Annual Conference 2019

11 - 13 April 2019

Masterclass in EII/SCI/SURE and Entrepreneur Relief

Darragh McCarthy, EY

Sections 1 – 5 explore EII, SCI and SURE reliefs. Section 6 looks at the Revised Entrepreneur Relief.

1. EII/SCI/SURE

The reliefs applicable to investment in corporate trades (“RICT”) have been significantly amended by Finance Act 2018. I won’t be covering designated investment funds or the previous regime which applied to shares issued up to 31 December 2018 as they are outside the scope of this paper.

The legislation covers 49 pages and the recently published Revenue guidance extends to 40 pages. The conditions remain exhaustive and (often) exhausting to wade through.

The most material change is the move to a “self-certification” regime, although Revenue pre-confirmation may still be required in certain cases.

Leaving aside the complexity, these remain valuable reliefs which can support investment and entrepreneurial activity. So perseverance is rewarded.

2. Back to Basics

There are three related reliefs; “Start-up Relief for Entrepreneurs” (“SURE”); Start-up Capital Incentive (“SCI”) and the Employment Investment Incentive (“EII”).

The reliefs are a form of state-supported equity financing for Irish trading companies. This brings the EU State-aid compliance requirements and contributes to the extensive anti-avoidance provisions.

The financing is provided by individuals and the “subsidy” is provided by Revenue through income tax relief. The income tax relief operates by way of a deduction against total income (value depending on the level of income subject to 40% income tax).

For EII/SCI 3/4 of the relief is given in the year of investment and the remaining 1/4 is given in year 4. In the case of SURE all of the relief is given in the year of investment (subject to sufficient income in prior years).

The reliefs should be on the agenda as part of any financing discussion. They can be broadly distinguished by reference to who is providing the finance:

Relief

Who is Providing the Funds?

SURE

Owner/founder

SCI

Friends & family

EII

External 3rd parties

I will explore how these interact and when they are most likely to be used.

3. How Valuable are these Reliefs to Investors?

So how valuable are these reliefs to investors? The answer is more valuable than you might think.

As a quick example we will assume your client receives their investment back at the end of year 4 and no additional return on capital.

Assuming a €100,000 investment (annual investment cap of €150K p.a.) the cash-flows are as follows:-

Year 1

Year 4

Total

Investment

(100,000)

100,000

0

Tax Refund

30,000

10,000

40,000

Net Cashflows

(70,000)

110,000

40,000

Ignoring the time value of money what is the return here? Your client has “spent” €100,000 and has received €140,000 so the quick answer is 40%? Yes, but this ignores the fact that the €40,000 is an after-tax return.

So EII gives a net 40% after-tax return where the capital is returned. This is equivalent to an approx. 83.3% return subject to income tax/USC/PRSI at 52% or to an approx 60% return subject to CGT at 33%. It is interesting how we often ignore tax in comparing investment options. Tax erodes net return! EII is much more attractive on an after-tax basis than it might first appear.

4. Overview of Reliefs

I have set out here a high level overview of the main conditions relevant to the reliefs – as you can see these are extensive so advisor beware! There is a related group concept called the “Relief for Investment in Corporate Trades” (RICT) group. Broadly, an RICT group is one under common direct or indirect control.

  1. Investment must be
  • in the form of equity (can be redeemable preferred shares)
  • newly issued shares and fully paid up
  • “at risk”, i.e. no risk mitigation through agreements
  • based on a written business plan
  1. Investor must
  • hold the shares personally (or via a nominee who files the appropriate Form 21R)
  • continue to hold the shares for 4 years
  • not be connected with the investee company (except in the case of SURE/SCI)
  1. A RICT group can raise a maximum of €5m in any rolling 12-month period subject to a life-time limit of €15m (this includes amounts raised under BES since 1984).
  2. Investee Company (“qualifying company”) must
  • be a holding company of a trading company or a trading company itself
  • hold a tax clearance certificate
  • not be controlled by another company
  1. Trading company must not carry on any other activities other than those which are “purely incidental” (Revenue consider holding a rental property to be non-incidental).
  2. Any subsidiaries must be carrying on a trade in their own right in the State or providing support to the qualifying company’s trade.
  3. Funds raised must be
  • used for a “qualifying purpose” within 4 years, i.e. relevant trading activities or R&D + Innovation (exclusion for financial activities, service industries, etc.)
  • used to grow business “organically”; purchase of an existing business is not qualifying
  1. 4 year clawback period during which various conditions must be met.
  2. 3 investment stages:
  • “initial risk finance”
  • “expansion risk finance investment” and
  • “follow-on risk finance investment”

Each investment stage is subject to separate conditions, e.g. in the case of “initial risk finance” it must not be more than 7 years after any current or past member of the RICT group made its first commercial sale.

