Written Answers - Tax Reliefs

Thursday, 15 December 2011

Dáil Éireann Debate
Vol. 750 No. 2

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  57.  Deputy Willie O’Dea  Information on Willie O'Dea  Zoom on Willie O'Dea   asked the Minister for Finance  Information on Michael Noonan  Zoom on Michael Noonan   the tax relief associated with revenue job assist; if this has changed since budget 2012; and if he will make a statement on the matter. [40486/11]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan  Zoom on Michael Noonan  Sections 472A and 88A of the Taxes Consolidation Act 1997 provide tax incentives for both employers and employees, to help the long-term unemployed to return to employment. The relief under Section 472A, known as the Revenue Job Assist scheme, allows qualifying employees, in addition to their normal tax credits, to claim certain income deductions, including additional deductions for qualifying children, for the three year period after taking up employment.

For the first year, the additional deduction equates to €3,810 plus €1,270 for each qualifying child. For the second and third years, the deduction is €2,540 and €1,270 respectively with qualifying child additions of €850 and €425 respectively. The relief for an employee, at the option of the employee, will be allowed in the three year period commencing with either the tax year in which the employment commences or the following tax year. Furthermore, an employee may change jobs once within that three year period and retain the relief. Section 88A provides an associated tax incentive for employers. Employers may claim a double deduction in computing the profits of the trade or profession in respect of the first 3 years’ wages paid to qualifying employees. This double deduction may also be claimed in respect of the employers’ PRSI contribution on such wages.

Both incentives apply in respect of individuals who have been unemployed for at least 12 months and are in receipt of a specified social protection payment or, who are in a category approved for the purposes of the scheme by the Minister for Social Protection with the consent of the Minister for Finance. Although the relief available under the scheme was unchanged in Budget 2012, I intend to bring forward an amendment in Finance Bill 2012 so that individuals signing on solely for credits with the Department of Social Protection can also qualify for the relief. This change is being operated on an administrative basis by the Revenue Commissioners currently.

  58.  Deputy Willie O’Dea  Information on Willie O'Dea  Zoom on Willie O'Dea   asked the Minister for Finance  Information on Michael Noonan  Zoom on Michael Noonan   the maximum relief for the business expansion scheme; if this has changed since budget 2012; if the conditions have changed; and if he will make a statement on the matter. [40487/11]

[418]Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan  Zoom on Michael Noonan  The maximum amount that can be raised by a company in a 12 month period under the Business Expansion Scheme (BES) is €1.5m. The lifetime amount that can be raised by a company under BES is €2m. Relief at the individual’s marginal rate of tax can be claimed by a qualifying individual who invests in eligible shares. These amounts were not changed in Budget 2012. However, no relief will be granted under the BES where eligible shares are issued after 31 December 2011. Section 33 of Finance Act 2011 replaced the BES with a new scheme entitled the Employment and Investment Incentive (EII). However, the measures provided for in Finance Act 2011 could not be given effect until the European Commission gave approval under the Community Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium-Sized Enterprises. In November 2011 that approval was granted, subject to minor changes to the qualifying conditions. This scheme was commenced as and from 25 November 2011 and I provided for this on Budget night by way of a Financial Resolution.

Under both the BES and EII an individual can invest up to a maximum of €150,000 per annum. However, these investments are subject to the high earners’ restriction which permits a maximum of €80,000 in specified reliefs that can be fully relieved in any one tax year. Any amount that cannot be relieved as a result of the restriction can be rolled-over and relieved in subsequent years. The maximum amount that can be raised by a company in a 12 month period under the EII is €2.5m and the lifetime amount that can be raised by a company is €10 million. Both these amounts represent significant increases on the limits that applied under the BES.

Relief under the EII can be claimed by a qualifying individual, who invests in eligible shares, at an initial rate of 30%. This represents a decrease from 41% under BES. However, the period for which the individual is required to hold the eligible shares has been reduced to 3 years as opposed to 5 years under the BES. A further 11% of tax relief will be available to the individual under the EII, where it can be demonstrated that employment levels in the company have increased at the end of the 3 year holding period or where evidence is provided that the company used the capital raised for expenditure on research and development. This additional 11% will not be subject to the high earners’ restriction.

Some of the conditions necessary to qualify for the BES have been altered in order to make the EII available to a wider range of companies. The BES was available only to companies carrying on certain trades, principally manufacturing. The EII is available to the majority of trading companies with only a limited number of exceptions. In view of the extended time frame involved in securing the approval of the European Commission, I decided to allow both the BES and EII schemes to run concurrently between 25 November 2011 and 31 December 2011.


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