The tax system contains a number of measures designed to assist businesses at various stages, including business start-up reliefs, entrepreneur reliefs and incentives to assist businesses to undertake research and development activities. Summary details of some of the main measures are set out below, and further information is available on the Revenue website at www.revenue.ie.
CGT Entrepreneur Relief
Section 597AA of the Taxes Consolidation Act 1997 provides for a revised relief for entrepreneurs disposing of certain business assets, the Revised Capital Gains Tax Entrepreneur Relief. This relief provides for a rate of 10 per cent to be applied (since 1 January 2017) to chargeable gains arising on the disposal, by an individual, of qualifying business assets up to a lifetime limit of €1 million.
The relief is available on the disposal of a wide range of qualifying businesses including high risk and potential innovation start-ups. It does not however make a distinction between start-ups and more traditional asset backed enterprises.
Research and development tax credit
The R&D Tax Credit provides a 25% tax credit for all qualifying R&D expenditure. Where a company has already offset the credit against current and previous year CT claims, it may apply for a refundable credit in three instalments. The credit is available to all companies carrying out qualifying research & development activities.
The refundable nature of the R&D tax credit can be particularly attractive to start-up companies in the early stages of trading as the credit can effectively part-fund the R&D activity and act as a valuable source of cash-flow.
Deputies will be aware that I committed during debates on Finance Bill 2018 to consider amendments to the R&D tax credit to encourage uptake of the R&D credit by smaller companies, and this work is nearing completion.
Knowledge Development Box
The Knowledge Development Box (KDB) that profits from certain qualifying assets that are earned by a company, chargeable to corporation tax in Ireland, can be taxed at 6.25%. This only applies to the extent that the assets relate to Research and Development undertaken by the company.
The main purpose of the KDB is to encourage companies to develop certain types of intellectual property in Ireland and thereby engage in substantive operations that have a high value add for the Irish economy.
The KDB (Certificate of Innovations) Act 2017 allows smaller companies to avail of the KDB by allowing SMEs to claim for assets which are “patentable but not yet patented”, and reintroduced substantive patent examination through the Irish Patents Office to ensure that Irish Patents can qualify for the KDB. This is available to companies with annual income from intellectual property that is less than €7.5m and annual global turnover of €50m. However, the relief does not make a further distinction between SMEs and high-innovation start-ups, as referenced in the Deputy’s question.