Finance Bill 21 October - the EII changes

Following on from last weeks Budget, here is the detail on EII measures in today’s Finance Bill (21 October 2021). CAVEAT - the provisions may change before passing of Finance Act

Detail on measures announced on Budget Day

Removal of company requirement to have 30% spend before relief available

Confirms removal of 30% spend requirement to issue a Statement of Qualification (SOQ) to Investors
Company now has 4 months from end of year to issue the SOQ to investors (previously was 2 years – but this was linked to 30% spend test). Gives certainty now to investors – latest date SOQs can issue is 30 April after end of year
Deadline for filing RICT return changed to 4 months from end of year in which investment made (previously was 60 days from date satisfied 30% spend). This deadline now aligned to SOQ – 30 April per above.
No effective date given – likely to be effective from date of Finance Act (Christmas). UPDATE - the Bill was updated (by Committee Stage ammendment) to provide that these changes are effective for shares issued on or after 1 January 2022.

Relaxation of the “capital redemption window” to allow greater capacity for investors to redeem their capital

Under existing rules, an EII company can redeem shares from any member other than an investor who is within their compliance period, without triggering a clawback of EII relief in certain limited circumstances (called the “capital redemption window”)

An EII investor can now qualify for the “capital redemption window” but they can not make a further qualifying EII investment in that company (or group) within 5 years after redemption.
The specific shares redeemed need to be outside of their compliance period (broadly, the 4 year holding period)

Broader range of investment Funds will qualify

Finance Bill provides further detail here

New changes – not announced on Budget Day

These should not have a significant impact in practice

Company metrics

For EII companies, post investment there were future specific metrics to be met regarding increase in employment numbers/salary or R&D+I spend. These metrics did not technically apply for investments made after 8 October 2019. However, Irish Revenue guidance still required them - so clients would have aimed to satisfy in any case.

The Finance Bill provides that for investments from 1 January 2022, the specific metrics as per above will now need to be met by the company. If not, a portion of the relief will be withdrawn (liability of the company) and there are updated provisions as to how this will work

SURE relief (for Founders)