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Sunday, 14th April 2024
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Government silent as EU gives green light to renewal of BES and Seed Capital Schemes Back  
Despite the absence of any reference to the Business Expansaion Scheme (BES) in the Budget, the Government has been given the green light to renew this initiative as well as the Seed Capital Scheme (SCS) until 2006, and probably longer by the European Commission. Both the BES and SCS provide individual investors with tax relief in respect of investment in certain sectors.
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Windfarms are one of the Irish businesses to have benefited from the use of the BES, now reprieved by the EU for another two years at least.

It is no surprise that renewal of the BES and SCS was not highlighted by the Government. Delivering his first Budget earlier this month, Finance Minister Brian Cowen said that his Department would examine a range of tax reliefs in conjunction with the Revenue Commissioners in a bid to close tax loopholes. Taoiseach Bertie Ahern subsequently said that the 'game is up' for rich people using reliefs to avoid a significant amount of their tax liability, indicating that restrictions are on the way.

Renewal of the BES and SCS in the Finance Act 2004 was unexpectedly held up by the European Commission which has spent most of this year assessing whether they were allowable under its state aid rules. The schemes have now been spared, until 2006 at least, with an extension likely, so that it is now set to become a permanent feature of the Irish private equity landscape. The Commission’s approval was backdated to February 5th , 2004.

The deal now means that the 2005 BES season can commence, and projects seeking up to €1 million in finance can proceed. For private investors, €31,750 is eligible for BES relief, which means that at 42 per cent, €13,334 in tax relief will be allowable for projects being launched in the next few weeks. This tax relief will be claimable for eligible projects in the current tax year.
The absence of BES has severely hampered Enterprise Ireland’s ability to help start-ups, and the news will result in a renewed kick start to the sector.

Welcoming the approval, the Minister for Enterprise, Trade and Employment, Michael Martin, said, ‘These schemes are a vital source of seed capital, which is the life blood of start-up companies. They foster the development and growth of many small and medium enterprises leading to the creation of quality employment opportunities.’

However, renewal of the BES and Seed Capital schemes will not extend to FINEX Europe, the open outcry derivatives exchange set up in the IFSC in 1994. In order to encourage the participation of traders and to stimulate exchange activity, the 1995 Finance Act included a number of amendments to the Seed Capital regime providing for tax relief on funds invested in companies established to operate on FINEX.

Commenting on the cessation of the scheme for FINEX Europe, the operation’s vice president, Pauline Leahy, told FINANCE that the decision not to renew its terms had been expected. ‘The scheme was very successful for FINEX but we don’t expect its expiry to have any impact on our operations. We have a core group of traders who bring liquidity to the exchange,’ she said.

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