The Employment and Investment Incentive (EII) replaced the Business Expansion Scheme in 2011. It is a tax relief incentive scheme that provides tax relief for investment in certain corporate trades and is targeted at job creation and retention for firms in their first seven years of market operation or before that point.
Generally, companies older than seven years should be in a position to raise funding without State support, either from existing investors or from financial institutions. However, such companies may still use the EII if they are expanding into a new product or market and are looking to raise more than 50% of their average annual turnover in the previous five years. Alternatively, they may avail of EII if they are still carrying on the same activity that they originally raised funding for (for example, in the case of R&D which is still ongoing) or where the additional fund raising was foreseen in their original business plan (for example, the business plan foresaw Phase one, Phase two and Phase three fund raising).
In 2018, I commissioned a report on EII which confirmed that market failures continued in the provision of risk capital for start-up companies.
The report, which was carried out by Indecon Economic Consultants, may be found at:
As the Deputy will be aware, subsequently the EII has been subject to significant changes in recent Finance Acts including a substantial redraft in Finance Act 2018 and changes aimed at:
- streamlining the application and approval process requirements;
- providing full income tax relief (40%) in the year in which the investment is made. This compares with current arrangements where 30% relief is provided upon the initial investment and a further 10% is given after Year 3 subject to certain conditions; and
- increasing the investment limit from €150k to €250K and to €500k in the case of those who invest for a minimum period of 10 years.
As a state aid, EII operates under the EU General Block Exemption Regulation (GBER). Article 21 of GBER allows Member States to incentivise investment in SMEs which have been in operation for less than seven years with certain exceptions. There are no plans at the present moment to review that position.