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Irish Revenue Updates Guide on Investment Tax Reliefs

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Irish Revenue Updates Guide on Investment Tax ReliefsIn April 2021, the Irish Revenue updated its guidance on administrative relief for those participating in the Employment Investment Incentive (EII) and the Start-Up Relief for Entrepreneurs (SURE) tax incentives schemes, and who may have been affected by the COVID-19 pandemic. This updated guidance is summarised here.

The SURE Scheme

 

SURE is a tax relief for entrepreneurs who leave employment to set up their own company. Those eligible for the scheme may claim a refund of PAYE income tax paid in years prior to an investment being made in a new company. The amount of tax refunded depends on the size of the investment but can be up to 41% of the capital funding invested.


Generally, to access the SURE scheme, an investor must enter full-time employment with a newly formed company for a 12-month period, either as an employee or as a director. That employment must start within the year in which the investment is made or if later, within 6 months of the date on which the share issue is made. If more than one share issue is made, employment must be taken up within the year the investment is made or within six months of the final issue.


However, in April 2021 the Revenue updated Tax and Duty Manual (TDM) Part 16-00-02 to provide guidance on temporary measures available to companies facing difficulties in meeting the SURE employment conditions due to the COVID-19 pandemic.
Under these temporary measures, all individuals who have made the "relevant investment" in the period of September 1, 2019, to March 31, 2021, will, from the date of the last subscription for that investment, have up to an additional 12 months to meet the condition. The guidance stresses though that no individual will have a period of greater than 18 months in which to fulfil the employment obligation.

Employment Investment Incentive (EII)

The EII scheme allows individuals to claim tax relief on equity investments in certain micro, small and medium-sized trading companies, subject to various restrictions. Due to changes in legislation, different conditions apply depending on when the investment was made.


The new guidance mainly affects investors who made an investment in a company under the scheme in 2017/18. These investors were required to hold shares for a minimum of four years, with three-quarters of eligible tax relief paid out in the first year, and the remaining quarter in the fourth year. For investors to claim the balance of the relief, certain conditions must be met, including the submission by the company of an application to the Revenue. However, given that the end of the holding period for those investing in 2017 and/or 2018 may fall in the period from March 1, 2020, to March 31, 2021 - when the economy was badly disrupted by the pandemic - the guidance explains that all affected companies will have an additional 12 months from March 31, 2021, to meet the conditions.

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