Investment incentives (Budget 2020)

Oct 08, 2019

The Department of Finance carried out a review of the Employment and Investment Incentive earlier this year.  Changes were therefore expected. But the changes announced are not enough to address the concerns raised by businesses.  Similarly, a public consultation at the start of the summer on the Key Employee Engagement Programme signalled changes were afoot. While enhancements are a move in the right direction, it is disappointing the Minister did not announce any changes to support unlisted shares where practically the market for such shares is limited.  

Employment and Investment Incentive (EII) Scheme

While, technical adjustments announced will improve the operation of the scheme, they will not fully address the concerns raised by businesses on the stifling impact of the EU General Block Exemption Regulation (GBER) for state aid on the scheme in recent years.  Nor will the concerns about the self-certification requirements on companies be alleviated. Perhaps we will see some additional steps towards rehabilitation of the scheme in the Finance Bill. 

As of today what we have heard from the Minister is:

  • an increase in the annual investment limit from €150,000 to €250,000 and to €500,000 for investments for a minimum of 10 years; 
  • a substantial change whereby full relief will be available in the year in which investment is made.  Currently relief is given in two tranches, 30% in the year of investment and 10% in year 3, subject to certain conditions. 

 

Key Employee Engagement Programme

Employees who have flexible working arrangements or who work part time can qualify for the KEEP. The KEEP provides for capital gains tax treatment on the disposal of shares acquired under a share option agreement instead of income tax, USC and PRSI on exercise of the shares.  The definition of a qualifying employee will be amended to accommodate these more common working practices.  Also, employees who work for different group companies as the need arises can qualify.  Other changes to the definition of a qualifying company were announced. 

Changes to tax law are needed to facilitate unlisted companies in providing liquidity in their shares by using mechanisms such as arrangements with the employees to buy back shares over time.  A change to the share buy-back legislation to ensure capital gains tax treatment applies on the disposal of the shares did not feature in the Budget.    

Details on the EII scheme and KEEP are expected in the Finance Bill.