The basis behind Business Expansion Schemes (BES) is to encourage investment in Irish small companies in certain sectors by providing tax relief to investors. The minimum qualifying investment in any one company is €250 per annum. However if the investment is made by way of a designated fund there is no minimum investment. Tax relief is granted to individuals who subscribe for ordinary shares in qualifying companies.
Under the rules of the BES scheme an individual cannot be connected with the company they are investing in for a period of two years prior to the issue of the shares and ending 5 years after the issue of shares. An individual is deemed connected with the company if he/she:
Ø is a partner of the company
Ø controls the company
Ø is a director or employee of the company
Ø directly or indirectly owns or is entitled to acquire 30% of the company. (If the issued share capital of the company does not exceed €500,00 throughout the term of the investment this restriction does not apply)
A qualifying company is a company, which is incorporated in Ireland and which for a period of three years from the date of issue of the shares:
Ø is resident exclusively in Ireland
Ø is an unquoted company
Ø carries on a qualifying trade
Ø is not connected with a non-qualifying company
Ø is not under the control / does not control another company
A company can raise share capital to a limit of €2,000,000 under a BES scheme subject to a maximum of €1,500,000 in a twelve month period.
Tax relief is provided by way of an annual deduction from total income, thereby insuring tax relief at the individual’s marginal rate of tax. The maximum relief allowable in any one year is €150,000 per annum. A husband and wife can claim €150,000 each provided they each have sufficient income in there own right.