The Start-up Capital Incentive (“SCI”)
“In time of recession there are massive opportunities and fortunes to be made, so for new up and coming entrepreneurs, this is the time to go and start a business.”
Richard BransonDid you know that some of the world’s most successful companies were started in a recession? IBM, Microsoft, Airbnb are just some of the household names for which the idea sparked in challenging times. Given the unprecedented economic impact of the coronavirus pandemic, its timely to consider the tax reliefs which may be of assistance to budding entrepreneurs. The Start-Up Capital Incentive (“SCI”) scheme was introduced with effect from 1 January 2019 and is available to “micro-enterprises”, i.e. businesses with less than 10 employees and an annual turnover/annual balance sheet total of less than €2m. Broadly, the SCI provides tax relief for investments made in qualifying companies, similar to the well-known Employment Incentive & Investment Scheme (“EIIS”) but with the added benefit of being available for investments made by family members. The maximum amount of funding which may be raised under the scheme is €500,000. The conditions which apply to the SCI are quite stringent. For example, in order to qualify for the relief, the company in which the investment is made must solely exist for the carrying on of a “qualifying new venture” and the shares must be issued to the investor within two years of the incorporation of the company. In addition, the company in which the investment is made must not have any partner or linked businesses. If available, the tax relief is available to the investor in two tranches. The first being available in the year of investment and is equal to 75% of the investment made, up to a maximum investment of €150k. The balance of the relief may be available after four years, provided that the company has either increased its number of employees or increased spending on R&D.