Entrepreneurship

New measures not announced in Budget 2025

Retirement relief: The Finance Bill provides confirmation of the extension to the upper age limit for the relief from 66 years of age to 70 years of age and also provides clarification on the revisions to the €10m proceeds cap.

• The existing six year clawback period will continue apply to the relief in respect of qualifying assets (“Assets”) disposed of for proceeds up to €10m. Where the proceeds on a disposal exceed €10m, a somewhat complex mechanism applies. 
• The change will mean that proceeds of up to €10m will be relieved and subject to the existing six year clawback period. Any capital gains tax on the excess (i.e. above the €10m proceeds cap) can be deferred until such a time as the Assets are disposed of or on the expiry of a 12 year period. An election must be made to avail of this deferral. 
• The capital gains tax deferred on the initial disposal will crystalise and is assessable and charged on the child on the expiry of the 12 year period. However, the child can make a claim for the CGT to be abated where the 12 year holding period is satisfied. 
• The proposed change will not affect disposals made by those aged over 70 (the existing €3m limit will continue to apply) and does not affect disposals prior to 31 December 2024.

Employment Investment Incentive (“EII”) Scheme: As announced in the budget the maximum cap of relief under the EII scheme has been extended from €500,000 to €1,000,000. Certain technical amendments have also been introduced in respect of this section.

Start Up Exemption: The Finance Bill provides for certain amendments to Start Up Relief. As expected, the cap on relief available has been extended to include certain PRSI contributions made on behalf of self-employed individuals.

Angel Investor Relief: The Finance Bill also extends the maximum relief available in respect of Angel Investment Relief from €3m to €10m. The existing section has been repealed and replaced with a new section, however the changes are not substantially different to the section introduced last year. The new section provides for details on the reporting requirements in respect of the relief and some technical amendments.

Stock exchange listing expenses: The Finance Bill provides for an introduction of a tax deduction incurred in respect of expenditure incurred in listing a company on a registered stock exchange with effect from 1 January 2025. The Finance Bill clarifies that the relief will also be available for investment companies and the relief will be allowable as an expense of management. This is a very helpful measure which will encourage the expansion of Irish business abroad.

As expected, the limit on the year one repayment of the research and development tax credit has been increased from €50,000 to €75,000.

What was unexpected?

The measures are largely in line with expectations. The extension of the deduction for costs incurred in respect of listing on a stock exchange to expenses of management of investment companies is welcomed.

Who will be affected?

Entrepreneurs, start up and scaling businesses will be impacted by a number of key measures announced in Finance Bill 2024.

When? What to do now?

The changes referred to above will take effect from 1 January 2025 onwards. The changes to Angel Investor relief are subject to a sunset clause of 31 December 2026. The relief is also subject to a commencement order to be made by the Minister of Finance.

Our view

The clarification on the changes to retirement relief are welcomed. If enacted, the changes to the relief will facilitate intergenerational transfer of a family business, however a mismatch does arise vis-à-vis the clawback periods applying to retirement relief from capital gains tax and business asset relief from capital acquisitions tax. The relevant clawback for business asset relief from capital acquisitions tax is 6 years (or 10 years where the disposal primarily relates to development land) as opposed to 12 years. As such, this creates a lack of symmetry between retirement relief and business asset relief. It is disappointing that no abatement provision was introduced for the threshold of €3m which applies to the disposal of shares to a child where the disponer is aged over 70 years old.

The revised Angel Investor Relief is substantially similar to the section which has been repealed. It is disappointing that no changes have been made to relax the criteria which must be satisfied in order to claim the relief.
As set out previously, the lack of revisions to the €1m cap relating to revised entrepreneurs’ relief represents a lost opportunity.

The amendments to the EII Scheme, Research and development tax credit and the introduction of tax relief for listing expenses are welcome as they will provide a much needed cash flow boost to businesses.