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EIIS could include VC money for start-ups

Stakeholders invited to webinar to discuss fund scheme changes

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Finance Minister Paschal Donohoe will discuss proposed EIIS changes in a two-day webinar at the end of the month. Photo: Steve Humphreys

Finance Minister Paschal Donohoe will discuss proposed EIIS changes in a two-day webinar at the end of the month. Photo: Steve Humphreys

Finance Minister Paschal Donohoe will discuss proposed EIIS changes in a two-day webinar at the end of the month. Photo: Steve Humphreys

The Government is considering extending generous tax breaks to investment in startups affected by Covid in a planned expansion of the Employment Investment Incentive Scheme (EIIS).

The Department of Finance has invited stakeholders to take part in a two-day webinar at the end of the month to discuss the proposed changes to the scheme, which also include harnessing EIIS money for investment in renewable energy projects.

The department is specifically seeking input on how EIIS funding might be harnessed to subsidise young firms as they seek to emerge from the pandemic - a major change from the scheme's original mandate to support job creation in indigenous SMEs.

Of particular interest to venture capital, private equity and other investment firms which have pushed to expand the scheme will be a discussion on broadening the kind of funds eligible to participate in EIIS projects beyond designated investment funds and irrevocable trusts.

The Irish Venture Capital Association (IVCA) lobbied the Government last September to relax EIIS rules during the "Covid emergency period" to attract more money to companies with high growth potential.

The lobby group pushed for enhanced relief for micro companies, a standard investment period of four years and tax relief eligibility for investment vehicles besides approved EIIS funds.

These changes, the group said, would open investment for more companies in the IT sector, which typically doesn't attract EIIS investment, as well as deploy capital from venture capital and private equity funds among Irish SMEs.

The seminar will also look at proposals on how to ensure EIIS investments can be allocated to benefit the Renewable Electricity Support Scheme, a Department of Environment initiative to provide financial backing to green energy generation.

The event, which will be launched by Minister for Finance Paschal Donohoe, represents the second stage of engagement in a public consultation process that was signalled in Budget 2021 and announced just before Christmas after the Finance Bill was passed.

Stakeholders such as investment firms, private investors and SME owners that have made submissions already are being invited to air their views on three potential reforms to EIIS.

EIIS is one of the most generous tax shelters available to rich investors. It offers tax relief of 40pc on qualifying investments of up to to €500,000 over a seven year holding period. The scheme provides access, via designated funds, of up to €5m per year for selected eligible companies, subject to a lifetime maximum of €15m.

EIIS has become a less important source of funding for SMEs after a peak in 2016, when the scheme raised more than €100m for Irish companies, leading many participating investment firms to push for enhancements to the scheme.

Money managers sourcing investments for EIIS funding became more cautious in the last year due to Covid, Brexit and recent high-profile blow-ups of EIIS backed firms.

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