Recent Changes to Reliefs for Investment in Corporate Trades Guidance: An Overview
Introduction
Employment Investment Incentive (“EII”) Relief, Start-up Capital Incentive (“SCI”) Relief and Start-up Relief for Entrepreneurs (“SURE”) are income tax reliefs designed to assist small and medium-sized enterprises (“SMEs”) attract equity-based risk finance investment from investors. Since 1 January 2024 a Relief for Investment in Corporate Trades Group (“RICT”) group can raise a limit of €16.5m of risk finance over its lifetime. There is also a €5.5m limit in any 12-month rolling period. The rate of tax relief currently ranges from 20% to 50% (being marginal rate relief on 50% to 125% of the investment made) depending on the circumstances in which the investment is made.
In December 2025, the Revenue Commissioners issued updated guidelines in respect of EII, SCI and SURE. The manuals replace the Tax and Duty Manual Part 16-00-02 (“TDM 16-00-02″) Relief for Investments in Corporate Trades dated October 2023. There are now four documents available.
- Tax and Duty Manual Part 16-00-02A (“TDM 16-00-02A”) is an introductory document which provides links to the below mentioned Revenue guidance.
- Tax and Duty Manual Part 16-00-03 (“TDM 16-00-03″) which provides guidance on EII and SCI from a qualifying company perspective.
- Tax and Duty Manual Part 16-00-04 (“TDM 16-00-04″) which examines EII and SCI relief from a qualifying investor perspective
- Tax and Duty Manual Part 16-00-05 (“TDM 16-00-05″) provides guidance on SURE Relief.
The legislation in respect of these reliefs underwent changes applicable from 1 January 2024 primarily to align with the EU’s General Block Exemption Regulation (“GBER”) rules, these updates had been included in the 2023 guidance previously. There have been little or no underlying changes to the legislation, however the guidance updates reflect a deliberate shift by Revenue towards greater clarity and targeted guidance, moving from a single comprehensive manual towards a segmented framework, reducing ambiguity for investors & investee companies alike. This article examines the key changes introduced for companies and investors with particular focus on the EII and SCI manuals.
TDM 16-00-03 EII and SCI – Qualifying Company Perspective
This TDM provides guidance for companies who wish to raise finance under EII or SCI notable updates to the new manual include the following:
Qualifying Company (Section 3 and Section 8)
The conditions to be met by the company and RICT group to qualify for EII and SCI and RICT group have been analysed as follows:
- Criteria relevant to the company at the time of the investment
- Criteria relevant to the RICT group at the time of investment
- Criteria relevant to the company throughout the relevant period
- Criteria relevant to the RICT group throughout the relevant period.
The conditions being set out separately is helpful as it provides greater clarity on investment criteria. There was ambiguity in previous drafts of the guidance on what conditions applied to the company or the entire RICT group.
The updated guidance elaborates on what constitutes “Green Energy Activities” with a list of what is considered renewable energy and non-fossil sources. This includes wind, solar, aerothermal, geothermal and biomass to name a few.
RICT Group (Section 7)
Section 7 of TDM 16-00-03 contains details of what a RICT group is and how it can include “linked businesses”, and “partner businesses”. The guidance has been updated to include some useful examples, providing further clarity on this. One notable update is an exception to the partner business rule, in the case of certain investors such universities, local authorities or institutional investors who are not linked to the company or do not exercise dominant control.
One area of ambiguity that has not been addressed in the new guidance is in determining the RICT group, if there are any linked business that can be traced through natural persons and whether they are considered to be operating in adjacent markets (that being directly downstream or upstream of each other). Further guidance or examples on this point would have been helpful as this is an area of consternation for companies seeking risk finance.
Reporting of Relief (Section 10)
The previous guidance applicable from 1 Jan 2024 introduced the requirement to specify on the RICT return whether an investment constitutes initial, follow-on or expansion risk finance investment or whether it is made indirectly through a QIF. However, the TDM 16-00-03 provides more depth on the different types of risk finance and the applicable rates. These are summarised below:
| Type of Risk Finance Investment | Relief |
| Initial risk finance investment where a RICT group which has not been operating in any market. | 125% of the investment may qualify for relief giving rise to a rate of relief of up to 50%. |
| Initial risk finance investment in a RICT group which has been operating in any market for less than 10 years post incorporation or less than 7 years following its first commercial sale. | 87.5% of the investment may qualify for relief giving rise to a rate of relief of up to 35%. |
| Expansion risk finance investment. | 50% of the investment may qualify for relief giving rise to a rate of relief of up to 20%. |
| Follow-on risk finance investment. | 50% of the investment may qualify for relief giving rise to a rate of relief of up to 20%.
|
| Investments made indirectly via a qualifying investment fund. | 75% of the investment may qualify for relief giving rise to a rate of relief of up to 30%. |
Additionally, the guidance now states that companies must issue the ‘Statement of Qualification’ (“SOQ”) to qualifying investors by 31 December of the year following the year in which the eligible shares were issued. This has been updated from the previous period of 4 months following the end of the year. The deadline for submitting the RICT Return remains unchanged, being no later than 4 months after the end of the year of assessment in which the shares were issued.