  1. The RICT group cannot be an “undertaking in difficulty” and cannot contain a listed entity (ESM excluded).

The quantum and scope of the conditions should not be underestimated. The above also does not address the extensive anti-avoidance provisions.

4.1 SURE

SURE is a relief to an individual for equity investment in a company carrying on a new venture (this contrasts with EII which facilitates the expansion of both new and existing ventures).

The relief is targeted at employees leaving employment to pursue new business opportunities. We are likely to see more interest in this relief in light of the trend towards increased self-employment.

Assuming the individual has paid a sufficient amount of “40% income tax” in prior years it provides for a 40% refund on capital invested. These refunds effectively reduce the net cost of investment, i.e. €100 invested costs €60 after tax relief.

The relief does suffer from a practical timing problem in that the former employee needs to fund the investment “up-front” to receive the tax-relief. This will be pressure on all parties to ensure the refunds are processed in a timely manner.

Additional points to note specific to SURE:

  • In the 3 years pre-preceding the year of investment, the individual must not have had non-employment income in excess of €50,000 (or the level of the employment income if lower than €50,000). So if the investment is in 2019 it is the years 2015, 2016 and 2017 which are tested here – 2018 is ignored.
  1. Individual must
  • acquire 15% of issued ordinary share capital in the qualifying company within 1 year
  • not hold 15% of the issued ordinary share capital of another company (apart from “dormant” companies)
  • take up full-time employment with the qualifying company
  • Investment by way of a maximum of 2 “relevant investments” subject to an overall cap of €700,000 (maximum tax “value” of €280,000).
  • Relief subject to an overall cap of €100,000 p.a. split between the current year and any of the previous 6 years (any used relief is brought forward).
  • The full €100,000 must be claimed in a particular year before claiming against another year such that some of the relief may be at the standard rate.

WORKED EXAMPLE – Example 1

John, Pauline and Ringo are ambitious employees working with ABC Software Limited where they have been employed for over 5 years. They want to leave to set up a new software development company “AI Limited” based in Dublin serving a new market in data analytics.

They have each been paid at least €150K p.a. over this time. As Ringo is the more junior of them he will hold 20% of the new company and Pauline and John will hold 40% each. Each will be employed by AI Limited in a technical capacity.

The financing requirements are €600,000 year 1 and €400,000 year 2. Debt funding is unavailable due to the uncertain nature of the business model. They have each agreed to provide funding pro-rata to their shareholdings – this may be all or partially borrowed.

You meet with them and advise them of the potential availability of SURE relief in respect of their investment as follows:-

John

Pauline

Ringo

Total

% of AI Limited

40

40

20

100

Investment OSC Year 1 (€000)

240

240

120

600

Tax Refund (€000)

(96)

(96)

(48)

240

Investment OSC Year 2 (€000)

160

160

80

400

Tax Refund (€000)

(64)

(64)

(32)

160

Net Cost after relief

240

240

120

600

After an extensive review you determine that they meet the qualifying conditions subject to preparing a business plan and complying with the various administrative requirements as set out in Section 5.

Example 1(a) Assume the same facts as above except

  • the trio are overly enthusiastic and begin to develop the data analytics software at the weekends and even manage to secure some copyright protection.
  • they now plan to transfer this IP business to the new company in return for shares.

  • IMPACT: No SURE relief as the “qualifying new venture” requirement is not met.

Example 1(b) Assume the same facts as above except

  • All 3 own 1/3rd of another dormant company which they had planned to use for this venture – it just has €200 in share capital subscribed.

  • IMPACT: No SURE relief as the “dormant” company is not dormant enough! The investment falls foul of s505 (5) TCA 1997 – cash in excess of €130.

Example 1(c) Assume the same facts as above except

  • Pauline wants to hold her shares through a personal holding company of which she holds 100% - she has been told by her tax adviser that this is advisable as it may enable her to sell the shareholding and avail of the exemption from tax as provided by s626B TCA 1997 after 1 year.

  • IMPACT: No SURE relief for Pauline as any investment by Pauline into her holding company won’t be an investment into a “qualifying company”. This is because Pauline HoldCo won’t meet the conditions of s490 (4) TCA 1997 as the 40% shareholding in AI Limited is not a “qualifying subsidiary” (“51% subsidiary” shareholding requirement per s492 (2)TCA 1997).

