Tax Schemes For Small Businesses

 
There are many Tax Relief/Tax Incentive Schemes that many business professionals are not aware of and don’t look closely at. Some of these include: R&D Tax Credits (25% of qualifying expenditure if your business is in a scientific or the technological advancement field); EIIS (the old BES Scheme can be used to raise finance at very favourable terms and is open to most SME’s); Seed Capital Relief (refund on 6 years income tax for PAYE workers who leave to set up their own business); Start Up Relief (3 years exemption on taxation of profits); and the Early Retirement Scheme (allowing for persons of 55 or over to extract value from their business in a tax efficient manner).
 
 
Two well worth expanding on are the EIIS Scheme and the Early Retirement Scheme. The EIIS Scheme works on the basis that the investor gets tax relief on their investment thus reducing their tax liability for that given year. The tax relief is at the higher rate of tax normally and works out at 30% for the first year and then 11% after the 4th year. The catch is that the investor must retain the share in the business for a 4 year period as otherwise a claw back system is implemented. The investor will be allocated a fixed number of shares for his/her investment with a Put & Call Agreement usually put in palace for the business to redeem the shares once the 4 year term is up at the initial purchase price plus usually 2% per annum. Caps are in place for the most an individual can invest as well as what the company can receive. The overall concept is that all going well the business will remain trading after 4 years. will have received a cheap source of finance, the investor gets tax relief plus a direct return on their investment ranging from 8-16%. There are many schemes for individuals interested in an EIIS investment and the process can be undertaken through a fund or by investing in an individual company.
 
Succession Planning is an important but often overlooked aspect of the modern small and family business. Under the Early Retirement Scheme a business owner(s) can choose to sell the business to a family member (say a daughter) to own and operate once they have reached the age of 55 without incurring Capital Gains Tax (CGT). Thus they can recoup their investments into the businesses in a tax efficient manner. Better still the former owners of the business are not require to actually retire and can maintain working in the business, even running the company as normal. As long as they don’t own shares in the business they can choose to stay involved in whatever capacity they wish (or whatever arrangement is agreeable to their Daughter in the above example).
 
Contact Avid Partners to find out about more Tax Schemes that may be of benefit to your business. Call us on 0818 303087. Email us at advice@avidpartners.ie . Alternatively you can fill out the enquiry forms below.
 
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