Fall-off in EIIS projects to hit SME investment
Number of schemes being marketed down by 50pc as approvals slow down, writes, Samantha McCaughren
The number of projects currently trying to raise funds under the Employment and Investment Incentive Scheme (EIIS) is around half that seen this time last year, according to practitioners working in the area.
The last quarter of the year is the busiest time for fundraising under the scheme, which has been a vital source of funding for Small to Medium Enterprises (SMEs) for many years. However, the scheme has been beset with problems this year due to changes in the rules to the scheme prompted by EU State Aid rules and delays in the processing by the Revenue Commissioners.
EIIS delivers tax reliefs to wealthy investors who invest in company fundraising, There are several reasons why fewer projects have reached the market this year.
Sources said that with many of last year's schemes still not approved, appetite among investors and client companies had waned. One senior adviser working on EIIS said that some SMEs have opted not to consider EIIS as a source of funding due to the uncertainty around it.
In addition to this, several schemes which raised money last year have been turned down by Revenue in recent months even though similar schemes would have been given approval in previous years.
Davy recently wrote to clients to say it would return money to investors if tax relief certs were not made available by Revenue by the year end. Other firms have also written to clients to flag issues with EIIS.
One senior accountant said delays in getting outline approval was hitting private companies in particular. Outline approval is given in the year the money is raised and final approval is given the following year. Some EIIS funds, which raise money for several companies, sought early outline approval and this was granted some months ago, allowing the funds to promote the product before year end.
However, many individual schemes for specific companies which sought outline in the autumn and are still awaiting decisions - meaning they cannot go to market.
Revenue admitted that there have been delays to the scheme. "Due to increases in both the volume of correspondence received and the complexity of the issues involved in relation to applications for relief under EII, there has been an unavoidable increase in the time taken to respond to that correspondence and to issue EII certificates," said a spokeswoman.
"At present, the backlog in EII claims is about two months , while the backlog in 'EII Outline' applications is three months."
Extra staff are now working on the scheme. "Additional resources have been assigned and procedures are in place to address the backlog and waiting times are expected to continue to drop in the coming months," she said.
Most recent Revenue figures show that in the period January to 25 September 2017, 196 applicant companies had been processed, of which 31 cases had been rejected, leaving 165 accepted. Revenue will publish end of year statistics early next year. The spokeswoman said: "Revenue's responsibility is for the administration of the tax and customs legislation in place. Tax policy is a matter for the Department of Finance."
While the department will review the scheme, officials have suggested that there are no plans to alter it.
In a statement to the Sunday Independent, a spokeswoman said: "While the Minister advised the Dáil that there would be a review of investment incentives ahead of budget 2019 (as part of the usual keeping all such incentives under review), there are no immediate plans for any changes to the relevant legislation beyond those already brought in at Dáil committee stage of Finance Bill 2017."
Sunday Indo Business