472AA Relief for long-term unemployed starting a business

Summary

This section provides a tax incentive for individuals who are long term unemployed to start their own businesses. Qualifying individuals will be entitled to claim a deduction in arriving at total income up to an amount of the lower of €40,000 or the amount of Case I / II profits chargeable to tax in that year of assessment.

As this sections provides for a deduction in arriving at Total Income, this relief is not a relief for USC or PRSI purposes.

Details

Definitions

(1) “continuous period of unemployment” is linked to the definition in the Social Welfare Consolidation Act 2005. This definition provides that an individual can work up to 3 days a week and have that period count towards a period of continuous unemployment. In addition, if an individual who was unemployed takes up employment and subsequently becomes unemployed again, if that is within 12 months of the original period of unemployment then both periods are linked for the purposes of determining a period of unemployment.

“new business” is a new trade or a new profession which is set up between 25 October 2013 and 31 December 2018. A new trade or a new profession cannot have been previously carried on by another person. That is, it cannot be acquired through a purchase, and inheritance etc. It must be new economic activity.

“qualifying individual” is a person who has been continuously unemployed for a period of 12 months and in respect of that period:

• Entitled to crediting contributions, e.g. signing on but because of means testing they are not in receipt of any payments, or
• In receipt of:
  • Jobseeker’s benefit
  • Jobseeker’s allowance
  • One-parent family payment, or
  • Partial capacity payment

And who has not previously claimed relief under this section.

“qualifying period” means a period of 24 months beginning on the date the new business is started.

“unemployment payment” is defined as Jobseeker’s benefit and Jobseeker’s allowance. This definition is used to deem payments received by individuals on FAS or other training schemes to be payments which an individual can receive and still qualify for this relief.

(2) Where an individual was in receipt of jobseeker’s benefit or allowance and is on a State training scheme, like FÁS schemes, then the period spent on the training course will qualify as a period of unemployment.

Any payments received in relation to this training will be deemed to be jobseeker’s benefit or allowance and so the individual will continue to meet the definition of a qualifying individual.

Sundays are not counted when looking at periods of unemployment.

(3) A qualifying individual who has set up a new business will be entitled to a deduction in arriving at Total Profits of an amount calculated in accordance with sub-section (4).

Deduction

(4) The deduction is equal to the lower of:

Or

The effect of these calculations is that an individual can claim no more than €80,000 in total and no more than €40,000 in any one year of assessment.

Order of set-off

(5) Relief under this section is given in priority to relief for losses carried forward under s.382 or to capital allowances granted under Part 9.

Limit of relief

(6) A qualifying individual can only claim €40,000 in a year of assessment.

Chargeable person

(7) A person claiming relief under this section is a chargeable person who must file a tax return.

Relevant Date: Finance Act 2021