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Start-up Capital Incentive Scheme

Start-up Capital Incentive Scheme

The Start-Up Capital Incentive (SCI) scheme in Ireland is a tax relief initiative designed to support early-stage businesses in raising equity financing. The SCI scheme is aimed at micro-companies and allows individuals, including family members of existing shareholders, to invest in shares and receive tax relief.
 

Overview of the Start-Up Capital Incentive (SCI)

The SCI scheme was introduced to encourage investment in new ventures and to provide financial support to start-ups during their critical initial stages. It applies to shares issued after January 1, 2019, and allows companies to raise a maximum of €500,000 under the scheme.


Eligibility Criteria for Companies

To qualify for the SCI scheme, broadly a company must meet the following conditions:

  • Microenterprise Status: the company must employ fewer than 10 people and have an annual turnover or balance sheet total of less than €2 million.

  • New Venture: The company must be carrying on a brand-new venture that has not been previously undertaken by any other person.

  • Timing Restrictions: The company must not have commenced any trade or business more than seven years prior to the date of issuing shares.

  • Independence: The company must not be a subsidiary or under the control of another company.

  • Qualifying Activities: The company must engage in relevant trading activities or, if not yet operational, focus on research, development, and innovation.

  • Employment Contribution: The funds raised must contribute to the maintenance or creation of employment.
     

Eligibility Criteria for Investors

Investors must also meet specific criteria to avail of the tax relief:

  • Family Members: The scheme is designed to assist family members of existing shareholders to invest in the company.

  • Qualifying Investment: The investment must be in the form of shares issued by the company.
     

Tax Relief Benefits

The SCI scheme provides income tax relief for individuals investing in qualifying companies. The relief is a deduction from total income but does not reduce income for PRSI (Pay Related Social Insurance) or USC (Universal Social Charge). The funds raised through the scheme must be used within four years of the share issue for the purposes outlined above.


Clawback Provisions

The scheme includes clawback provisions, which means that the tax relief may be withdrawn if the conditions of the scheme are not met within the specified timeframe.
 

Additional Support for Start-Ups in Ireland

In addition to the SCI scheme, Ireland offers other initiatives to support start-ups, such as:

  • Employment Investment Incentive (EII): A tax relief incentive program offering qualifying investors the opportunity to receive tax relief against their total income for investment in small to medium companies. It is designed for companies raising funding from third parties.

  • Start-Up Relief for Entrepreneurs (SURE): Assists individuals starting their own new companies.

The SCI scheme is a valuable tool for start-ups looking to secure early-stage funding and for investors seeking tax-efficient investment opportunities.

The within is a high-level summary of the SCI and is for information purposes only. If you have any specific questions or need further assistance, feel free to ask!

For more information on the SCI scheme, please contact our tax specialist.