Budget 2024

Introduction?

On Tuesday 10th October, the Minister for Finance Michael McGrath and the Minister for Public Expenditure Paschal Donohue announced Budget 2024. While today’s headlines have been dominated by the new cost of living package, the increase in social welfare payments, and relief for mortgage holders, tenants and landlords, measures were also introduced to assist Irish SMEs struggling in a high-inflation economy.? SMEs form the backbone of the Irish economy: close to 70% of the working population are employed by them and 98% of businesses are classified as SMEs. The announcements today signal somewhat of a tone-shift in the central government’s attitude towards SMEs. It is clear that, without intervention and protection, a vital segment of the Irish economy may be in jeopardy.

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Budget 2024

As part of Budget 2024, several changes were directed at the Irish SME market. The Increased Cost of Business Scheme will support Irish SMEs cope with increasing business costs. Under this scheme, SMEs will receive one-off grants in 2024, corresponding to up to 50% of their commercial rates paid in 2023. To qualify for this scheme, SMEs must be currently paying less than €20,000 per annum in commercial rates. 87% of all Irish SMEs (130,000 businesses in total) pay rates of less than €20,000 .?

Moreover, VAT thresholds for businesses are set to increase marginally under Budget 2024. For services, VAT thresholds are to rise from €37,500 to €40,000 for goods from €75,000 to €80,000.

However, the announced 12% rise in the minimum wage (bringing it to €12.70), is sure to increase commercial operating expenses and further erode the economic gain from the aforementioned changes.?

Budget 2024 announced several measures to support Irish enterprise, particularly Irish SME start-up companies. Under Budget 2024, angel investors invested in Irish SME start-ups will receive significant Capital Gains Tax (CGT)? relief. This relief will help Irish start-ups to attract the necessary capital they require from private investors to grow their business. This relief consists of a reduced CGT of 16% for the disposal of qualifying investments for gains up to twice the initial investment’s value. A €3 million lifetime limit on gains under the lower CGT rate will be implemented.?

In addition, the Irish tech start-up sector also benefited from an increase in the Research and Development tax credit rate from 25% to 30% for qualifying expenditure filed in 2025. This Tax Credit will help the Irish SME sector attract investment in their R&D. Moreover, the year one payment threshold rose from €25,000 to €50,000, ensuring smaller companies engaged in R&D projects will avail of significant cash flow support.?

Additional funds have also been designated to support business growth. This budgetary measure includes allocating €27 million for IDA’s Regional Property Grants Programme, €9 million for Local Enterprise Office and €3 million for the Digital Services Coordinator.?

In last year's budget, several schemes were introduced to empower struggling SMEs in the face of rising energy costs, such as the Ukraine Credit Guarantee Scheme and the Temporary Business Energy Support Scheme.? The latter scheme originally aimed to provide €1.3 billion in support, covering up to 50% of the increase in electricity costs for businesses. However, over the course of the year, only €130 million has been drawn down to support Irish businesses; in other words, 90% of the value of the scheme has not been used for its intended purpose. The aforementioned scheme ended in July 2023. The excessive requirements and strict eligibility criteria ensured that this scheme would not be fit for its purpose. It is imperative that new schemes introduced in Budget 2024, such as the Increased Cost of Business Scheme, do not suffer the same end as the schemes introduced in Budget 2023.?

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Irish SME Market

Under current economic conditions, Irish SME businesses are facing significant challenges as they grapple with rising business costs. Insolvency levels of businesses in Ireland have risen by 33% in the first nine months of the year, compared to the same period last year. This sharp increase has been in response to the high inflationary environment combined with the de-escalation of COVID-19 government supports such as Revenue’s Debt Warehousing Scheme.?

Moreover, Ireland has recently lost two major banks from its banking sector: KBC and Ulster Bank, adding to the existing pressure on Irish SMEs in their quest for capital. There has been a significant contraction of the Irish banking sector in recent years. Furthermore, the remaining banks in the Irish banking sector have not prioritised SMEs, especially with regard to the provision of credit, causing a significant funding gap for Irish SMEs. This had led to the emergence of alternative lenders in Ireland.?

Santiago SME Finance aims to address these challenges faced by Irish businesses by offering faster funding through the company’s innovative technology.