Starting your own business - tax relief

Start-up Refunds for Entrepreneurs (SURE)

The Start-Up Refunds for The Start-Up Refunds for Entrepreneurs (SURE) scheme replaced the Seed Capital Scheme and is a modest tax incentive scheme for those looking to set up a new company who were previously in PAYE employment or were recently unemployed. The SURE scheme provides tax relief in the form of a refund of PAYE tax paid by claimants of up to 41% of the capital invested in the new business.

To qualify, you must:

• Setup a new company carrying on a new qualifying trading activity
• Mainly have been earning Pay As You Earn (PAYE) income in the previous 4 years
• Take up full-time employment in the new company as a director or employee
• Invest cash in the new company by purchasing new ordinary shares  

There are a number of specific conditions that the individual and the companies must meet in order to qualify for this relief. For more information on the qualifying conditions see the SURE manual.

Start-up Relief

If you want to start your own business, you may be able to get tax relief for your start-up. This consists of a reduction in Corporation Tax for the first three years of trade. The tax relief can be applied to your profits and on chargeable gains made on assets. This scheme has been extended to 2026.

You can claim relief if:

• Corporation tax due is €40,000 or less in the tax year (if corporation tax is between €40,000 and €60,000, you may be entitled to partial relief)
• Your PRSI is a max of €5,000 per employee and €40,000 on total

As of 2013, you have the possibility of carrying forward any unused relief from your first three years of trading. Certain restrictions may apply.

The start-up must:

• Be incorporated on or after 14 October 2008
• Be set up and trading between 1 January 2009 and 31 December 2026
• Not exceed the specified levels of corporation tax due

In most cases, the trade of a start-up company set up between 1 January 2009 and 31 December 2026 is a qualifying trade.

Trades that don't qualify include:

• One previously carried on by another person with which the company has succeeded
• Previously carried on as another person’s trade or profession
• Land development
• Exploration and extraction of petroleum or minerals
• Service company activities as defined in Part 13 (Section 441) of the Taxes Consolidation Act 1997
• Activities, including fishery, aquaculture, production of agricultural products and the coal sector
• Activities carried on by an associated company of the new company which forms part of the trade carried on by the associated company

If your company takes on the activities of another trade, while already claiming relief, the new trade won’t be considered a qualifying trade. If your company transfers part of your qualifying trade to a connected person, then you’re no longer entitled to relief for that trade.

The relief is limited to the total amount of the employer’s PRSI you pay and may be reduced if you pay over the limit of €5,000 per employee or the total PRSI limit of €40,000.

For example, if you pay an employer’s PRSI of €6,000 for one employee, only €5,000 will be considered for relief.

If your corporation tax is between €40,000 - €60,000, then you may be able to claim partial (also known as marginal) relief and since 2013, it’s possible to carry forward unused relief from the first three years of trading.

Training Schemes

Certain training schemes count towards your period of unemployment, including:

• Further Education and Training (FET) courses
• Community Employment
• Back to Education Scheme

If you work part-time

If you’re working part-time and claim your jobseeker’s payment for the other days you can still qualify for the Start Your Own Business Relief as long as you've been getting your jobseeker's payment for 312 days of unemployment. You can check with your social welfare local office or Intreo centre if you’re unsure if you qualify.

If you qualify for the Start Your Own Business Relief, the following must also apply:

• Business must be set up between 25 October 2013 - 31 December 2018
• Business must be new (not bought, inherited or otherwise acquired)
• Must be unincorporated (not be registered as a company)

Back to work enterprise allowance and claiming

You can claim Start Your Own Business Relief if you’re getting the Back to Work Enterprise Allowance (BTWEA). If you started to get the BTWEA before 25 October 2013, you won’t qualify for this relief because you had already started your business before the start date for the scheme. Up to €40,000 is available on profits each year up to 2 years.

How you calculate the relief depends on when you set up the business:

Year 1:

You don’t need to pay income tax on your profits if they’re less than the cap. If you start your new business in January (and you use the calendar year as your accounting year) the cap for the year is €40,000. If you start your business later that year the cap will be reduced proportionately according to the month you start.

Example:

Say you start your business in February, 11 months remain in the year so you can earn up €36,667 (11/12 of €40,000). If you start your business in December, then 1 month remains in the year so you can earn up to €3,333 (1/12 of €40,000).

Year 2:

You don’t need to pay income tax on profits if they’re less than the cap of €40,000. The accounts for the second year will always be for a period of 12 months.

Year 3:

Any profits that fall into the first 24 months of your business in this year are still income tax-free as long as they are under the cap. The cap for year 3 is calculated as €40,000 x [months left to claim]/12.

If you set up your business in January, then you’ll have used up the 24 months of relief in Year 1 and Year 2 anyway so there is no relief available for Year 3. If you started your business later in the year then there is still some relief available.

Example: If you started your business in February, of the first year you claimed 11 months and you have 1 month left to claim for the 3rd year.

If you make a loss

If you make a loss in your first year of trading you can claim Start Your Own Business Relief before you claim relief for losses in following years.

This means that even if you make a loss you will receive actual value for those losses in future years instead of setting those losses against profits which would not have been subject to income tax under the Start Your Own Business scheme.

You apply for this relief when you do your income tax return and as a new business, you get an extension to the normal filing date. The Start Your Own Business Relief only applies to income tax payable on the profits from your business, so you’ll be liable to pay PRSI and USC on any profits earned in your new business.

Example: If you make a loss in year 1, you must claim Start Your Own Business Relief in year 2 before you claim relief for any losses you made in the first year.

Capital Allowances: You must use Start your own business relief before claiming Capital Allowances. You can carry unused amounts of capital allowances forward for use in future years.