New measures on seed capital and business expansion scheme

BES changes:The addition of recycling companies who have had a grant or financial assistance from an industrial development agency to the list of companies eligible for the Business Expansion Scheme (BES) is just one of a number of additional measures unveiled in yesterday's Finance Bill.

A number of changes to improve the operation of the BES and seed capital schemes were also announced. The time limit for carrying forward unused relief under the schemes is being extended to December 31st, 2013.

To facilitate additional equity funding under the SCS, individuals may reduce their shareholding in the company below 15 per cent after the first year, instead of after two years, and not lose the relief.

Minister for Finance Brian Cowen has also increased the overall aggregate limit on amounts subscribed for share and loan capital of the company from €317,500 to €500,000 for an individual holding more than 30 per cent of the share capital of a company to ensure that the individual will not be regarded as "connected" with the company.

The Bill also requires that development agencies in future only approve an employment grant for internationally-traded services as opposed to actually paying the grant in order to gain entry to the scheme. It will also replace the feasibility grant payment requirement with a condition that the relevant county enterprise board provides a certificate validating the business proposal.

To comply with European Commission reporting requirements, the Revenue Commissioners are being empowered to request information from qualifying companies and the managers of designated funds relating to the BES and SCS schemes and to make this information available.

The continuation of the schemes and the proposed changes require the approval of the European Commission.

Mr Cowen said that the formal complaint by the Irish Congress of Trade Unions to the EU over the expansion of the schemes had no basis in fact because the new schemes were not yet in place under law. He hoped that the complaint would not cause undue delay in getting approval.

Green Party spokesman Dan Boyle said that while the schemes were necessary in helping the promotion of more successful indigenous industries, the lack of proper and rigid evaluation of their effectiveness was a worry.