Simplification / Modernisation of Business Reliefs

In late 2023 a new Tax Administration Liaison Committee (TALC) sub-committee, the Sub-Committee on Simplification and Modernisation of Business Reliefs was set up to address concerns noted by the Minister of Finance regarding "awareness by small businesses of the range of supports available through the tax system and to examine administrative hurdles faced by such businesses in availing of these supports". The sub-committee is mandated to present a report on recommended changes by mid-year. While TALC'S remit is limited to administrative matters what changes might you recommend to improve the administrative ease of use and access of such reliefs from both a policy and administrative procedural respect?

Angela Fleming, Partner & Head of Financial Services Tax: The function of the TALC Sub-Committee on Simplification and Modernisation of Business Reliefs for SMEs is to provide a forum where Revenue and tax practitioners can identify opportunities to simplify and modernise the administration of business supports. 

Since the establishment of the TALC Sub-Committee, the committee has met 6 times , with the aim of submitting a formal report to main TALC by end June 2024. The group structured their review of supports for business by reference to the phases in a business life cycle, i.e. start-up, group and expansion, and possible divestiture or succession. While the group discussed a wide range of business reliefs, some common themes emerged across multiple business supports from an administrative perspective, including: 
  1. Lack of awareness of business supports available, particularly for businesses in a start-up phase which may not have access to tax advice; 
  2. Uncertainty regarding meeting the qualification criteria for each of the various reliefs or supports, and concerns regarding the risk of subsequent clawback and/or penalty for making invalid claims, which in some cases, led to businesses opting not to claim reliefs on a cost-benefit basis; and 
  3. Improvements that may be made to the content contained on the Revenue website to provide additional clarity, and to aid the understanding of the business supports available by non-tax professionals.
As mentioned, the remit of the group was to identify potential opportunities to simplify the administrative processes associated with various business supports and schemes, with a particular focus on smaller businesses. Making recommendations on matters of policy was outside of the remit of TALC. However, in the meetings certain matters of policy were raised, and rightly so. It is impossible to ignore the fact that much of the administrative burden for businesses is a result of the legislation underpinning the reliefs. In order to truly achieve simplification and modernisation, both the legislative policy, and the administration of that legislation, need to be looked at. 

An area of simplification that I have written about before in these columns is the whole area of tax relief for interest. Even before the introduction of interest limitation rules in 2022, our tax rules for interest relief were highly complex, as has been acknowledged by the Minister for Finance. While the introduction of the new rules for “qualifying financing companies” in Finance Act 2023 was a very welcome development as a first step in the simplification and modernisation process, what is needed now it is a review of the entire interest deductibility regime, and a simplification of same. We cannot continue to layer new interest rules on top of our existing regime. Doing so is not simplification, it is adding further complexity, which brings with it administrative burden for taxpayers of all sizes.   
 
Content adapted from Finance Dublin’s Irish Tax Monitor.