Tax relief on EIIS

S

sector_000

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Background:
EIIS investments give 30% tax relief at the outset.
Then if the investment recipient complies with certain rules (like increasing employment), you get an additional 11% tax relief in the year after the investment matures (takes 3 years to mature).

Question:
if you put €10K into an EIIS now, get your €3K back after filing 2012 taxes.... is the further 11% tax relief against income earned in 2016?
Or is it an ammendment to your 2012 tax filing that you then do in 2016?

If it's relief against 2016 income, I take it that's reducing your scope to max out on "tax relief" investments initiated in 2016 (e.g. EIIS, Pension AVCs, Film.....)?

What I am getting at is if in 2016 you only have say €10K of income that is in the 41% tax bracket, are you better to forget claiming the EIIS 11% and instead doing something else that gets the full 41% of €10K (e.g. AVC)?
 
sector_000 said:
Background:
EIIS investments give 30% tax relief at the outset.
Then if the investment recipient complies with certain rules (like increasing employment), you get an additional 11% tax relief in the year after the investment matures (takes 3 years to mature).

Question:
if you put €10K into an EIIS now, get your €3K back after filing 2012 taxes.... is the further 11% tax relief against income earned in 2016?
Or is it an ammendment to your 2012 tax filing that you then do in 2016?

If it's relief against 2016 income, I take it that's reducing your scope to max out on "tax relief" investments initiated in 2016 (e.g. EIIS, Pension AVCs, Film.....)?

What I am getting at is if in 2016 you only have say €10K of income that is in the 41% tax bracket, are you better to forget claiming the EIIS 11% and instead doing something else that gets the full 41% of €10K (e.g. AVC)?
Click to expand...

The relief operates as a deduction from Total Income.

[broken link removed]
Relief as deduction from income
Subject to being an investment in a designated fund the relief is given as follows:
(a) by means of a deduction equal to thirty forty-firsts of the amount subscribed for eligible shares from the individual’s total income in the year of assessment in which the shares are issued. This part of the relief is subject to the high earners restriction.
(b) Subject to satisfying the requirements of subsection (10) by means of a deduction equal to eleven forty-firsts of the amount subscribed for eligible shares from the individual’s total income in the year of assessment in which the shares are issued. This part of the relief is not subject to the high earners restriction.

So if you invest 10k in 2012, your income is reduced by €7,317 for that year. Assuming you pay tax at 41% this equates to 3k less tax payable.

If all the conditions are satisfied, in 2016 you can have your 2012 income revised downwards by a further €2,683. Assuming you paid tax at 41% on at least this amount, this equates to a €1,100 tax refund.

Your 2012 investment doesn't have any impact on your 2016 taxes.
 
Mandelbrot.... thanks for the response.
I asked the accountancy company raising the funds for the particular EIIS investment...
they said the 11% is relief against 2016 taxes!
 
sector_000 said:
Mandelbrot.... thanks for the response.
I asked the accountancy company raising the funds for the particular EIIS investment...
they said the 11% is relief against 2016 taxes!
Click to expand...

Apologies, it appears that they are correct, and that does make more sense! The Notes for Guidance published by Revenue, from which I quoted above, appear to be incorrect... :eek: they clearly state that the 11/41 is also applied to the year the shares are ISSUED.

However the legislation itself states:
"(b) subject to subsection (10), eleven forty-firsts of the amount subscribed by an individual for any eligible shares shall be given as a deduction from his or her total income for the year of assessment following the date on which the relevant period ends."

So in our hypothetical scenario of investment in 2012, that'd be 2016 for the final 11% relief.

The important thing to bear in mind isin the case where you have say 10k of income taxed at 41% in 2016, you'll still get 41% tax relief on the 11/41 deduction - with this relief you'll never be in a position where you are better off not claiming the relief if you're entitled to it. The reason being that whatever relief is available is a DEDUCTION from total income, so it reduces the amount of income to be taxed at the marginal rate.
 
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