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EII Scheme information for investors

Submitted by bdoieadmin on Mon, 2010-10-25 17:21

What is the Employment and Investment Incentive Scheme?

The Employment and Investment Incentive Scheme (“EII Scheme”) is the reformed and revamped Business Expansion Scheme (“BES”). It is a tax relief incentive scheme which provides tax relief to eligible Investors for investments in certain qualifying small and medium sized trading companies (“SMEs”)*.

The EII Scheme offers one of the few remaining tax reliefs and is one of the few sources of total income relief (which includes, for e.g. rental income and deposit income).

How does it differ from BES?

The main differences between the EII Scheme and the former BES are:

  1. Shorter investment term - 3 years compared to 5 year
  2. Avail of tax relief of up to 41%* - 30% in the year of investment and a further 11% in the year following the 3 year investment period.
  3. Wider scope of companies can now avail of funding under the EII Scheme - The new scheme is available to the majority of SMEs as opposed to the BES which was restricted to manufacturing and internationally traded services companies.
  4. Significantly increased company investment limits - a qualifying company can raise up to €10 million under the EII Scheme (previously €2 million).

The Davy EII Tax Relief Fund

The Davy EII Tax Relief Fund will be managed by BES Management Limited which is a joint venture between BDO and Davy and is Ireland’s longest running BES/EII Scheme Manager.

Key Characteristics of BES Management Limited:

  • Managed by BDO and Davy
  • Successfully raised 19 BES Funds over the past 16 years
  • Raised over €125 million which is invested in over 140 Irish companies
  • Funds are managed by a full-time and experienced management team.

Why invest in the Davy EII Tax Relief Fund?

  1. Avail of one of the few remaining all income tax deductions offering up to 41% tax relief*
  2. Reduce your risk exposure by investing in a managed fund which will:
    • Spread your investment over a portfolio of strong and performing companies
    • Focus on established, indigenous Irish companies with future growth potential, and
    • Invest in a range of industries which will reduce exposure to any one sector.
  3. Avail of a professional, experienced and knowledgeable investment team.

WARNING: The value of your investment may go down as well as up. Investors can lose some or all of the amount invested. Terms and Conditions apply.

Summary

  • Available to qualifying individuals - tax resident & paying income tax in Ireland
  • Up to 41%* tax relief available - 30% upon investment and an additional 11% * in the year following the 3 year investment period
  • All income tax relief
  • 3 year investment term
  • Tax relief on up to €150,000 per annum
  • Return of up to 12% available under the Davy EII Tax Relief Fund.

Risks

  • This is a medium to long term investment (3 years minimum) and there is no early exit mechanism
  • Investors are exposed to the performance of the companies in which the Fund will invest and investors may lose some or all of the amount invested
  • Taxation relief may not be granted or may be withdrawn if the conditions of the legislation are not satisfied
  • Applicants are advised to consult their financial and taxation advisors before subscribing
  • A more detailed set of risks attaching to this investment are set out in the Prospectus of the Fund

Warning: This information is based on our understanding of current tax legislation and the current Revenue Commissioners interpretation thereof and is subject to change including retrospectively without notice. This is intended as a general guide only and is not a substitute for individual tax advice. Potential investors should seek competent professional tax advice specific to their circumstances prior to investing. Investors are responsible for establishing their entitlement to participate in this Investment and for making their own tax relief claims.

*Relief on an investment in the Fund is available to Investors in two tranches. Investors can deduct 30/41’s of the amount subscribed (i.e. an effective rate of 30%) to the Fund from their total income for income tax purposes for either the tax year of subscription ending on 31 December 2011, or if so desired the tax year of investment by the Fund ending 31 December 2012 and Investors can deduct 11/41’s of the amount subscribed (i.e. an effective rate 11%) from their total income for income tax purposes in the year of assessment following the end of the three year investment/relevant period, subject to conditions in relation to employment levels or expenditure on research and development being achieved. You should consult your tax advisor about the rules that apply in your individual circumstances. This investment may not be suitable for all investors.