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Employment and Investment Incentive Scheme

Employment and Investment Incentive Scheme

Employment and Investment Incentive Scheme replaces the Business Expansion Scheme (BES). The scheme significantly broadens the scope of the scheme as “qualifying trade” limitations have been removed and the scheme is available to the majority of small and medium sized trading companies, most of whom qualify except for:

 

  • Financing activities
  • Dealing in or developing land
  • Operating or managing nursing homes and hotels
  • Professional service companies

The operation of hotels, guest houses and self-catering accommodation is a “qualifying activity” where the conditions of the Tourist Traffic Act are met.

The lifetime limit that a company can raise is €15m (€10m prior to 2015) with the annual amount being €5m (€2.5m prior to 2015).

 An individual may invest up to €150,000 per annum in this scheme. The maximum limit applies separately to both spouses, provided that they both have sufficient income in their own right.  Where full relief cannot be availed of in a tax year, the excess can be carried forward to subsequent years. 

The period for which shares need to be held has been increased from three years to four years. A claw-back of relief will arise if shares are disposed of within 4 years.

Tax relief for subscriptions for eligible shares has been reduced as follows:

Year 1 relief: 30/40 of the amount invested

Year 3 relief: 10/40 of the amount invested

Tax relief for subscriptions for eligible shares has been reduced from 41% to 30%, with a further 11% relief granted if at the end of the holding period the company has increased  its numbers of employees since the investment was made, or the company has increased its expenditure on research and development.

The Company must be an unquoted Company throughout the holding period and either be resident in the State, or if an EEA State other than Ireland it must carry on business through a branch or an agency in the State and carry on relevant trading activities from a fixed place of business.

The scheme has been extended to 31st December 2020

The restriction that applies to High Earners will not apply to a subscription of shares under the EIIS from 16th October to 31 December 2016.

These changes are subject to ministerial order.

Seed Capital Relief

This relief was introduced to encourage individuals who cease employment to start up their own businesses using a company structure. The relief is given by way of a deduction against total income for the six years preceding the cessation of employment. The maximum available is €100,000 per annum (previous maximum €31,750 per annum).

This relief is given by way of a refund of PAYE paid by the individual over the six years preceding the year of investment. There is a minimum shareholding requirement of 15% for one year in order to qualify for the relief (previously two years).

The limit on the amount of money a company may arise from seed capital relief is €2m subject to a limit of €1.5m in any twelve month period.

The Seed Capital Scheme has amalgamated into the employment and Investment Scheme (EII) and to that end claimants must comply with the requirements under the EII scheme in order to qualify for tax relief.

Film Scheme – Companies and Individuals

This relief is given by way of deduction against total income and is confined to a maximum of 100% of €50,000 for any tax year.  Relief is available to both spouses and relief may be claimed under both schemes, giving a potential maximum tax saving of €164,000 if both schemes are availed of by both spouses. Any unrelieved amount can be carried forward to the next tax year. For companies, the maximum amount deductible is 80% of €3,810,000 to enable the production of a single film.

The cap on the maximum amount of funding per film is €50,000,000 (previously €35,000,000).

From 1 January 2012 the Company must provide the Revenue Commissioners with a compliance report within 6 months of completion of the film. Where this report is not filed, tax relief for the individual investor may be affected.

The scheme is due to end on 31 December 2015 (subject to Ministerial order).

Tip: Film schemes may be structured to favour small investors where a financial institution provides both the funding for the €50,000 contribution required by the individual and the balance of the loan amount, this reduces the return on the investment but can make the investment more affordable.

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