John and Ringo remain eligible for SURE relief in relation to their investments.

Example 1(d) Assume the same facts as above except

  • John and Ringo club together and hold their shares jointly via JR HoldCo which in turn holds 60% of AI Limited. John and Ringo invest in shares in JR HoldCo which in turns invests in shares in AI Limited.

Pauline sticks with her direct holding in AI Limited as she is now turned off the idea of a holding company.

  • IMPACT: No SURE relief for Pauline as AI Limited is now not a qualifying company as it is under the control of another company (s490 (3)(a)(ii)(II)TCA 1997).

But what about John and Ringo’s investment into JR HoldCo? It is an investment into a qualifying company as JR HoldCo meets the conditions of (s490 (3)(a)(ii) TCA 1997).

Example 1(e) Assume the same facts as above except

  • The 3 club together and hold their shares via PJR HoldCo which in turn holds 100% of AI Limited. Each invests in shares in PJR HoldCo which in turns invests in shares in AI Limited.

  • IMPACT: SURE relief for all as it is an investment into a qualifying company as PJR HoldCo meets the conditions of (s490 (3)(a)(ii)TCA 1997).

4.2 SCI

SCI allows early stage “micro companies” to raise funds from family members who would not otherwise qualify for EII (due to falling foul of s500 (2)(b)(iii) TCA 1997). Funds raised under SCI are capped at €500,000. Investors are subject to the same investment thresholds as under EII, i.e. €150,000 p.a.

“Micro companies” are those with

  • less than 10 employees; and
  • turnover/gross assets not exceeding €2m.

The company raising investment under SCI cannot

  • be more than 7 years “old”;
  • be a member of an RICT group; or
  • have any “partner businesses” (broadly a 25% common control test).

SCI relief is available for investors whose associates (i.e. spouse/civil partner, sibling, ancestor or lineal descendant) have an existing interest in the company. By contrast EII relief would only be available to such investors where

  • any interest they and their associates held was itself entitled to RICT relief; and
  • they and their associates do not control the company during the compliance period.

EII relief would also be available to such investors if the only capital subscribed is on formation and the company has not commenced preparations for carrying on a trade or business (s500(6) TCA 1997).

WORKED EXAMPLE- Example 2

In 2015 Fred Astaire established a new health monitoring business (“MindyaHealth Limited”) with initial capital invested €500K – you advised him on SURE relief for this investment. He now wants to meet to discuss options to raise further capital to expand into the US.

You meet and determine that he is still not at a stage where traditional bank funding is available. You mention the availability of a RICT relief for investment by “friends and family” subject to a maximum of €500K. Fred believes the company to be worth €1m (it has turnover just below €1.5m and gross assets of €400K).

Fred’s sister Joanna also works in the medical industry and was thinking of setting up her own business. You meet them both and it is agreed that Joanna will invest €150K for 13% of MindyaHealth Limited (post money valuation €1.15m).

After another extensive review you determine that they meet the qualifying conditions subject to preparing a business plan and complying with the various administrative requirements as set out in Section 5. You note that the need for this funding was foreseen as part of the initial business plan prepared at the time of the SURE investment such that it will constitute “follow-on risk finance investment” (s496(7) TCA 1997).

Joanna will borrow €45K and fund the balance of €105K from her own resources. The refund of €45K in year 1 will be used to immediately repay the outstanding bank borrowings.

Example 2(a) Assume the same facts as above except

  • MindyaHealth Limited is an old dormant company owned by Fred, which filed a health monitoring patent in 2011.

  • IMPACT: No SCI relief as company has commenced preparations for carrying on a trade more than 7 years prior to the share issuance.

Example 2(b) Assume the same facts as above except

  • MindyaHealth Limited has been more successful than Fred would have thought – it managed €1.8m in turnover last year and now has 12 full-time employees!

  • IMPACT: No SCI relief as company is not a “micro-enterprise” (greater than 10 employees).

Example 2(c) Assume the same facts as above except

  • Fred agrees to limit Joanna’s investment losses to the net investment cost to her after tax refunds (€90K).

  • IMPACT: No SCI relief as the shares are not “eligible shares” per s495 TCA 1997 (agreements to substantially reduce investor risk).

Example 2(d) Assume the same facts as above except

  • MindyaHealth Limited invests €75K in expanding the business and €75K in buying 30% of a business based in Australia (“OzCo”).

