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Taxes Consolidation Act, 1997 (Number 39 of 1997)

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493 Individuals qualifying for relief.

[FA84 s14; FA93 s25(e); FA94 s16(1)(b); FA97 s146(1) and Sch9 par13(4)]

(1) (a) An individual shall qualify for relief if he or she subscribes on his or her own behalf for eligible shares in a qualifying company and is not at any time in the relevant period connected with the company.

(b) For the purposes of this section and paragraph 2 of Schedule 10, any question whether an individual is connected with a company shall be determined in accordance with this section.

(2) An individual shall be connected with a company if the individual or an associate of the individual is—

(a) a partner of the company, or

(b) subject to subsection (3), a director or employee of the company or of another company which is a partner of that company.

(3) An individual shall not be connected with a company by reason only that the individual or an associate of the individual is a director or employee of the company or of another company which is a partner of that company unless the individual or the individual’s associate (or a partnership of which the individual or the individual’s associate is a member) receives a payment from either company during the period of 5 years beginning on the date on which the shares are issued or is entitled to receive such a payment in respect of that period or any part of it; but for that purpose there shall be disregarded—

(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the individual or the individual’s associate in the performance of the duties of the individual or of the associate, as the case may be, as such director or employee,

(b) any interest which represents no more than a reasonable commercial return on money lent to either company,

(c) any dividend or other distribution paid or made by either company which does not exceed a normal return on the investment,

(d) any payment for the supply of goods to either company which does not exceed their market value, and

(e) any reasonable and necessary remuneration which—

(i) (I) is paid for services rendered to either company in the course of a trade or profession (not being secretarial or managerial services or services of a kind provided by the company itself), and

(II) is taken into account in computing the profits or gains of the trade or profession under Case I or II of Schedule D or would be so taken into account if it fell in a period on the basis of which those profits or gains are assessed under that Schedule,

or

(ii) in a case where the individual is a director or an employee of either company and is not otherwise connected with either company, is paid for service rendered to the company of which the individual is a director or an employee in the course of the directorship or the employment.

(4) An individual shall be connected with a company if he or she directly or indirectly possesses or is entitled to acquire more than 30 per cent of—

(a) the issued ordinary share capital of the company,

(b) the loan capital and issued share capital of the company, or

(c) the voting power in the company.

(5) For the purposes of subsection (4)(b), the loan capital of a company shall be treated as including any debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company,

(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on the debt).

(6) An individual shall be connected with a company if he or she directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in other circumstances, entitle the individual to receive more than 30 per cent of the assets of the company which would at that time be available for distribution to equity holders of the company, and for the purposes of this subsection—

(a) the persons who are equity holders of the company, and

(b) the percentage of the assets of the company to which the individual would be entitled,

shall be determined in accordance with sections 413 and 415, references in section 415 to the first company being construed as references to an equity holder and references to a winding up being construed as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.

(7) An individual shall be connected with a company if he or she has control of it within the meaning of section 11.

(8) (a) An individual shall not be connected with a company by reason only of subsection (4), (6) or (7)

(i) if throughout the relevant period the aggregate of all amounts subscribed for the issued share capital and the loan capital (within the meaning of subsection (5)) of the company does not exceed [1]>£250,000<[1][2]>[1]>€317,500<[1]<[2][2]>€500,000<[2], or

(ii) in the case of a specified individual, by virtue only of a relevant investment in respect of which he or she has been given relief in accordance with section 489(5).

(b) Notwithstanding paragraph (a), relief granted to an individual in respect of a subscription for eligible shares at a time when by virtue of this subsection the individual was not connected with the company shall not be withdrawn by reason only that the individual subsequently becomes connected with the company by virtue of subsection (4), (6) or (7).

(9) For the purposes of this section, an individual shall be treated as entitled to acquire anything which he or she is entitled to acquire at a future date or will at a future date be entitled to acquire, and there shall be attributed to any person any rights or powers of any other person who is an associate of that person.

(10) In determining for the purposes of this section whether an individual is connected with a company, no debt incurred by the company by overdrawing an account with a person carrying on a business of banking shall be treated as loan capital of the company if the debt arose in the ordinary course of that business.

