Angel Investor Relief

Many of you will be aware that the standard rate of Capital Gains Tax (CGT) here in Ireland is currently 33%. Our legislation provides for some reliefs – for example where full Retirement Relief is available the effective rate of CGT is 0% or where Entrepreneur Relief can be availed of a reduced CGT rate of 10% applies. In order to avail of these reliefs, a number of conditions must be satisfied.

On Budget Day recently, it was announced that a new CGT relief is to be introduced for “angel investors” who invest in innovative start-up businesses and the recent Finance Bill gives a flavour of what the relevant legislation will look like when it is enacted.

Where this new relief can be availed of, the effective rate of CGT to apply to qualifying gains will be 16% if the investment is made by an individual or 18% if it is made through a partnership. Both rates are obviously very attractive compared to the standard CGT rate of 33%.

There are a number of conditions to be satisfied in terms of what will constitute a “qualifying investment”, “qualifying investor” and “qualifying company” for the purposes of availing of this relief and I do not propose to consider these in detail for the purposes of this article but, very simplistically, it is intended that the relief will be available to investors who meet the following criteria:

The investment is in an innovative start up which is a small and medium enterprise (“SME”).

The investment is held for a period of at least 3 years.

The investment is in the form of fully paid up newly issued shares of at least €10,000.

The investment must also constitute between 5% and 49% of the ordinary issued share capital of the company.

The scheme will involve a certification process. It will be necessary for the company to obtain a certificate of going concern and a certificate of commercial innovation to ensure that the relief is targeted at financially viable innovative SME’s and the company must be able to demonstrate that it complies with EU General Block Exemption Regulation.

The relief will be available on a gain up to twice the value of the initial investment. There is also a life time limit of €3m in terms of the gains that this reduced rate of CGT will apply to.

You will appreciate that this is intended as a whistle stop overview of the new CGT relief which is to be targeted at “angel investors” but if you are planning to invest in innovative start up businesses in the future, it may be worth your while seeking tax advice to explore whether or not this relief is likely to apply and, if so, to ensure that you structure your investments in an appropriate manner.

CGT Deadline

In the meantime, for those of you fortunate enough to have realised a gain on the disposal of assets during 2023, just a timely reminder that CGT in respect of disposals which occurred during the 11 month period ended 30 November 2023 is due for payment by 15 December 2023 and CGT in respect of disposals which occur during the month ended 31 December 2023 is due for payment by 31 January 2024.

CGT Returns in respect of disposals made during the year ended 31 December 2023 are due for filing with Revenue by 31 October 2024.

It is also important to note that the date of disposal determines the CGT Payment and Return dates. The date of disposal is not necessarily the same as the date of completion. Where there is an unconditional contract for a disposal the date of disposal is the date of the contract and where there is a conditional contract the date of disposal is the date on which the condition is satisfied.

Angel Investor Relief