6 Big Challenges That Irish Businesses Face Today
Meeting the challenges head on
Operating a small or medium-sized business is hard - and that’s without throwing in a global health crisis on top. But for Irish SMEs in particular, there’s a broad spectrum of hurdles and challenges to face over the next 12 months that are unlike any seen before. Yes, the Irish economy is (usually) relatively strong, but that doesn’t mean everything’s automatically fine.
Higher living costs and wage growth that hasn’t kept up have taken a heavy toll on both households and business across Ireland over the last few years. Then COVID-19 came along and turned everything we know on its head.
Here we consider the challenges Irish SMEs are facing, both during the remainder of this year and into 2021.
1. The COVID-19 pandemic
And what a year it has been. No one could have predicted how life in 2020 would change so drastically, and with no end to the pandemic in sight the Irish economy is struggling.
In September the government confirmed that Ireland is officially in recession, shrinking by a record 6.1% in the second quarter of this year. Unsurprisingly, the travel, tourism, leisure and hospitality industries have been hit the hardest.
2. Cash flow
We can’t talk about the pandemic without mentioning cash flow, as for the majority of Irish businesses the two have gone hand in hand.
A major issue faced by the majority of SMEs across Ireland is cash flow irregularity. This is especially the case in these tough economic times, perhaps as a result of lockdowns, reduced sales and/or footfall, and difficulty in getting credit.
After the 2008 financial crash, and of course now following the coronavirus pandemic, many businesses have had to rebuild from scratch. However, a lack of cash flow can have serious implications on your ability to grow and expand. Many have availed of certain government help like Bounce Back Loans, but for many this hasn’t been enough.
There are many questions still unanswered around the UK’s departure from the EU and how it will affect Irish markets. Not only are rules and regulations still being thrashed out, but issues securing funding are a particular headache too.
With the 31st January now only weeks away, the timing really couldn’t be worse when set against the backdrop of COVID-19. However, one positive point to note is around settled status.
Earlier this year it was announced that Irish citizens who choose to reside in the UK will be deemed as ‘settled’, so will have no residency or work permit requirements. They can also move freely between the two nations which comprise the Common Travel Area (CTA), in the same way as UK citizens. Citizens can work within either country, including entering into self-employment. What is still unclear however is what the effect will be on the provision of social security, and how qualifications gained in Ireland will translate to the UK market and vice versa. Pension arrangements too remain unclear, although negotiations are still ongoing.
Then on top of that of course there’s the exchange rate. With the economy sliding and Brexit uncertainty only adding to the pain, sterling’s value has been far from stable this year. Imports from the Irish Republic are cheaper than they used to be - welcome news for business buying supplies from the UK. However, exporting is now more expensive meaning that Irish companies looking to sell their goods in the UK will suffer a financial blow.
4. Laws and guidelines
If there’s one thing we’ve learned from the emergence of COVID-19 it’s that laws and guidance can change at the drop of a hat. Even in ‘normal’ times, companies continuously have to make sure they comply with the latest health and safety and employee laws in particular. Although such regulations and guidance are clearly in the public interest, they can still be expensive and time consuming to implement. This is especially the case for SMEs where resources are more limited.
Offering something bigger, bolder and better than your competitors is simply another facet of running a business. But for start-ups and SMEs in particular, the risk of customers ditching you for someone else are real. Customers can easily be lost to larger companies that can take advantage of economies for instance.
6. Investing in growth
SMEs and start-ups need to invest in growth and innovation; it’s the only way they will thrive long term in increasingly tough circumstances. But such projects don’t come cheap.
Step in Research and Development (R&D) Tax Credits.
R&D Tax Credits are a Revenue-backed tax programme developed in the early 2000s. It was created to encourage business growth and innovation across all industries and sectors in the Republic of Ireland.
R&D expenditure that meets Revenue’s strict criteria will attract a 25% tax credit for offsetting against Corporation Tax, in addition to a lower rate of tax set at 12.5%. This means that in effect Irish companies successfully claiming R&D Tax Credits can receive a Revenue refund of €37.50 for every €100 of R&D project costs. It’s an incredibly generous and valuable incentive indeed.
Want to know what your company could claim? Use our calculator to find out instantly.
Don’t leave your claim to chance
Submitting a successful R&D Tax Credit claim that Revenue will accept first time is difficult. The process is complex and often laborious, not to mention resource intensive. The last thing you need is to have your claim to be rejected, or worse, for Revenue to launch an investigation into your wider tax affairs. This is why consulting with the experts at Myriad Associates (developers of the Tax Cloud portal) is so important.
Whilst many accountancy firms have some knowledge of R&D tax issues, we specialise entirely in R&D funding and tax rebates. This means we know the entire process in a huge amount of detail, and are best placed to advise you on all areas of this niche area of tax.
With sections for both businesses and accountants the Tax Cloud portal is ideal for those looking for a more-hands off, great value application tool, with added support from us if required. It’s free to sign up and easy to use, so why not start your claim now.
Got a question or want to talk to one of our friendly team? Call +353 1 566 2001 or use our contact form and we’ll call you back.
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