(11) Where an individual subscribes for shares in a company with which the individual is not connected (either within the meaning of this section or by virtue of paragraph 2(2)(b) of Schedule 10), he or she shall nevertheless be treated as connected with it if he or she subscribes for the shares as part of any arrangement which provides for another person to subscribe for shares in another company with which the individual or any other individual who is a party to the arrangement is connected (within the meaning of this section or by virtue of that paragraph).

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493 Seed capital relief.

(1) Notwithstanding section 489, this section shall apply for affording relief from income tax where—

(a) a specified individual makes a relevant investment,

(b) the shares issued to the specified individual are issued for the purposes of raising money by a qualifying company for the benefit of its activities referred to in paragraph (d),

(c) the activities carried on by the qualifying company constitute a qualifying new venture,

(d) the money was used, is being used or is intended to be used for the benefit of a qualifying new venture for the purposes of—

(i) carrying on of relevant trading activities, or

(ii) in the case of a company which has not commenced the carrying on of relevant trading activities, incurring expenditure on research and development within the meaning of section 766,

and

(e) the use of the money as set out in paragraph (d) will contribute directly to the creation or maintenance of employment in the company.

(2) Subject to subsection (3), relief in respect of a relevant investment made by a specified individual shall be given as a deduction of that amount from his or her total income for the year of assessment in which the shares are issued.

(3) (a) Subject to this subsection, a specified individual may, in relation to a relevant investment made by such individual (being that individual’s first such investment), elect by notice in writing to the inspector to have the relief due given as a deduction from such individual’s total income for any one of the 6 years of assessment immediately before the year of assessment in which the eligible shares in respect of that investment are issued which such individual nominates for the purpose, instead of (as provided for in subsection (2)) as a deduction from the specified individual’s total income for the year of assessment in which the shares are issued, and accordingly, subject to section 490 and paragraphs (c) and (d), for the purpose of granting such relief (but for no other purpose of this Part) the shares shall be deemed to have been issued in the year of assessment so nominated.

(b) Where the specified individual makes a subsequent relevant investment (being that individual’s second such investment)—

(i) in the same company as such individual’s first such investment, and

(ii) within either the year of assessment following the end of the year of assessment in which such individual’s first such investment was made or the year of assessment subsequent to that year,

then, the specified individual may, in relation to such individual’s second such investment, elect by notice in writing to the inspector to have the relief due given as a deduction from such individual’s total income for any one of the 6 years of assessment immediately before the year of assessment in which the eligible shares in respect of such individual’s first such investment were issued which such individual nominates for the purpose, instead of (as provided for in subsection (2)) as a deduction from such individual’s total income for the year of assessment in which the eligible shares in respect of such individual’s second such investment are issued and, accordingly, subject to section 490 and paragraphs (c) and (d), for the purpose of granting such relief (but for no other purpose of this Part) the shares issued in respect of the second such investment shall be deemed to have been issued in the year of assessment so nominated.

(c) Where any of the years of assessment following the year of assessment nominated under paragraph (a)or (b), as the case may be, precede the year of assessment in which the eligible shares in respect of the specified individual’s first relevant investment are in fact issued, subsections (3) to (5) of section 490 shall operate to give relief in such years of assessment as may be nominated by such individual for that purpose.

(d) To the extent that the amount of the relief which would be due in respect of the specified individual’s first relevant investment or second relevant investment, as the case may be, has not been given in accordance with paragraphs (a) to (c) it shall, subject to subsections (3) to (5) of section 490, be given for the year of assessment in which the eligible shares in respect of the first such investment or the second such investment, as the case may be, are in fact issued or, if appropriate, a subsequent year of assessment.

(e) This subsection applies in respect of not more than 2 relevant investments made by a specified individual on or after 2 June 1995.

(f) This subsection applies notwithstanding any limitation in section 865(4) on the time within which a claim for a repayment of tax is required to be made. Section 865(6) shall not prevent the Revenue Commissioners from repaying an amount of tax as a consequence of an election made under paragraph (a) or (b) where the specified individual has made a timely claim for relief in accordance with section 501 and a valid claim for a repayment of tax within the meaning of section 865(1)(b).

