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Audit exemption rules on groups level playing field for SMEs

Posted: November 26, 2015 Comment: 0 Read: 514 times
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There has never been a better time for small and medium-sized businesses (SMEs) to form a group structure. Previously, the maintenance of a group structure due to stringent audit requirements was cost-prohibitive for most small businesses. This meant only larger organisations could take advantage of the benefits that a group structure brings.

Now that the Companies Act 2014 exempts small groups from audit requirements, small businesses are well-placed to avail of benefits such as loss relief, Capital Gains Tax (CGT) exemptions and Dividend Withholding Tax (DWT) exemptions.

Take the case of two companies operating under a group structure. Company A can sell its shares in Company B and pay no tax on the sales proceeds provided certain conditions are met. Up until June this year (2015), many Irish SMEs were unable to take advantage of this law. This is because the costs of an audit, a key requirement for the group structure under the Companies Act of 1963-2013, lay outside the resources of smaller companies.

If we expand on the above scenario where there are three companies in the group. Each company could operate separate arms of the business independently while still availing of benefits of being in a group structure. For example, loss relief would allow for losses from one company to be offset against the profits of the other companies within the group. Additionally, group structures allow business owners to isolate the potentially higher risk operations within their business by incorporating a separate limited company without directly impacting the resources of the other more profitable companies within the group.

The changes come as the State attempts to create an efficient and competitive environment for business, and the new Act supports the current Government’s business-friendly policy. The Act was in the pipeline for 15 years, and came into effect on June 1 this year. The new legislation is likely to result in a surge in company restructures and will allow more companies to claim audit exemptions by reducing or simplifying qualifying criteria surrounding balance sheet value, turnover and staff size.


The company and the group must qualify as “small” by meeting two or more of the following requirements.

1. The amount of turnover of the holding company and other members of the group taken as a whole does not exceed €8.8 million;

2. The balance sheet total of the holding company and other members of the group taken as a whole does not exceed €4.4 million;

3. The average number of employees of the holding company and other members of the group taken as a whole does not exceed 50.

What’s involved in setting up a group structure?

It’s never been easier and more cost-effective to establish a Group structure. We can complete all the documentation required and provide supporting tax advice. Contact us today to find out more. 

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