  • IMPACT: SCI relief limited to 50% as the money used to buy OzCo is not used for a qualifying purpose.

Example 2(e) Assume the same facts as above except

  • MindyaHealth Limited invests €75K in expanding the existing business and €75K is invested in share capital of a US subsidiary which will be selling its product in the Americas.

  • IMPACT: SCI relief available in full as the money invested in the US subsidiary is in a qualifying subsidiary (s492 TCA 1997) which carries out support functions for the qualifying company’s trade.

4.3 EII

EII is a relief to an individual for equity investment in a company carrying on a new or an existing venture. Typically EII capital will be provided by 3rd parties (although it can be provided by related parties in certain limited circumstances as set out in 4.2 above).

Investment can now be by way of redeemable preferred shares, which is a form of quasi debt (although it will be treated as equity from the company’s perspective).

Assuming the individual has paid a sufficient amount of “40% income tax” in prior years it allows an individual investor to claim a 30% initial refund on capital invested and a trailing 10% refund in year 4.

WORKED EXAMPLE – Example 3

John, Pauline and Ringo continue to be successful with “AI Limited” – you will recall from above that they provided €1m in SURE capital. After 2 years you meet to discuss general financing options to fund both organic growth and a possible acquisition. The funding is required to support expansion into the US and Asia.

You determine that a combined €25m is needed; €16m to fund organic growth and €9m for the acquisition of Analytico Limited (an Irish resident company which will carry on a qualifying trade in the State).

You discuss the possibility of raising EII relief; however you note that it will not be available for acquisition funding and it is also capped at €5m in any rolling 12 month period and an overall cap of €15m (of which €1m has already been exhausted through SURE). A 3rd party bank would be willing to fund the balance subject to EII investment being raised.

After another extensive review you determine that this should constitute “expansion risk finance investment” per s496(6) TCA 1997 – the fundraising was not envisaged as part of the business plan used to support the SURE claim but constitutes expansion into a new market. You determine that the qualifying conditions should be met subject to preparing a business plan and complying with the various administrative requirements as set out in Section 5.

The agreed funding plan is as follows:-

EII (€m)

Bank Funding (€m)

Total (€m)

First Fundraise

5

-

5

2nd Fundraise (+12 months)

5

-

5

3rd Fundraise (+12 months)

4

11

15

TOTAL

14

11

25

Example 3(a) Assume the same facts as above except

  • Analytico Limited is US tax resident carrying on a trade in Ireland through an Irish branch.

  • IMPACT: No EII relief as AI Limited has a non-qualifying subsidiary (s492 TCA 1997) being a subsidiary resident outside EU/EEA (and not providing support functions to AI Limited).


Example 3(b) Assume the same facts as above except

  • On further review AI’s revenues averaged over €30m over the last 2 years!

  • IMPACT: No EII relief as the investment does not constitute “expansion risk finance investment”, i.e.

  • the €14m EII being raised is less than 50% of the average annual turnover); and
  • the funding was not foreseen in the business plan that was used to raise the SURE (initial risk finance investment).

Example 3(c) Assume the same facts as above except

  • After the EII funds are raised it turns out that the Analytico Limited acquisition is actually going to cost €15m of which €4m will be sourced from the €14m EII funds raised.

  • IMPACT: EII relief will be restricted to 5/7 as the funds were only partially used for a qualifying purpose, i.e. €10m out of €14m raised.

Example 3(d) Assume the same facts as above except

  • 2 years after the 3rd EII fund-raise AI Limited offers to redeem shares held by EII investors at a premium.

  • IMPACT: EII relief will be reduced for those investors who accept the redemption per s508P (3)(a)TCA 1997 in the amount of the proceeds received.

5. Overview of New Self-Certification Process

The move to self-certification has been the most significant change introduced by Finance Act 2018. While this will certainly help to speed up the process, it increases the risk that there will be future questions as to whether certain conditions are met.

Section 508D TCA 1997 provides for Revenue confirmation in relation to certain limited matters (e.g. whether there is an RICT group and whether the business plan requirement is met).

