Empowering start-ups: Tax reliefs and financial supports for entrepreneurs in Ireland

New businesses face a range of challenges as they navigate the start-up and early-stage phases and are always appreciative of any assistance forthcoming. Many entrepreneurs may not be aware that the Irish tax system can be a source of help with a number of incentives designed to assist such businesses, particularly when it comes to raising capital.

Start-Up Relief for Entrepreneurs (SURE)

SURE is a relief targeted at individuals who are leaving PAYE employment and are now setting up their own business. There are a number of conditions to be met and these must be reviewed carefully at the outset, but in headline terms the relief can apply to investments in new trading companies (most, though not all, trading activities qualify) in which the individual holds a shareholding of at least 15% and where they commit to holding the shares for at least four years and to work in the business on a full-time basis for at least 12 months. The individual must also have been primarily a PAYE employee in the four years prior to the investment and not have held significant shareholdings in other companies in the 12 months preceding the investment.

Where the relief applies, the individual may deduct the amount invested against their taxable income in the current tax year and/or in any of the six tax years preceding the year of investment, with relief therefore applying at their marginal rate. The maximum investment is €980,000 (a maximum deduction of €140,000 in each of the seven years), although in practice many of the qualifying investments are at a more modest level. The resulting tax refund can provide the investors with additional capital to invest in their business or simply to fund their own living expenses for a period, having potentially committed much of their savings to the business.

It is important to note that for an investor to claim the relief, it is not a requirement that their fellow investors also qualify.

In practice, investors encounter a number of difficulties in accessing the relief. For example, they may have commenced the business as a sole trader before subsequently incorporating a company, they may have committed their initial investment by way of loans as opposed to subscribing for share capital, or they may struggle to meet the “working test”. In some cases, the timing of the investment can cause some of the conditions to not be met or the quantum of the relief to be reduced.

Ultimately, many of these difficulties can be traced back to a lack of awareness of the relief at the time the business is being set up, and it is therefore important that potential claimants take advice during that preparatory phase.

Employment Investment Incentive Scheme (EIIS)

The objective of EIIS is to assist trading companies to raise finance from external investors by providing the investors with tax relief on their investment.

Where an investment qualifies, the investor may deduct the amount invested against their taxable income in the year of investment, thereby reducing their income tax liability for that year. Recent changes to the relief (which also apply to SURE above) mean that the actual quantum of the relief depends partly on the stage of the life cycle at which the company finds itself; in broad terms, start-up and early-stage businesses qualify for a greater level of relief, potentially as much as 50% effective tax rate, than more mature businesses or those raising a second or subsequent round of EIIS funding. While this adds another layer of complexity to the relief, start-up and early-stage businesses may see this as an opportunity.

Start-up and early-stage businesses may also be interested in the Start-up Capital Incentive (SCI), which is essentially a variation of EIIS that can allow such companies to raise funds from certain connected parties; there are stringent rules that effectively prohibit connected parties (for example, relatives of the owners) from claiming EIIS on investments in a company, but these are relaxed for micro companies that are less than seven years trading, which can raise up to €500,000 from such investors under SCI.

There are a number of conditions to be met before relief under EIIS or SCI can apply. Since 2019, the company raising the funds must self-certify and warrant their compliance with the conditions and issue a Statement of Qualification (SOQ) to investors. It is therefore important that advice is taken before raising any funds under EIIS, in particular as the company can be subject to onerous penalties should they incorrectly issue such SOQs.

Angel Investor Relief Scheme

The Angel Investor Relief Scheme is a new scheme, effective only since 1 March 2025, which provides investors in start-up and early-stage innovative enterprises with a reduced rate of CGT on an eventual disposal of their shares.

The minimum investment is €20,000, or €10,000 if the individual owns at least 5% of the shares in the company. The maximum shareholding that the investor may hold in the company is 49% and they must retain the shares for at least three years.

The company must be an SME that is less than seven years old, and it must be engaged in an innovative activity – this will require the obtaining of a Certificate of Commercial Innovation, generally to be issued by Enterprise Ireland.

Where the relief applies, the investor will be subject to a reduced rate of CGT of 16% (or 18% where a partnership invests) as opposed to the standard CGT rate of 33% on a gain of up to two times the amount invested. A lifetime cap of €10 million will apply to each investor.

Other reliefs

There are various other tax reliefs which, while not directly concerned with assisting in raising finance, can indirectly provide companies with additional capital. These include:

• The Start-up Exemption from Corporation Tax, which exempts a company carrying on a new trade from corporation tax on profits and on chargeable gains generated from that new trade for the first five years. The exemption can apply to up to €40,000 of corporation tax in each of those first five years, although the actual quantum partly depends on the amount of Employer’s PRSI paid. Critically for start-up and early-stage businesses, where there is insufficient corporation tax payable to use the relief in full, any unused element can be carried forward.
• The Research and Development Corporation Tax Credit, which allows companies to claim a tax credit of up to 30% of qualifying expenditure on qualifying R&D activities. There is no requirement for a company to have a corporation tax liability in order to utilise this credit; instead, it is paid in three annual instalments. This can be especially useful for companies in the start-up or early phases who may not have significant tax liabilities to offset. In addition to incentivising and rewarding R&D activities, it can also act as a source of finance in those early stages.

As with the other reliefs discussed above, there are detailed conditions to be met, and it is important that timely advice is taken before claiming any of these additional reliefs.

Grants and Government supports

Enterprise Ireland also offer grants in the area of research, development and innovation and, while the criteria are not the exact same, there is some overlap between these grants and the Research and Development Corporation Tax Credit above. In practice, we note that often claimants of the Enterprise Ireland grants have overlooked and may be missing out on the benefits of the tax credit. This can be particularly frustrating as it may be too late at that stage to claim the tax credit, as it must be claimed within 12 months of the end of the accounting period, and also as it is recommended that contemporaneous records of the R&D activity be maintained to support a claim for the credit.

Businesses should also be aware that Enterprise Ireland offer a number of other grants to start-up and early-stage businesses as well as ongoing support for innovative start-ups with international growth potential, while early-stage businesses initially focused on the domestic market are supported through their Local Enterprise Office (LEO).

Crowe offers a full range of tax services to start-up and early-stage businesses as well as advising on raising finance and accessing various government supports. Should you have any queries, please do not hesitate to get in touch with a member of our tax department.