Investment tax supports

Oct 22, 2018

Finance Bill 2018 introduced measures aimed at supporting the limited number of tax reliefs still in place under the Irish tax code; KEEP, start-up company investment incentives (EII and SURE) and film relief. 

KEEP

The Budget day measures announced for Key Employee Engagement Programme (KEEP) are reflected in amendments to section 128F TCA 1997 subject to a Ministerial order following State Aid approval.  The Bill provides that the total market value of shares that can be granted by a company to an employee is now subject to a life-time cap of €300,000 and is limited to 100 percent of the employee’s emoluments in a year of assessment.  These measures are subject to a Ministerial Order.  It is not entirely clear if these amendments will have the desired effect of stimulating participation in KEEP.  One of the main problems faced by SME companies in terms of employee share incentive schemes is the challenge of a ready market should the employee wish to exit the company.  The linking of CGT treatment under share buy-back provisions to KEEP is essential if this incentive is to reach its full potential. 

Employment Incentive and Investment Scheme

On Budget Day, Minister Donohoe noted his intention to bring forward a package of measures in the Finance Bill to address the problems identified with the Employment Incentive and Investment  scheme (EII) and the Start-up Relief for Entrepreneurs (SURE) during a review of the reliefs conducted earlier this year.  And so it came to pass; with the details of the package set out in the Bill.  Responding to calls from professional accountancy bodies represented under the CCAB-I to tackle the complex conditions underpinning the legislation, the text of Part 16 of TCA 1997 is replaced with a revised and consolidated text.  Only time will tell if this attempt at simplification will revive this tax incentive.  The new text introduces the following:

  • A new Start-up Capital Incentive aimed at early stage start-up ventures
  • A self-certifying capability for the company raising investment and for the investor
  • A single trigger point for when claims can be made i.e. when 30 percent of the funds raised are spent for qualifying purposes
  • Clarification on the qualifying uses of the funds raised
  • Preference redeemable shares are no longer prohibited for the purposes of EII
  • Definitions of professional services and unlisted companies are aligned to similar definitions under KEEP
  • Companies who raise funds via EII can now float on the stock exchange four year after claiming the EII
  • Designated funds can now invest in qualifying companies for EII purposes
  • Requirements are placed on holding companies to return capital to investors on sales of subsidiaries which EII is claimed.

The EII, SURE and the new Start-up Capital Incentive (SCI) are set to operate until 31 December 2021.

Film relief

Film relief, in the form of a corporation tax credit under section 481 TCA 1997 is extended until December 2024 and will operate on a self-assessment basis.  The Bill also provides a time-limited tapered percentage uplift in relief for productions in State Aid approved regions of the country.  The uplift is tapered over four years and is applied at a rate of five percent in years 1 and 2, three percent in year three and two percent in year 4.  The tapered uplift is subject to State Aid approval.