Budget 2023 Business Taxation

Temporary Business Energy Support Scheme (TBESS)

A new support scheme has been introduced for business to help mitigate the consequences of increased energy costs. It will operate in a similar way to the Employment Wage Subsidy Scheme (EWSS). The scheme is open to those taxpayers carrying on a trade, whose taxes are up to date, and who have experienced significant increases in their natural gas and electricity costs.

The scheme operates by comparing the average electricity/gas unit price for each period in 2022 against the average unit price for those periods in 2021. Where the increase is greater than 50%, a business becomes eligible for the support. The business must then register with Revenue to claim the support. The support is 40% of the amount of the increase in the bill amount. The scheme requires EU Commission approval, which is expected in early 2023.

Research & Development tax credit

Finance Bill 2022 will introduce changes to the payment provisions for the R&D tax credit, to align with new international definitions of refundable tax credits. However, this will not amend the quantum that a taxpayer can claim. The new rules will allow for an accelerated payment of the credit for SMEs. To date the R&D tax credit has been offset against corporation tax in the year of claim and the excess payable over three years with a cap on the amount refundable in any one year linked to the amount of payroll taxes paid by the business.

The new regime will be a fixed three-year payment approach. The business can request repayment of the credit or offset of the credit against other tax liabilities. The cap on annual repayment will be removed for larger companies, and for smaller business up to the first €25,000 of a claim will be refundable in year 1, which would otherwise have been limited to one third of the repayable credit.

Knowledge Development Box (KDB)

The KBD has been extended by four years, to accounting periods commencing before 1 January 2027. The KDB will have a new effective rate of 10%, to come into effect from a date to be set by commencement order.

Currently, a company qualifying for the KDB may be entitled to a deduction equal to 50% of its qualifying profits. This means its qualifying profits may be taxed at an effective rate of 6.25%. The introduction of a higher 10% rate has been proposed to bring the scheme into line with the OECD Pillar Two agreement, and the commencement order to introduce the rate will be effected after final agreement on the OECD provisions internationally.

Film corporation tax credit

The corporation tax relief for film production companies is being extended to the end of 2028. This relief was due to come to an end by the end of 2024. This relief is given at a rate of 32% of the lower of (a) eligible expenditure, (b) 80% of the total cost of production of the relevant film, or (c) €70 million.

Key Employee Engagement Programme (KEEP)

KEEP is extended to 31 December 2025. The new provisions allow the buy-back of KEEP shares by the issuing company and an increase in the lifetime limit value of options that a company has granted, from €3 million to €6 million.

The rules currently operate to limit the applicability of KEEP relief to companies holding shares in a single subsidiary. Finance Act 2019 proposed amendments to the legislation to allow employees of companies who are within a group to qualify for KEEP.

There is also a change in the requirement for an individual to be a full-time employee/director and devote substantially the whole of their time to the service of the qualifying company in order to qualify for the relief (with a minimum of 30 hours per week being required). This will be amended to allow for part-time and flexible working employees to qualify and for the movement of employees between companies within a qualifying group. The relief will now be extended to qualifying individuals who devote at least 75% of their working time to a qualifying company or who work at least 20 hours per week for such a qualifying company.