Entrepreneurs take on enormous risks when they start a business. They stand to lose everything including their homes if the business fails. Is there a case for special tax incentives for business founders to reward them for taking on that risk?
“Founders don’t choose to start up a business for the tax incentives available to them,” says Colm O’Callaghan, tax partner with PwC Private. “They don’t set up businesses to avail of R&D Tax Credits or to get refunds of tax paid. They do it because they are wired to become entrepreneurs and take risks. Without entrepreneurs, we don’t have people creating employment and contributing to economic growth. They take all the risk, and when they set up a business they should be supported.”
KPMG Ireland tax partner Camilla Cullinane believes there is a strong case for targeted tax incentives to reward business founders for the significant risks they undertake. “While the recent increase to the lifetime limit of CGT [capital gains tax] relief for entrepreneurs was positive, overall tax policy in Budget 2026 did not go far enough to foster a culture of business retention, scaling businesses of international scale and rewarding entrepreneurial risk,” she says. “Failing to reduce tax on dividends for active SMEs is a missed opportunity to support entrepreneurs to grow their business instead of selling early to cash out.”
Cullinane calls for action on a number of reforms to bring about a step-change for the SME sector. “This includes improving access to finance by enhancing and simplifying the EIIS [Employment and Investment Incentive Scheme] and aligning angel investor relief rules with SME commercial structures,” she explains.
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“We also need to introduce measures to encourage individuals to invest in domestic enterprises, such as a rollover relief for investment in innovative companies. As a nation we have €163 billion sitting on deposit; there is such an opportunity to encourage investment using those funds. It is also imperative to end the 3 per cent USC surcharge on the self-employed.”
O’Callaghan believes the Startup Relief for Entrepreneurs (SURE) scheme should be enhanced. “This gives relief for PAYE paid by entrepreneurs prior to starting a company and investing cash in it,” he explains. “But not every entrepreneur has the cash to invest. Why not give them some PAYE back if they set up a company? After all, they may not be able to take a salary for some time. It could be linked to employment creation in the company.”
Entrepreneur Relief and the CGT regime are also in need of reform, he contends. “The last budget increased Entrepreneur Relief to €1.5 million,” he says. “But that is still not good when compared to the UK, where it is £10 million (€11.5 million). To get access to it, you have to sell the business. Why is that needed? Dividends should be able to qualify for the relief. That would avoid people having to sell. We shouldn’t be encouraging people to sell businesses, better to encourage them to stay and scale the business.”
Taking in new investment should also be facilitated. “If a business owner sells a portion of the enterprise, that’s taxed as income. They should be allowed to avail of the CGT rate for that.”
The Key Employee Engagement Programme (KEEP) should also come in for attention, according to Cullinane. “The programme was designed to help businesses attract and retain talent through share-based incentives,” she notes. “However, in its current form, KEEP does not adequately accommodate the commercial realities of many businesses or the varied working arrangements of their employees, which has led to limited uptake.
‘Critically we need to build resilience in infrastructure, housing and energy to support businesses, including indigenous enterprise’
— KPMG Ireland tax partner Camilla Cullinane
“Although Budget 2026 has extended the scheme to 31 December 2028, it does not address the practical barriers to accessing KEEP. As a result, private companies remain at a disadvantage compared to multinationals when offering equity-based compensation. Reform of the tax rules governing KEEP is essential to ensure it effectively supports businesses in competing for skilled staff.”
Cullinane also recommends measures to reduce the cost of employment to help attract and retain world-class talent. “We need to expand SARP to Irish domestic businesses to allow them to compete for international talent. Also, the cost of employment with rising wages, auto enrolment and increasing PRSI costs needs to be managed. We should increase the entry point to the marginal rate of tax. And we should cap the amount of income subject to PRSI for both employees and employers.
“Critically we need to build resilience in infrastructure, housing and energy to support businesses, including indigenous enterprise. We could, for example, incentivise employers to develop employee accommodation and allow a corresponding BIK [benefit in kind] exemption.”
