Seed Capital Relief
Posted by Angela Clarke | Filed under Accounting, Company Secretarial, Grants, Latest News, Research and Development, Start ups, Tax
The relief is set to end on 31st December, 2013.
The purpose of the scheme is to give any person who is an employee, an unemployed person or were made redundant recently and are interested in starting their own business an opportunity to avail of the tax refund to which they may be entitled under the Seed Capital Scheme
Purpose of the Relief
An employee who leaves employment and invests by means of shares in a company which carries on a new business, may claim a refund of income tax paid in previous years. An unemployed person may also avail of this facility.
The Tax Refundable
-You could receive all the income tax you have paid over six years, if your investment is big enough.
-You can select the tax years for which you may claim refunds from any or all of the six years prior to the year of investment. Your investment must be claimed up to the extent of your total income in each of the selected years (subject to a max. of €100,000). There is no facility available where the investment can be spread over a number of years so as to utilise personal allowances in each year.
For each of the selected years, the refund is limited to the tax you have paid, with an upper limit in any year of the tax paid on €100,000.
-The refund may be claimed when the company starts to trade
-You may obtain a refund in this manner for two investments in the company made within a three year period. Both investments, however, must be made in the same company
What Conditions Apply?
The Investor
The scheme is designed for those who are or were in PAYE type employment. To ensure that this intention is achieved the sources of your income over the four tax years immediately before the year in which you invest in the company are reviewed. In the tax year immediately before the year in which you invest, your income may come from any source (that is, it may be from self-employment, rental, investment, PAYE or other). In the other three tax years, your non PAYE income should not exceed the lower of €25,000 or your total PAYE type income
These income limits do not apply in the case of an individual who invests in a company which is set up to trade on an exchange facility established in the Custom House Docks Area.(now no longer a qualifying trade)
You must enter into a full-time employment contract for at least one year with the company as an employee or a director starting either within the tax year in which the investment is made or if later, within 6 months of the date on which the relevant investment is made.
Your investment in the company may be made in two stages, the second investment must be made within two years following the tax year in which your first investment is made. The facility to claim relief under the scheme in respect of a second investment is only available to investors who make both investments in a qualifying company.
It should be noted that where a second investment is planned the scheme will only be available up to 31 December,2013.
You must buy shares in the company.
You must acquire at least 15% of the issued share capital of the company and you must maintain the level of your shareholding at this percentage for at least two years, even if the share capital of the company should expand. This condition will apply in the case of both a first and a second investment
The Company
The company must be set up with the intention to carry on qualifying trading operations. Qualifying trading operations are
- the manufacture of goods
- the operation of certain tourist traffic undertakings
- internationally traded services
- certain activities which have the potential to become internationally traded services
- the cultivation of mushrooms
- the micro-propagation of plants and plant cloning
- the cultivation of horticultural produce in greenhouses
- research and development activity which is undertaken with a view to carrying on certain of these qualifying trading operations and which are certified as such by an industrial development agency
- commercial research and development activities
- the production, publication, marketing and promotion of a qualifying musical/video recording by a new artist
- recycling activities in relation to waste material which has been subjected to any process or treatment which results in value-added material that is reusable. Waste material means any of the following: packaging, construction and demolition waste, metals, wood, glass and plastics, electrical and electronic equipment, batteries, end of life mechanically propelled vehicles
12. The company must obtain a certificate from an appropriate body or person certifying that the qualifying trading operations to be carried on by the company will be a bona-fide new venture, which having regard to certain criteria may be eligible for grant aid or financial assistance from the certifying body or person. The grant aid or financial assistance requirement does not apply to the activities listed at (6) above.
It should be noted that the approval of a grant or equity investment from one of the industrial development agencies, is required in the case of internationally traded services. In the case of activities which have the potential to become internationally traded services, an industrial development agency must have
- provided a certificate confirming eligibility for the grant of financial support of not less than €2,540 towards the carrying out of a feasibility study by a person approved of by the agency into the commercial viability of the services to be rendered.
- It should be noted that in the case of recycling activities in relation to waste material, approval of a grant or financial assistance from an industrial development agency including a County Enterprise Board is required; or, written confirmation from an industrial development agency including a County Enterprise Board that the company has submitted a business proposal to the agency or board, and that in the opinion of the agency or board the activities described in the business proposal come within the scope of a service industry specified in the Schedule to the Industrial Development (Services Industries)
How do I apply For Certification
Complete an Application Form, available from your Development Adviser
Existing Clients of Enterprise Ireland, should contact their Development Adviser , who will work with you to complete the Application for Certification and bring it forward to a decision making Committee for approval.
If you are not an existing Client of Enterprise Ireland, you will need to contact your Regional Enterprise Ireland Office and a Development Adviser will be assigned to you.
Refund from Revenue
Once approved, Enterprise Ireland will forward to you the Certificate and the RINE C and RINE I forms on which to make the application for the tax refund.
Your application should be accompanied by the relevant:
P45s/P60s
Form P21 (Balancing Statement)
Copies of Form B5 (proof of share issue and receipt)
Capital Duty paid
Bank Statement showing the amounts paid in respect of qualifying shares and certificate of incorporation
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