seed capital tax releif

[cossieh]

Hi,

I set up a small SME in April 2007 and lookig for advice

I have read about seed capital tax relief and think I qualify but wondering what, if any, is the catch?

I have been certified as eligible by a state Enterprise agency as technically the business offers internationally traded services

The company has two shareholders, both are diectors and full time employees - and we both were PAYE for at least three years prior to when we set up on our own.

As far as I can see, if we injected capital into the company(say 100k), we could claim it all back against previous income tax paid in previous lives as employees

Anyone know the details or am I deluded? Specifically ..

1. How do I progress the claim? Will my accountant need to be involved or can I DIY it? As i said i already have the certificate of eleigibility

2. How is the money injected? Do I simply lodge funds and then issue new shares? Will the revenue write me a cheque - or will they first want to see the investment in place - i.e. I would need to borrow money to invest - while awaiting revenue to recompense

3. Once the money is put i nto company coffers, what are the rules? Will revenue want to know specific investment reasons, eg. purchase of office?
What can I do then with the money? Can I use it for ordinary cashflow in the company? If I have issued shares for the investment, i presume i must hold on to them?

4. we are n earing the end of our first year trading. are we technically still a start up?

all advice hugely appreciated - many thanks

c

 

[Nige]

If you have been certified by the relevant agency, you need to complete forms RINE C and RINE 1 (I think) which the certifying agency will give to you. You send these to the Revenue with proof of the share capital investment (so the bank statement showing the lodgement, and the CRO forms showing the issue of the shares), your P60(s) from the year(s) you wish to claim the tax refund.

If everything is in order, the Revenue will issue your tax refund in a couple of weeks.

The company must continue to be a qualifying company for 3 years and you must hold the shares for 5 years. There's lots more information on leaflet IT 15 which you can download from www.revenue.ie

 

[Andrew Duffy]

Can you clarify how you have been certified? I run a software company that is currently in product development, and according to both EI and DCEB (and the Revenue leaflet about the scheme) I need to apply for a grant for a feasibility study or employment to be eligible for the scheme - that fact that I don't want a grant is irrelevant.

 

[cossieh]

hi andrew
i th ink you have the gist of i right
we applied for and received a vy small grant that was a lot of paperwork and not particularly needed (fully refundable)
still it will hopefully will be worth our while if it opens up seed capital route
c

 

[dman987]

1. How do I progress the claim? Will my accountant need to be involved or can I DIY it? As i said i already have the certificate of eleigibility

You can do it yourself, but it's reasonably intricate/complex/messy. That said, I got my accountant to do it for me and it was as much a learning process for them as for me...

2. How is the money injected? Do I simply lodge funds and then issue new shares? Will the revenue write me a cheque - or will they first want to see the investment in place - i.e. I would need to borrow money to invest - while awaiting revenue to recompense

The revenue have to see proof that you've put money into Share Capital (so you can't stick in a director's loan and then take it out a bit later)

3. Once the money is put i nto company coffers, what are the rules? Will revenue want to know specific investment reasons, eg. purchase of office?
What can I do then with the money? Can I use it for ordinary cashflow in the company? If I have issued shares for the investment, i presume i must hold on to them?

you can do whatever you want with the money you get back from Revenue (it's a cheque made out to you personally for each eligible year), but there are some conditions where they could technically ask for it back (eg if you sell your shares within 5 years)

4. we are n earing the end of our first year trading. are we technically still a start up?

i'd say you are, but the seed capital scheme doesn't have to be specifically for a start-up.

One thing I'd say is that the IT15 leaflet doesn't go into the various different scenarios that are typical of small companies, eg the investments must all be within a certain period of time to be eligible. In my own case I had several small investments spread out, they only became issued shares at one point in time, meaning that some of the investments weren't eligible because they fell outside the time period (I think it's within 12 months).

best of luck - if you're eligible you'd be mad not to look into it.