Ireland: Angel Investors Excluded From CGT Relief In Finance Bill
25 October 2013
Posted by: Author: Una McCaffrey
Author: Una McCaffrey (The Irish Times)
The capital gains tax "entrepreneur relief” flagged
in Budget 2014 will not be available to so-called angel investors, who
provide capital for new businesses without taking on executive roles.
Details of the measure, published in the Finance Bill, show it is aimed
at the owner/manager, who "is required to devote substantially the whole
of his or her time to the service of the company in a managerial or
The section 43 incentive,
which the Government said is particularly designed to encourage
investment by "serial entrepreneurs”, will work by offering relief to
individuals who have recently paid CGT and subsequently invest in a new
business, before selling that new interest no earlier than three years
after the investment date.
The CGT due on this
sale will be reduced by the lower of either the CGT paid on the original
disposal or by half of the CGT due on the new sale.
The original CGT must have been paid since
the start of 2010, while the second investment, which will be worth at
least €10,000, must be made between January 1st, 2014, and December
Technically, an entrepreneur could
qualify for the relief if they were to invest in a number of projects at
the same time, but the practical difficulties of playing an active,
executive role in different businesses is likely to limit the measure’s
application in such scenarios.
Tim O’Rahilly, tax
partner with PricewaterhouseCoopers, last night described the measure as
"restrictive” and mused that it may evolve over the period of its
application. He pointed out that the second company must be involved in
an activity "not previously carried on” by the entrepreneur or an
associate, thus excluding many.
O’Rahilly also noted the volume of business losses experienced across
the economy since 2010 will have reduced the number of business people
who actually paid tax on disposals over the relevant period. He said the
measure was very much aimed at the "micro” business sector.
The Government has emphasised that the provision must receive EU state aid approval before it can come into application.
This article first appeared in irishtimes.com.