TDM Part 16-00-04 EII and SCI – Qualifying Investor Perspective
This TDM provides guidance for investors who wish to claim relief on investments made under EII or SCI. The main updates are as follows:
Quantum of Relief (Section 2)
A legislative change that has been included in the new guidance is that qualifying investors may avail of income tax relief on qualifying investments made in qualifying companies of up to €1 million per year of investment. This has increased from €500,000 in 2024.
Connected Persons (Section 3)
Further detail has been provided in the guidance for when an individual is considered to be connected to a company. In the context of directors and employees who are in receipt of reasonable payments that an independent third party would receive. Connection would not apply in such circumstances. Also, it provides further guidance where individuals are considered to have an interest in the capital of the company.
The guidance also details an anti-avoidance provision which provides that investors cannot circumvent the connected party rules by making an arrangement with another individual to make reciprocal investments in each other’s companies. These rules had previously been included in legislation but have now been incorporated into the guidance.
Eligible Shares (Section 4)
The new guidance places a stronger emphasis in highlighting how any arrangements guaranteeing repayment of capital or dividends will not be eligible shares. It also contains an additional example of how this can apply where investors have been given rights over asset and in such circumstances these investments will not be qualifying investments.
Investment Funds (Section 5)
The new guidance includes details of how the relief operates in the context of Designated Investment Funds (“DIFs”) and Qualifying Investment Funds (“QIFs”) and in particular how the EII rules are modified when investing through these vehicles.
These modifications include the investment amounts, the ability to invest in preferential shares, how the connected person rules can change and adjustments to how the relief is administered.
Withdrawal of Relief (Section 8)
The 2024 guidance contained detailed sections on return of capital, capital redemption windows and withdrawal of relief. The 2025 investor guidance reframes these from the investor’s perspective. This includes a dedicated section on withdrawal of relief from the investor. This includes practical examples of circumstances of when the relief will be withdrawn such as, where arrangements are in place to reduce risk, acquisition of a business previously carried on by an investor and where funds are not raised for bona fide commercial reasons. It also contains a section of when relief will be reduced, such as where options are acquired in respect of eligible shares, where there is a disposal of a qualifying subsidiary and where value is received from the company.
Treatment of Gains and Losses (Section 9)
Whilst the previous guidance dealt mainly with income tax relief and the clawback of it. The Capital Gains Tax consequences for the individual were not central. The 2025 manual adds a specific Capital Gains Tax implications section for investors, including the treatment of gains and losses in the hands of the investor. The losses section points out the restriction that applies to the base cost on shares on which EII applies. Again, this isn’t a new provision and was previously included in another TDM, however, it is useful to have this incorporated into the EII manual.
Qualifying Investor Decision Tree (Appendix A)
A useful decision tree has also been included at Appendix A to assist investors in determining if they qualify for EII Relief.
Conclusion
The updated guidelines by the Revenue Commissioner in respect EII, SCI and SURE are a welcome development. The previous manual TDM 16-00-02 has been replaced with new guidance, examining EII and SCI from a qualifying company perspective (TDM 16-00-03), EII and SCI relief from a qualifying investor perspective (TDM 16-00-04) and SURE (“TDM 16-00-05″).
The creation of standalone manuals for investors and qualifying companies for EII and SCI and a new manual for SURE are welcome developments. Previously, the investor obligations were embedded within broader company-focused guidance along making it difficult for taxpayers to identify relief conditions, filing requirements and clawback triggers. The manuals provide a clearer explanation of when the company and investor can qualify for EII, SCI and SURE, how the reliefs are claimed and positively reframes the investor and investee journey.
If you require any EII assistance please reach out to the BDO EII team of Derek Henry, Maoliosa McHugh and Amy Scally.
Author: Derek Henry, Partner & Head of Tax – BDO and Graduate of the BA Accounting & Finance and the MSc Accounting
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