How to claim Corporation Tax Relief for Start Ups

Section 486C tax relief allows relief from Corporation Tax for the first three years of trading provided certain conditions are met.

Full relief is available (i.e. the Corporation Tax liability is reduced to NIL) if the Corporation Tax liability does not exceed €40,000.

Marginal relief is available where the Corporation Tax liability is between €40,00 and €60,000. No relief is available where the Corporation Tax liability is over €60,000. The relief is availed of when submitting the company’s Corporation Tax return.

The value of the relief is limited to the amount of Employers PRSI paid by the company (maximum of €5,000 per employee and an overall maximum of €40,000). The result is that this relief is not useful to many small owner/managed limited companies where the only employees are the directors and they do not pay Employers PRSI on their own salaries.

Qualifying Trade

The company must commence a qualifying trade in order to avail of the relief.

A qualifying trade does not include:

  • A trade which was previously carried on by another person or company. For example, a sole trade transferred to a company.
  • Dealing in or developing land.
  • Exploration and extraction of natural resources.
  • Professional services as per Section 441 of the Taxes Consolidation Act 1997.

EU Regulation on State Aid

EU regulation on State aid specifically excludes the following activities from the relief:

  • Fishery and aquaculture sectors
  • Primary production of agricultural products
  • Coal sector

EU regulation has established a de minimis celling for State aid to a single recipient, below which it is deemed there is a negligible impact on trade and competition within the EU. Any amounts paid above this de minimis ceiling must be notified to the EU Commission. A company availing of Corporation Tax relief should be aware that the amount of Corporation Tax relief received during the 3-year period is taken into account when calculating whether the company exceeded the de minimis ceiling.

In order to comply with EU regulation on de minimis aid, the Revenue Commissioners may disclose information on the tax relief claimed by companies to Government Departments and Agencies paying other de minimis aid and, if requested, to the EU Commission.

It is possible to carry forward any unused relief against future tax years, provided certain conditions are met.

If you have any queries of a general nature, please feel free to leave a comment below.

 

Updated 11/04/19

Image courtesy of Jacob Botter

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