‘This is a positive Budget for start-ups and scale-ups’

9 Oct 2019

Conor Gouldsbury and Liz McCarthy leading a Scale Ireland meeting. Image: Scale Ireland

Scale Ireland believes that the timely measures announced in the Budget will help stimulate innovation-driven entrepreneurship in Ireland.

Not-for-profit, industry-led initiative Scale Ireland has said that Budget 2020 was a positive one for the country’s start-ups and scale-ups.

Prior to the Budget announcement, Scale Ireland launched with a number of recommendations for the Irish Government, calling for a revamp of the Key Employee Engagement Programme (KEEP), enhancement of the Employment and Investment Incentives Scheme (EIIS), a more simplified iteration of the R&D Tax Credit and improvements to the Capital Gains Tax.

After Minister for Finance Paschal Donohoe outlined the terms of Budget 2020, the group commended the Government’s measures to support Ireland’s emerging entrepreneurs.

Scale Ireland’s chair, Brian Caulfield, said: “This is a positive budget for start-ups and scale-ups, and is an important step in the right direction. Scale Ireland welcomes the changes to the KEEP and EII schemes announced today by the Minister for Finance.

“These changes target the key priorities for Scale Ireland in this year’s budget – access to talent and access to capital. While we await the details of these measures to be published in the Finance Bill, it’s encouraging to see the increased support for indigenous innovation-driven enterprise.”

Head of Scale Ireland, Liz McCarthy, was similarly pleased. “Scale Ireland’s focus has been on securing an ambitious package of measures that takes account of the unique profile and challenges facing Ireland’s innovation-driven enterprises,” she said.

“We’re pleased to see the changes announced today to KEEP, EIIS, the R&D tax credit and the Earned Income Tax Credit for the self-employed, which will be welcomed by entrepreneurs around the country.”

A man in a grey suit sits beside a woman in a houndstooth blazer. To the right of the woman is a man in a grey shirt and jeans. They are sitting in front of a white TV screen that reads "Scale Ireland".

From left: Conor Gouldsbury, Liz McCarthy and Brian Caulfield.

What’s next for Scale Ireland?

While McCarthy and Caulfield were satisfied with the outcome of yesterday’s Budget, Scale Ireland still has work to do.

“We are clearly aligned with other business representative organisations in the changes we are seeking,” McCarthy said. “Beyond Budget 2020, Scale Ireland will be working to achieve a step-change in how Ireland’s entrepreneurs and IDEs [innovation-driven enterprises] are supported from a policy perspective.”

As noted yesterday in our rundown of the most important Budget 2020 announcements for start-ups, SMEs and businesses, this year’s Budget did not offer any new allowances for the Capital Gains Tax (CGT) for entrepreneurs.

One of Scale Ireland’s key requests from the Government was that CGT would be improved to incentivise entrepreneurs to reinvest their expertise and capital in the next generation of start-ups.

Entrepreneurs’ Relief

In Scale Ireland’s pre-Budget submission, the organisation said: “CGT is a key determining factor for investment in the economy. The CGT regime can both reward entrepreneurship and act as a driver for reinvestment that benefits the broader economy by accelerating the next generation of IDEs, thus strengthening the ecosystem.”

In Ireland, CGT has a headline rate of 33pc, up from 20pc in 2008. This is the fourth-highest rate among 35 countries in the OECD. CGT Entrepreneurs’ Relief (CGT ER) was introduced to address this by lowering the rate to 10pc, however, the structure and design of CGT ER means that it only applies in limited circumstances and it only applies to lifetime gains of up to €1m.

Scale Ireland called on the Government to raise the lifetime cap of CGT ER to €10m and remove the requirement for individuals to own at least 5pc of the ordinary shares in the qualifying company, in order to encourage scaling and avoid penalising founders of highly capital-intensive businesses, such as biotech.

Kelly Earley was a journalist with Silicon Republic