Westmeath people save on tax bill while reinvesting in local businesses

As one of the last remaining tax shelters likely to be untouched by the impending Budget, investors in Westmeath are increasingly realising the tax benefits of BES (Business Expansion Scheme ) investment.

Investments also benefit the community at large as many of the companies receiving this funding are based in Westmeath or the surrounding counties, thus boosting the local economy and assisting in job creation.

Jeremy Walker of Financial Engineering in Westmeath commented, “Couples in Westmeath investing in BES could be eligible for total tax relief of up to €300,000 in any one year subject to each individual’s income level. Unlike other reliefs which are ringfenced to certain sources of income, BES can be offset against all income.

“In these more difficult times, when taxes are set to soar, more and more people are looking at the options available to cut back on the amount of money they have to hand over to the tax man. BES schemes support local Irish businesses and if the economic downturn has taught us anything it’s that people need to look at investing in local business rather than funds that simply benefit overseas companies. This type of grass roots support is imperative to regenerate the local economy.”

BES first came into being in 1984 as a tax efficient investment aimed at stimulating companies operating in the Irish economy. BES legislation is currently more attractive than it has ever been to investors, with tax relief available against all income. Investments of up to €150,000 can receive tax relief. As the term of the BES investment is usually five/six years (min five years ), this offers tax relief within the individual’s working life.

“If the need for BES relief was great in 1984, it is even more critical now. The challenging economic climate that all businesses are facing and the difficulties obtaining funding from banks means the need for independent capital for SMEs is even greater than ever before. As a consequence, the quality of participating companies available to potential BES investors has never been better,” added Mr Walker.

Foremost in people’s considerations when investing in local BES companies is that unlike most internationally focused pension funds, BES schemes support local Irish businesses with investors often able to select high potential businesses in Westmeath or neighbouring counties.

Other factors would include the short investment horizon – five-six years rather than up to 40 years for pension money. Tax breaks are also better with BES schemes attracting 41 per cent relief at the point of investment and only subject to 25 per cent CGT on any growth at maturity. Pension contributions still attract 41 per cent, though this is expected to be reduced in the upcoming budget, and are subject to normal income tax of up to 41 per cent on income withdrawn on maturity.

 

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