant, only available to companies that can produce a plan to reduce energy costs, will be administered by Enterprise Ireland, IDA Ireland and Údarás na Gaeltachta.

A €1.2bn Ukraine Credit Guarantee Scheme revealed today will assist the wider business sector with liquidity and energy efficiency. It will provide low-cost working capital to SMEs of up to €1m on a six-year term with no collateral required for loans up to €250,000.

The credit guarantee scheme is in addition to a new Growth & Sustainability Loan Scheme that will make up to €500m in low-cost investment loans of up to 10 years available to SMEs. The scheme requires no collateral for loans up to €500,000. A minimum of 30pc of the lending volume will be targeted towards environmental sustainability purposes.

Agencies get funding boost

Funding for offices and agencies under the Department of Enterprise, Trade and Employment – such as Enterprise Ireland and IDA Ireland – has also increased. Overall, Budget allocation for the department has risen by €36m to €940m this year.

Local Enterprise Offices will receive an additional €4m in funding to include a new grant for microenterprises. The Small Firms Investment in Energy Efficiency Scheme will provide a grant to companies to encourage capital investment in projects to reduce carbon emissions.

IDA Ireland, responsible for the attraction of foreign direct investment, has received a €14.8m increase in capital funding to help it accelerate implementation of its regional property programme.

It will also use the funding to invest in the National Institute for Bioprocessing Research and Training (NIBRT) as well as in advanced manufacturing.

Enterprise Ireland’s increased capital allocation includes €12m for the Climate Transition Fund and the Digital Transition Fund, both of which opened earlier this year and are part of Ireland’s National Recovery and Resilience Plan.

Varadkar said the increased funding for offices and agencies of his department “means we can maintain quick turnaround times on employment permits, help companies with the twin transition, digital and green, and create more jobs in all parts of Ireland”.

In addition, €7m is being provided for Enterprise Ireland’s many innovation development programmes, while there has been a €1.5m increase in funding to assist Irish companies in securing additional contracts with the European Space Agency.

“Our businesses must be innovative to avail of the opportunities of tomorrow and continue to drive growth,” McGrath said in his speech.

“Today’s Budget will enable Enterprise Ireland to enhance their science and technology programmes. It will also allow further calls to take place under the Disruptive Technologies Innovation Fund.”

Tax credits

The Government is updating the Research & Development tax credit to keep up with international definitions, and extending the Knowledge Development Box (KDB) for four additional years.

KDB provides for an effective rate of 6.25pc for corporation tax on income arising from qualifying assets – with the objective of encouraging the development of intellectual property in Ireland.

Cathal Noone, tax partner at Deloitte, noted that uptake of the KDB has been low to date “in part due to the restrictive requirements for the relief”.

“While the extension announced by the minister is a welcome step in the right direction, continuous reform will be required to the relief to ensure it remains fit for purpose.”

Ian Collins, partner and head of innovation incentives at EY Ireland, added that “with the appropriate level of reform, this regime can be enhanced to encourage greater levels of engagement across SMEs and multinational corporations alike”.

The Key Employee Engagement Programme (KEEP) has also been extended until 31 December 2025. This tax share option scheme allows employees to acquire shares at a future date and at a fixed price, under specific conditions, without paying tax.

Alison McHugh of EY Ireland said this will be welcomed by employers wishing to provide share-based remuneration to their employees at a time when “attracting and retention of top talent is a key focus”.

Overall, accountancy body CPA Ireland described Budget 2023 as a “pro-SME Budget” that will “provide certainty to SMEs and boost their confidence at a time of considerable international uncertainty”.

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Vish Gain is a journalist with Silicon Republic