(4) Reference in this section to the amount of the relief are references to the amount of the deduction given under subsection (2) or (3), as may be appropriate.

(5) Relief shall be given on a claim and shall not be allowed in the case of a relevant investment unless and until the qualifying new venture commences to carry on relevant trading activities or in the case of a company referred to in section 493(1)(d)(ii), has expended not less than 30 per cent of the relevant investment on research and development activities which are connected with and undertaken with a view to the carrying on of the relevant trading activities.

(6) In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.

(7) In the case of a claim allowed before a specified individual commences a relevant employment with the company in which that individual has made a relevant investment (being that individual’s first such investment), the relief shall be withdrawn if the specified individual fails to commence such employment—

(a) within the year of assessment in which the investment is made, or

(b) if later, within 6 months of the date of—

(i) where the investment consists of the subscription of only one amount for eligible shares, that subscription, or

(ii) where the investment consists of the subscription of more than one amount for eligible shares, the last such subscription.

(8) Subject to section 504, no account shall be taken of the relief, in so far as it is not withdrawn, in determining whether any sums are excluded by virtue of section 554 from the sums allowable as a deduction in the computation of gains and losses for the purposes of the Capital Gains Tax Acts.

(9) (a) In this subsection “distribution” has the same meaning as in the Corporation Tax Acts.

(b) For the purposes of this subsection, an amount specified or implied shall include an amount specified or implied in a foreign currency.

(c) This subsection applies to shares in a company where any agreement, arrangement or understanding exists which could reasonably be considered to eliminate the risk that the person beneficially owning those shares—

(i) might, at or after a time specified in or implied by that agreement, arrangement or understanding, be unable to realise directly or indirectly in money or money’s worth an amount so specified or implied, other than a distribution, in respect of those shares, or

(ii) might not receive an amount so specified or implied of distributions in respect of those shares.

(d) The reference in this subsection to the person beneficially owning shares shall be deemed to be a reference to both that person and any person connected with that person.

(e) Relief from income tax shall not be allowed under this Part in respect of the amount subscribed for any shares to which

this subsection applies.

(10) Where a specified individual claims relief under this section, no relief shall be granted to that individual under section 489 in respect of the same qualifying company.

(11) The Revenue Commissioners may require the qualifying company to provide to them such evidence as they consider necessary and may consult with such persons or body of persons as in their opinion may be of assistance to them, to enable them to verify that the conditions necessary for the claiming and granting of the relief have been satisfied.

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Chapter 3

Qualifying investments

493. Interpretation (Chapter 3)

In this Chapter—

business plan” means a written business plan which contains details of product, sales and profitability development, establishing ex-ante financial viability and which includes both quantitative and qualitative details of the activities the investment is sought to support;

expansion risk finance investment” means the issue of eligible shares to fund entering a new product on the market or entering a new geographic market;

follow-on risk finance investment” means the issue of eligible shares subsequent to an initial risk finance investment or an expansion risk finance investment;

initial risk finance investment” means the first issue of eligible shares other than an expansion risk finance investment.

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Substituted by FA01 sched5.

[2]

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Substituted by FA07 s19(1)(e). With effect from 1 January 2007 per SI 614 of 2007.

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Substituted by FA11 s33(1)(a). Has effect in respect of shares issued on or after 25 November 2011. Note: FA 12 s26 (2) amends FA 11 s33 and provides: (b) This section does not have effect in respect of shares issued before 25 November 2011 and, for all the purposes of Part 16 in connection with those shares, the Principal Act has effect as if this section had not been enacted. (c) This section does not have effect in respect of shares issued on or after 25 November 2011 and on or before 31 December 2011 where— (i) the company issuing the shares, or (ii) where the shares are acquired by an investment fund, the fund acquiring the shares, elects by notice in writing to the Revenue Commissioners on or before 31 December 2011 that, for all the purposes of Part 16 in connection with those shares, the Principal Act has effect as if this section had not been enacted.

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Substituted by FA18 s25(1). Has effect as respects shares issued on or after 1 January 2019.