In March 2019, the Irish Revenue published new guides on the reliefs available under three incentive schemes: the Employment Investment Incentive (EII), the Start-Up Capital Incentive (SCI), and the Start-Up Relief for Entrepreneurs (SURE). The guides and the incentives are briefly summarised here.
The EII is a tax relief for companies that are in a position to raise funding from individuals who are, in general terms, not connected with the company.
The scheme provides for tax relief of up to 40% in respect of investments made in certain corporate trades. The EII allows an individual investor to obtain income tax relief on investments for shares in certain companies up to a maximum of €150,000 per year in each tax year up to 2020.
Initially relief is allowed on thirty fortieths (30/40) of the EII investment in the year the investment is made. Potentially, this can result in a tax saving for the investor of up to 30% of the investment. Relief in respect of the further ten fortieths (10/40) of the EII investment will be available in the fourth year after EII investment was made providing that certain conditions are met. Potentially, this can result in a further tax saving for the investor up to 10 percent of the investment
There is a €EUR15m life time limit and a €5m limit on a rolling 12-month period ending with the share issue on the amount a company can raise.
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The SCI is a tax relief for early stage micro companies to attract equity-based risk finance from family members. There is a €500,000 lifetime limit that a company can raise under the incentive.
The only difference between the investors who qualify for SCI and EII is in relation to the restriction placed on associates of investors. EII is not available for investors whose associates have an interest in the capital of the company. SCI is available to those associates.
SURE is a tax relief for entrepreneurs who leave an employment to set up their own company. Under the scheme, those starting a company may be eligible for a tax refund of up to 41% capital invested. Depending on the size of the investment, a taxpayer may be entitled to a refund of income tax paid over the six years prior to the year in which the investment was made.
The general conditions for SURE are that:
- A new company must be established for the carrying on of qualifying trading activity;
- The person starting the company must have had mainly PAYE income over the previous four years;
- The person starting the company must take up full-time employment in the new company either as a director or an employee; and
- Cash must be invested in the new company by way of the purchase of new shares.
The maximum a company can raise under SURE is €4.2m.
The three reliefs available are all designed to help trading companies attract equity-based risk finance from individuals. Eligibility to relief in each case arises if there is:
- A qualifying company;
- A qualifying investment; and
- An investor who meets certain criteria.