Róisín Shortall
Question:68. Deputy Róisín Shortall asked the Minister for Finance the tax incentive schemes that exist to encourage employers to take on new employees; and the cost of these in a full year. [39255/18]
View answerThursday, 27 September 2018
Questions (68)
Written answers
There are a range of tax measures designed directly or indirectly to encourage employers to take on new employees. These include the following:
Key Employee Engagement Programme (KEEP): The policy objective of KEEP is to assist small to medium size businesses in competing with larger companies when attempting to attract and retain key employees. Share options can provide key employees with a financial incentive linked to the success of the company and may improve the attractiveness of an SME employment offer. The incentive provides that the value of the benefit to the employee on exercise of a qualifying share option will be subject to capital gains tax when the employee subsequently disposes of the shares. In the absence of the KEEP incentive, such gains would be subject to income tax, USC and PRSI at the time of exercise.
As this is a new measure, there will be no immediate cost in 2018 as the share options must, with limited exceptions, be held for a minimum of twelve months before they can be exercised under this scheme. It is also likely that employees may hold the KEEP share options for a number of years before exercise, as the options must be granted at not less than market value on the date of grant, so a benefit will only arise to the employee if the shares increase in value from that date. It is estimated that the eventual full-year cost of the Key Employee Engagement Programme will be in the region of €10m.
Key Employee R&D Tax Credit: Separate from KEEP, this key employee provision allows for the transfer of the financial benefit of the R&D tax credit from a company to an individual employee. The key employee measure is designed to assist companies in the State to attract and retain employees with key skills in the field of R&D. Such skills are necessary to allow companies innovate, expand and develop. The generation of new products, processes and innovations should lead to more jobs being created in the economy. The cost of the measure in 2015, the latest year for which data are available, was less than €0.05m.
The Employment and Investment Incentive: The Employment and Investment Incentive (EII) is a tax relief incentive that provides tax relief for investment in certain corporate trades and is targeted at job creation and retention. The scheme replaced the Business Expansion Scheme (BES) which had been in place from 1984. The incentive allows an individual investor to obtain income tax relief on investments, up to a maximum of €150,000 per annum, in each tax year up to 2020. Relief is initially available to an individual up to a maximum of 30% of the amount invested. A further 10% tax relief is available where it has been proven that employment levels have increased at the company at the end of the specified period (3 years) or where evidence is provided that the company used the capital raised for expenditure on research and development. The cost of EII in 2016, the latest year for which data are available, was €32m. A review of the scheme is currently underway.
The Special Assignee Relief Programme (SARP): SARP is aimed at reducing the cost to employers of assigning key individuals already employed by their companies from abroad to take up positions in the Irish based operations of the employer. The intention is that the recipients of SARP will assist with the establishment of additional functions for their companies in Ireland and, due to a transfer of skills, these functions will be able to operate without the assistance of SARP after a period. The existing SARP scheme is limited to existing overseas employees of companies and is not available to new hires. The cost of SARP in 2015, the latest year for which data are available, was €9.5m. This scheme is subject to a sunset clause with an end date of 31 December 2020.
Start Up Relief: Three Year Start Up Relief (Section 486C TCA 1997) provides for relief from corporation tax for start-up companies in their first three years of trading. The relief was introduced to provide support to new business ventures in their critical early years of trading, thereby supporting the creation of additional employment and economic activity in the State. The relief is granted by reducing the corporation tax payable on the profits of the new trade and gains on the disposal of any assets used for the purpose of the new trade. The relief exclusively supports start-up companies that create and maintain jobs, by restricting the relief available to a company by reference to its Employers’ PRSI payments. The cost of the measure in 2016, the latest year for which data are available, is provisionally set at €5.7m.
Film Relief: Section 481 of the TCA 1997 requires that a producer company that receives the relief employs a certain amount of trainees on the production for which the relief is received. The number of trainees is directly linked to the amount of corporation tax relief claimed. A production must have two trainees for every €335,000 of relief claimed, this is capped at a maximum of eight trainees per production. There isn’t a specific costing for the trainee element of Film Relief as this measure is a requirement for obtaining the relief.