There has been a mixed reaction to the measures included in the Budget for Irish start ups and SMEs.

Despite some intensive lobbying by the business community for an extension of the capital gains tax relief available for entrepreneurs on a sale of their business there was no movement in this regard. The entrepreneur's relief available in Ireland remains significantly less attractive than the UK equivalent.

On the flip side the amendments announced to the Key Employee Engagement Programme (KEEP) and  the Employment and Incentive Scheme (EIIS) have been generally welcomed.

KEEP allows employees of Irish SMEs granted qualifying share options to avail of a capital gains tax rate (33%) on gains accruing on exercise of their options rather than an income tax rate (>50%). It has been criticized as being overly restrictive. The proposed changes are:

 - The legislation is to be amended to allow existing shares to qualify for KEEP

 - Companies who operate through a group structure will now qualify for KEEP.  This will allow employees to move roles within a group and retain their share options. 

- Definitions within the legislation relating to the conditions for a ‘qualifying employee’ will be amended. Part-time/Flexible employees will now be eligible for KEEP as well, having previously been locked out of the scheme.

These are all welcome changes although the devil will be in the detail with the enabling legislation yet to be published.

The proposed EIIS changes are:

- The annual investment limit will be increased from €150,000 to €200,000 and to €500,000 in the case of those who invest through EIIS for ten years or more. 

- An entire tax relief of 40% will be made to investors in the first year of their investment. This compares with the current arrangement where the relief is availed of in two tranches being (i) 30% relief is provided upon the initial investment and (ii) a further 10% is given after Year 3 subject to certain conditions.