The biggest stumbling block when setting up a new business is finance. Banks are trying to repair their own balance sheets, and therefore are not helping new businesses like they used to. So you should check if grants or tax reliefs are available.
If you have a business start up idea, you may qualify for funding from Enterprise Ireland or the County and City Enterprise Boards.
- Enterprise Ireland is involved with funding high potential business start ups which will employ more than 10 employees, will be exporting and are innovative.
- County and City Enterprise Boards get involved with smaller start up businesses with less than ten employees.
- Full details of their funding and support programmes are on their websites
There are tax incentive schemes which may also help:
1) SEED CAPITAL SCHEME
Who can avail of it: PAYE workers and persons made redundant recently who want to set up their own business.
What does this scheme offer:
- For every euro you invest in starting up, you can claim a refund of tax you paid under the PAYE system going back six years.
- For each year, the refund is limited to the tax that you have paid and is capped at tax paid on €100,000
- This refund can be claimed as soon as the company starts to trade
- If you received BES relief for any of the six years, you are restricted to the difference between the €100,000 cap and the original BES Scheme.
What are the conditions for the investor:
- In the tax year before you invest, your income may come from any source. In the three preceding years, your non PAYE income should not exceed the lower of €25,000 or your total PAYE type income.
- You must be employed as a employee or a director of the Company for at least one year and subscribe for 15% of the issued share capital of the Company. Your investment may be made in two stages with the second payment made within two years following the tax year the first investment was made but before 31st December 2013 when the scheme ends.
In the twelve months before your first investment ,you cannot have held more than 15% of the share or loan capital/voting power of any other Company unless
- (a) the turnover of the other Company in each of the three preceding accounting periods did not exceed €127,000
- (b) The other Company is a trading Company (excluding land or financial services) and
- (c) the other Company is a shelf or dormant Company.
Any business transactions with your former employer must be on normal business terms and with no special arrangements.
What are the conditions for the Company:
- The company must be set up with the intention to carry out qualifying trade operations which can be found on the Revenue website.
- The company must obtain a certificate confirming it is carrying out a bona fida new venture which may be eligible for grant aid or financial assistance.
- International traded services, must provide a certificate confirming eligibility for the grant of financial support of not less than €2,540 towards carrying out a feasibility study into the commercial viability of the services to be rendered.
- Waste recycling activities ,require approval for a grant or financial assistance from an Industrial Development Agency or a County Enterprise Board.
2) EMPLOYMENT and INVESTMENT INCENTIVE SCHEME
The existing Business Expansion Scheme has been reformed to focus on job retention and job creation. Investors will be encouraged to invest in a broad range of companies that did not have access to BES funds. However there will be a list of excluded trades.
External investors invest money in your company and can get tax relief on their investment. EII/BES is a specified relief for the purposes of the high earners restriction.
What are the conditions for the investor:
- Must be resident in the State for the tax year they make a claim
- Subscribes for eligible shares in a qualifying company and hold them for three years (BES Scheme 5 years)
- Must not be connected to the company
Use of the BES money invested:
- To undertake its trading operations
- To undertake research and development
- To develop new and existing markets
- To increase sales or provision of services
- Creation and maintenance of employment in the Company
Tax relief
- Tax relief has been reduced from 41% to 30% to reflect the reduced holding period.
- A further 11% tax relief will be available where it is proven that employment levels increased at the Company at the end of the holding period or where evidence is provided that the Company used the capital raised for expenditure on research and development.
3) CORPORATION TAX EXEMPTION
Recently a new provision under Section 486C of the Taxes Consolidation Act 1997 provides relief from corporation tax for start up companies in their first three years of operation.
- Company must have been incorporated on or after 14th October 2008
- Commenced a qualifying trade in 2009 , 2010 or 2011
- Corporation tax liabilities do not exceed €40,000.
- For Companies whose liabilities exceed €40,000 but are less than €60,000, marginal relief is available
- From 1st January 2011 the relief for start up companies is based on the employer PRSI paid, and, if lower then relief is restricted to the lower amount.
Trades that do not qualify:
- Trades that were already in existence
- Dealing in or developing land or exploration and extraction of natural resources
- A trade consisting of a Service Company
Claims for this relief are made on the annual CT1 form
Professional advice should be sought before relying on the above outline.