The administrative process is comparatively straightforward:

  • The Investor provides the funds to the company
  • The company must “spend” a minimum of 30% of these on a qualifying purpose – normal accounting treatment will be followed here such that an accrual for expenditure constitutes “spend” for this purpose
  • Once the 30% expenditure threshold is met the company issues a “Statement of Qualification” to the Investor (either SQEII 3, SQSCI 3, SQSURE 3)
  • The Investor claims income tax relief on receipt of the Statement of Qualification (self-assessment subject to meeting the Investor conditions)
  • In year 4 EII/SCI Investors will be issued a “Statement of Qualification” (Second Stage Relief) subject to the company meeting the additional condition 3 years after the investment is made:
  • the company has at least one more full-time employee than in the year before the investment (and overall emoluments have not decreased); or
  • spends more on R&D+I than it did in the year before the initial investment
  • The Investor claims the balance of income tax relief on receipt of the Statement of Qualification (Second Stage Relief) – again self-assessment subject to meeting the Investor conditions

The company must file a return with Revenue providing details of eligible shares issued in addition to including certain details on its corporation tax return for the relevant period (s508E TCA 1997).

6. Entrepreneur Relief

I will discuss the “Revised Entrepreneur Relief” (s597AA TCA 1997) which provides for a 10% rate of CGT on the first €1m of lifetime chargeable gains – referred to below as “Entrepreneur Relief”.

RICT investments may qualify for Entrepreneur Relief (more likely to be relevant in the case of SURE/SCI given the working time requirements).


It is important not to forget about the original entrepreneur relief (s597A TCA 1997) - it is a form of roll-over relief allowing credit for historic CGT paid where the net of CGT funds were rolled over into new assets prior to 31 December 2018. Relief under s597A TCA 1997 will apply where this is more favourable.

I will focus here on 5 aspects relevant to Entrepreneur Relief;

  • 50% working-time requirement
  • Qualifying “chargeable business assets” – pitfalls
  • Timing issues – pitfalls
  • Structuring questions
  • Ex-statutory concessions

6.1 50% Working-time “Requirement”

It is interesting to think that some of the most well-known entrepreneurs like Elon Musk would likely struggle to meet the working-time requirements for Entrepreneur Relief. This is because he (like many entrepreneurs) spreads his time over multiple overlapping business interests.

From s597AA TCA 1997

“qualifying person” means an individual who is or has been a director or employee of a company (or companies in a qualifying group) who —

(a) is or was required to spend not less than 50 per cent of that individual’s working time in the service of that company (or those companies) in a managerial or technical capacity, and

(b) has served in that capacity for a continuous period of 3 years in the period of 5 years immediately prior to the disposal of the chargeable business assets of which the disposal of shares in the company (or one of those companies) forms the whole or part;

“working time” means any time that an employee or director is —

(a) at his or her place of work or, in the case of an employee, at his or her employer’s disposal, and

(b) carrying on or performing the activities or duties of his or her work.


The above definition begs some questions in the context of a controlling shareholder

  • Are they ever an employee?
  • Are they ever “required” to do anything – do they not decide what they do?
  • As a “director” do they have a “place of work” and if so what is the “working time” associated with this – is it just time spent performing directors’ duties?
  • Does a “director” spend any time at all serving in a “managerial or technical” capacity?

Concluding on the working-time requirement can also be difficult for employees. If their employer only requires them to be at the employer’s “disposal” for 20 hours a week is

  • the “working time” 20 hours; and
  • is the “qualifying person” a person who spends 10 of these hours in the service of the company in a “managerial or technical” capacity?

6.2 Qualifying “Chargeable Business Assets” – pitfalls

Entrepreneurs typically hold their business assets through limited group structures (to mitigate business risk, etc.). Either of the following may undermine the availability of Entrepreneur Relief in a corporate group context:-

  • a subsidiary shareholding of 50% or less (must be more than 50% of OSC direct or indirect); or
  • a company in the group (other than a holding company) which does not itself wholly or mainly carry on a “qualifying business”, i.e. a business other than investments, development land or letting land;

WORKED EXAMPLE – Example 4

Cain and Abel want to start a new technology company – AlphaOmega Limited to be held personally 50/50. They both work full-time in the business.

It is successful and after 3 years they sell the shares for €2m (€1m each). You review and (subject to some uncertainty as to the “working time” requirement) you advise that the gain should qualify for s597AA TCA 1997 Entrepreneur Relief.

Example 4(a) Assume the same facts as above except

  • Their previous advisor told them to hold their shares in AlphaOmega Limited through separate personal holding companies (Cain HoldCo and Abel HoldCo).
  • IMPACT: No Entrepreneur Relief on a sale of Cain HoldCo or Abel HoldCo as neither is a “holding company” as defined (must hold more than 50% of OSC).

