493 Seed capital relief

Summary

This section sets out conditions which must be satisfied in order to qualify for SURE, [Startup Refunds for Entrepreneurs] formerly know as the Seed Capital Scheme [SCS]

(1) Notwithstanding section 489, this section shall apply for affording relief from income tax where –

(a) An individual qualifying for SURE (specified individual) makes a relevant investment

(b) The shares issued to the specified individual are issued for the purposes of raising money by a qualifying company for the benefit of its activities referred to in paragraph (d),

(c) The activities carried on by the qualifying company are a qualifying new venture

(d) The money was used, is being used or is intended to be used for the benefit of a qualifying new venture for the purpose of carrying on relevant trading activities, or in the case of a company that has not commenced qualifying trading activities, incurring expenditure on research and development within the meaning of section 766,

(e) The use of the money set out in paragraph (d) will contribute directly to the creation or maintenance of employment in the company.

Relief as deduction from income

(2) Subject to subsection (3) the relief in respect of a relevant investment is given by means of a deduction (equal to the amount subscribed for eligible shares) from the individual’s total income in the year of assessment in which the shares are issued.

Relief for SURE investment

(3)(a) A specified individual (that is, an individual making a SURE investment) in relation to his/her first relevant investment (that is, the first SURE investment) is entitled to have the relief due in respect of that investment given as a deduction from his/her total income for any one of the 6 tax years immediately before the tax year in which the eligible shares are issued in respect of that investment. For the purpose of granting relief only, but subject to certain limits on relief set out in section 490 and in paragraphs (c) and (d) below, the shares which are issued in respect of the investment are deemed to have issued in the nominated year.

(3)(b) Where a specified individual makes a second SURE investment —

• in the same company as the first such investment, and
• within the 2 tax years following the tax year in which the initial such investment is made,

the relief due for the second investment is given as a deduction from the investor’s total income for any one or more of the 6 tax years, which he/she nominates, immediately before the tax year in which the eligible shares were issued in respect of the first such investment. The nominated year may be the same or different to that nominated in respect of the first such investment. Again, for the purpose of granting relief only, but subject to certain limits on relief set out in section 490 and in paragraphs (c) and (d), the shares which are issued in respect of the investment are deemed to have issued in the nominated year.

(3)(c) Any unabsorbed relief in respect of both the first and second SURE investments is carried forward to the tax years nominated by the individual for this purpose between the tax year originally nominated and the tax year in which the shares actually issued in respect of the first such investment.

This procedure ensures that tax refunds for up to 6 tax years are paid to the individual.

(3)(d) Any relief still outstanding in respect of the first or second SURE investment is given in the year in which the shares are actually issued or in a subsequent year as normal EII relief.

(3)(e) The SURE relief is only available in respect of 2 relevant investments made by a specified individual in all tax years.

(3)(f) Subsection (5) is to apply notwithstanding the general time limit for making a claim for a repayment of tax contained in section 865. Any excess tax paid may be repaid on foot of a timely (within the time limits set out in section 503) and valid claim within the meaning of section 865(1)(b). (The meaning of a valid claim is dealt with in section 865).

Meaning of “relief”

(4) References in this Part to the amount of the relief are references to the amount qualifying as a deduction from the investor’s total income given by way of SURE relief.

Claiming of Relief

(5) The relief must be claimed and is not allowed —

• in the case of a SURE Scheme investment unless and until the qualifying new venture commences to carry on relevant trading activities or in the case of a company that has not commenced the carrying on of qualifying trading activities, has expended not less than 30 per cent of the relevant investment on research and development activities which are connected with and undertaken with a view to the carrying on of relevant trading activities

Withdrawal of relief

(6) Relief will be withdrawn where an event occurs within the appropriate relevant period which results in the claimant not being entitled to relief.

SURE: relevant employment

(7) A specified individual (that is, a SURE investor) must take up relevant employment within the year of assessment in which the relevant investment is made, or if later, within 6 months of —

• the date of the relevant investment in the case of a single investment, or
• where more than one investment is made in that year of assessment, the date of the last such investment.

Capital gains tax

(8) Subject to section 506 (which deals with capital gains tax on the disposal of shares) any relief granted is not taken into account in calculating any future capital gains tax which may arise on the disposal of shares.

Restriction of relief

(9) “distribution” has the same meaning as in the Corporation Tax Acts.

Relief is denied in respect of amounts subscribed for shares in a company where the shareholder or a person connected with the shareholder is either —

• assured of recovering part or all of the capital subscribed, other than a distribution,
  or
• assured of receiving an agreed dividend.

A shareholder is assured of recovering capital invested or of receiving a dividend where by virtue of an agreement, arrangement or understanding it could reasonably be considered that the risk element attaching to the investment is removed.

Restriction of relief

(10) Where a specified individual claims relief under SURE, no relief shall be granted to that individual under section 489 (EII) in respect of the same qualifying company

Evidence

(11) The Revenue Commissioners may require the qualifying company to provide evidence as they consider necessary and may consult with such persons or body of persons as in their opinion may be of assistance to them, to enable them to verify that the conditions necessary for the claiming and granting of relief have been satisfied

Relevant Date: Finance Act 2019