The scheme provides relief from Income tax for long term unemployed people who started a business from the 25th October 2013 to the 31st December 2018.
Who can avail of it?
Long term unemployed individuals who start a new business.
They must be unemployed for 12 months or more before starting the business.
What is the maximum relief the scheme can provide?
A maximum relief from Income Tax of €40,000 per year for a period of two years.
Who qualifies for the scheme?
Any person who has been out of work for twelve months or more, and
during that time were in receipt of any of the following:
- Crediting contributions
- Jobseeker’s allowance
- Jobseeker’s benefit
- The one-parent family payment
- Partial capacity payment
Do training courses and schemes apply?
If you took part in training courses during your twelves months plus of unemployment, they will be treated as part of the period of unemployment.
Examples of valid training courses:
- FÁS training courses
- Community Employment Schemes
- Job Initiative
- Back to Education Schemes
- What are the restrictions?
What are the restrictions?
- The business must be set up between the 25th of October 2013 and the 31st of December 2018.
- It must be set up by a person that qualifies for the relief.
- The business must be new – it cannot be inherited or bought.
- It must not be registered as a company i.e. it must be unincorporated.
How do I apply for the scheme?
Complete the relevant section of your annual Income Tax Return form.
The relief only applies to Income Tax – not USC and PRSI.
How do I calculate the relief?
The calculation depends on when you started your new business.
Revenue.ie explains how the relief is calculated below:
Year 1 – Profits are relieved from income tax once that they are less than the cap.
If you start your new business in January, the cap is €40,000. If you start it later in the year then the cap will be reduced proportionately according to the month you start. For example if you start your business in February, 11 months remain in the year so you can earn up €36,667 (being 11/12 of €40,000). If you start your business in December, one month remains in the year so you can earn up to €3,333 (being 1/12 of €40,000).
Year 2 -Profits are relieved from income tax once they are less than the €40,000 cap.
The accounts for the second year will always be for a period of 12 months so there is no need to consider reducing the cap.
Year 3 – Profits for any part of this year which fall within the first 24 months of business are income tax free once they are less than the cap.
The cap for year 3 is calculated as €40,000 x [months left to claim] / 12
Months left to claim = 24 – [Months claimed in Year 1] – 12
If you started your business in January, then you have used up the 24 months relief in Year 1 and Year 2 and there is no relief available for Year 3. If you started your business later in the year then there is still some relief available.
All of the above information was acquired from www.revenue.ie.