Example 4(b) Assume the same facts as above except

  • Alpha Omega Limited set up a new entity (DormantCo) which was to pursue a new market opportunity which went nowhere.

  • IMPACT: Entrepreneur Relief is still available on a sale of Alpha Omega Limited as it is still a company “whose business consists wholly or mainly of carrying on a qualifying business” (s597AA (2)(a)(ii)(I) TCA 1997). The existence of the DormantCo should not undermine that.

Example 4(c) Assume the same facts as above except

  • A new holding company (Alpha HoldCo) was interposed above Alpha Omega Limited. Alpha HoldCo set up a new entity (DormantCo) which was to pursue a new market opportunity which went nowhere.

  • IMPACT: No Entrepreneur Relief on a sale of Alpha HoldCo as it is
  • Not itself a company “whose business consists wholly or mainly of carrying on a qualifying business” (s597AA (2)(a)(ii)(I) TCA 1997); or
  • Not a “holding company of a qualifying group” as one of its subsidiaries is not “wholly or mainly…carrying on a qualifying business”.

Example 4(d) Assume the same facts as above except

  • Alpha Omega Limited has over €1m in cash on the balance sheet arising from previous trading activities.

  • IMPACT: Potential question as to whether Alpha Omega Limited is a “company whose business consists of wholly or mainly of carrying on a qualifying business”. I would be of the opinion that it does qualify for Entrepreneur Relief on the basis that the cash derived from trading activities and is being held to fund future business expansion. Regard should be had to similar analysis in the context of s626B (2) and Revenue commentary in Tax Briefing 66 which has been incorporated in Part 20-01-14 of Revenue’s Tax and Duty Manual. (It should be noted that this manual is currently unavailable as it is being updated)

6.3 Timing Issues – pitfalls

A couple of timing issues to consider in the context of Entrepreneur Relief:

  • Firstly consider capital loss offset and timing.

Gains qualifying for entrepreneur relief (as with any capital gain) will be offset by capital losses forward – there is no ability to defer using the capital losses against future standard 33% gains. However, married couples can opt out of automatic capital loss transfers between them (s1028 (3) TCA 1997).

Section 546(6) TCA 1997 helpfully allows losses to be offset against gains at higher rates in a year in priority to gains at lower rates.

  • Secondly consider the interaction between Entrepreneur relief and Retirement relief.

Where a client is considering separate disposals involving both Retirement relief and Entrepreneur relief the sequencing is important.

Any chargeable gain arising on the disposal of “chargeable business assets” (as defined in s597AA TCA 1997) on or after 1 January 2016 will erode the €1m lifetime limit. This is notwithstanding that the CGT arising on the chargeable gains is relieved under Retirement relief (s598/s599 TCA 1997).

The key point to note here is that Retirement relief reduces the CGT on chargeable gains – it does not reduce the gains themselves.

Consider all disposals on or after 1 January 2016 in determining the remaining lifetime threshold for Entrepreneur relief. It may also be possible that disposals qualifying for Retirement relief may not in fact qualify for Entrepreneur relief (e.g. due to the presence of a dormant company, etc.) in the group.

6.4 Structuring Questions

Entrepreneur relief raises interesting structuring questions; particularly in the context of joint ventures where ownership is dispersed. Questions which I typically encounter in practice are

  • Should you structure ownership directly or indirectly via a holding company?
  • How about splitting your ownership between direct and indirect holdings?
  • If you split your ownership how much should you retain in direct ownership?
  • What will the lifetime limit be on exit?
  • If you hold your shares directly can you be confident that you will meet the conditions for Entrepreneur Relief on exit?

6.5 Ex-Statutory Concessions

The following ex-statutory concessions which practitioners should be aware of are contained in the Tax and Duty Manual (Part 19-06-02b):

  • Share buy-backs qualifying for CGT treatment (s176 TCA 1997) are within scope of the Entrepreneur Relief.
  • Entrepreneur Relief is available in respect of capital distributions on liquidation provided the company was carrying on a qualifying business up to the time the liquidator was appointed and the liquidation is completed “within a reasonable period of time” (any period up to 2 years is deemed reasonable). It is unclear whether this extends to holding companies.
  • Entrepreneur relief is available on the sale of partnership assets where the individual is an active partner and the partnership carries on a qualifying business.

7. Reference Material

  • Section 25 Finance Act 2018
  • Tax and Duty Manual Part 16-00-02 and Part 16-00-03
  • Section 597AA Taxes Consolidation Act, 1997
  • Tax and Duty Manual Part 19-06-02b