The Finance Act 2011 introduced the Employment and Investment Incentive (EII) scheme which replaced the Business Expansion Scheme (BES) originally introduced in 1984. The EII scheme is a tax relief incentive that provides tax relief to private investors for investment in certain corporate trades.
The EII scheme broadly operates by allowing investments (up to a maximum of €150,000 per annum) for new ordinary shares in qualifying companies to qualify as a tax deduction against the investor's taxable income. The EII scheme offers investors an initial 30% tax relief on their total income. A further 11% tax relief will be available to investors where it has been proved that employment levels have increased at the investee company at the end of the holding period (3 year minimum) or where evidence is provided that the investee company used the capital raised for expenditure on research and development.
An investor can obtain relief under the EII scheme either by investing directly in a qualifying company or through a Designated Investment Fund. For more detail on Designated Investment Funds click here.
Recent Changes to the EII scheme
The Finance Act 2013 introduced two changes to the EII scheme:
- The current deadline for investment under the scheme is 31 December 2013. The Finance Act 2013 provides for the extension of the scheme to December 2020 (subject to a commencement order by the Minister for Finance);
- Investee companies involved in the operation and management of hotels, guest houses, self catering accommodation or comparable establishments or managing property used for such trading activities did not previously qualify for EII investment. The Finance Act 2013 extends the scope of the EII scheme to companies involved in the aforementioned trading activities provided that the company qualifies as a tourist trading undertaking and has prior approval from Failte Ireland (this has effect in respect of shares issued on or after 1 January 2013).
Designated Investment Funds and the Employment & Investment Incentive Scheme - Accountancy Ireland, 64(5), October 2012