The Start-Up Relief for Entrepreneurs, commonly known as SURE, is a tax incentive designed to encourage individuals to invest in new companies. This program is particularly aimed at companies that are less than two years old and are engaged in qualifying activities. However, it's important to note that certain trades are excluded from this relief.
In Raising Finance - Key Tax Pitfalls and Opportunities, Michael O'Scathaill took viewers through this relief.
To be eligible for SURE, investors must meet several conditions. Firstly, they must invest money into the company by purchasing new shares. In some cases, loans may be converted into shares if done within 12 months and if the funds were used in the trade. Additionally, the investor must hold at least a 15% shareholding in the company and commit to working full-time for the company for a period of at least 12 months.
One of the critical aspects of SURE is the PAYE Test. This test is applied to the four tax years preceding the year of investment, excluding the immediately preceding tax year. For instance, for an investment made in 2023, the test would apply to the years 2019, 2020, and 2021. During these 'relevant years', the claimant’s non-PAYE income must not exceed their PAYE income, and it cannot surpass €50,000.
Moreover, to avoid a clawback of the relief, the shares must be retained for at least four years. It is also crucial that the individual’s shareholding is not diluted below 15% in the first 12 months, especially if new investment is being considered from other sources.
When it comes to the relief itself, the amount invested can be deducted against taxable income in the year of investment and in the six preceding tax years. The maximum deduction allowed is €100,000 per annum. Claimants have the flexibility to rank the years in order of preference, usually starting with high income/high tax years first. The amount invested is offset in that order until it is fully utilised, subject to the €100,000 limit per year.
Investors should also be aware that a second claim for the relief can be made for a follow-up investment by the end of the second tax year following the initial investment. This follow-up investment must be provided for in the original business plan.
The SURE program offers a substantial incentive for entrepreneurs and investors looking to start or grow a new business. However, strategic planning for the timing and amount of investment is essential due to the constraints and requirements of the program. By understanding and adhering to the stipulations of SURE, investors can maximise their potential tax benefits while contributing to the growth of innovative new companies.
For the full session, please click here. In this course, Michael O’Scathaill covers the following topics;
- Debt v Equity – a tax analysis
- Obtaining tax relief on interest payments – including an overview of Section 247, TCA1997
- Withholding Tax obligations on dividend and interest payments to investors
- Tax-based finance schemes - EIIS, SCI and SURE
- The new Angel Investor CGT Relief – an overview
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.