MGR Accountants’ Tax Director Anne Hogan assesses the strengthening of the EIIS in Budget 2014 for the Limerick Leader.
Despite continuing on the austerity theme, Budget 2014 did include the very welcome news that the tax relief provided for under the EIIS scheme is no longer included in the list of ”specified reliefs” for the purposes of the High Income Earners Restriction. This amendment brings good news all round for investors who are seeking “all income” tax shelters, for small to medium sized companies seeking funds and for the job-seeking population as a whole for whom the EIIS is intended to promote job creation.
The EIIS was introduced by Finance Act 2011 as a replacement for the Business Expansion Scheme (“BES”). The purpose of EIIS is to support companies in a diverse range of sectors and industries which are crucial to economic growth by encouraging investment in such companies from individual investors. Such investors are incentivised to invest in these companies through the granting of tax relief against their total income for investments in such companies of amounts of up to €150,000 in any one year. In the current economic environment many companies at which EIIS is targeted face significant funding challenges and EIIS is one of the few sources of finance available to them
However, up until now, an anomaly had existed whereby an investor found themselves restricted in the use of this tax relief on their full investment of €150,000 under another separate provision of the tax legislation i.e. the “High Income Earners Restriction”. This was because, for tax purposes, relief from tax under the EIIS was considered to be a “specified relief” for the purposes of the High Income Earner’s Restriction. The tax relief that could, in fact, be utilised by such investors in any one year was potentially restricted to a maximum of €80,000 despite the EIIS being intended to allow relief for investments of up to €150,000. The net effect was that investors were only inclined to invest a maximum of €80,000 in any one year despite the EIIS allowing for an investment of up to €150,000.
Many tax practitioners, including McKeogh Gallagher Ryan Accountants, had been lobbying the Minister for some time to amend this anomaly as the inclusion of EIIS as a specified relief was hindering the amount of finance that could be raised by relevant companies through the scheme. It made no sense that individuals, who invested in companies which ultimately should generate employment and return funds to the economy, should face this restriction.
The amendment introduced in this year’s budget freeing EIIS relief from the fetters of the High Income Earners Restriction is therefore a very positive move. This amendment is applicable for EIIS investments made after 15th October 2013 (Budget day) and before 1 January 2017.
The EIIS is focused on the creation of employment and the carrying out of R&D activities. It is less restrictive than its predecessor the BES as it is open to most trades, benefiting both tax payers and companies looking to raise affordable finance. In the final months of 2013 taxpayers looking to reduce their tax liability should consider EIIS investments, many of which will be publicised over the coming months.
ABOUT THE AUTHOR
Anne Hogan is a Director in McKeogh Gallagher Ryan Accountants, Limerick. She is a graduate of the University of Limerick, a Chartered Accountant and a Chartered Tax Advisor. Anne advises on tax issues across all tax heads specialising in the areas of EIIS investment, Revenue Audits, Debt Restructuring and Succession Planning. McKeogh Gallagher Ryan Accountants is a recently established practice with offices in 5 Shannon Street, Limerick. Led by Mary McKeogh, Eoin Gallagher, and Eoin Ryan they offer the full suite of taxation, audit and advisory services. They are experienced EIIS advisors and will be offering an EIIS private placing in 2013.