Following an assessment carried out by the Department of Finance earlier this year to consider how the EII scheme could be enhanced, the Minister for Finance announced both an extension and expansion of the EII scheme to the end of 2024.
EII is a tax incentive which allows an individual investor to obtain income tax relief of up to 40 percent on investments for shares in certain companies up to certain limits each tax year. However, the 2014 revision of EU General Block Exemption Regulation (GBER) for State Aid significantly restricted the scope of the EII scheme and its effectiveness as a workable tax relief.
During his speech, the Minister said that the EII scheme could be a real driver of investment in early-stage companies and high-potential start-ups, but recognised that the scheme “has yet to reach its potential”.
The Minister has therefore announced the extension of the scheme for a further three years, along with further modifications to the scheme. Following consultation with relevant stakeholders, the Minister announced his intention to open up the scheme to a wider range of investment funds in order to attract more investors into the scheme. It is also proposed to allow greater capacity for investors to redeem their capital without penalty - the so called 'capital redemption window' and to remove the rule that 30 percent of an investment in an EII company must be spent before relief can be claimed.
The 30 percent requirement places a significant administrative burden on early-stage companies in tracking expenditure and it also reduces the attractiveness of EII schemes due to the lack of clarity on when the investor can claim tax relief. The CCAB-I made a number of recommendations in its response to the public consultation on the EII scheme, including that a statement of qualification should be issued once an investment has been made in a qualifying company.
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