Ministers Paschal Donohoe and Michael McGrath outside Government buildings today. Image: Julien Behal Photography
As well as an extension of the Innovation Equity Fund, the Government revealed changes to the Employment Investment Incentive scheme.
New funding announced in Budget 2022 could lead to investments of up to €90m for early-stage Irish start-ups.
In his Budget speech this afternoon (12 October), Minister for Finance Paschal Donohoe, TD, promised further investment into the Innovation Equity Fund announced in last year’s Budget.
Previously, €30m was committed through the Ireland Strategic Investment Fund to back domestic, high-innovation enterprises.
Today, Donohoe said the Government plans a further €30m investment to this fund through Enterprise Ireland, which is set to be matched by €30m from the European Investment Fund.
“Through a memorandum of understanding currently being developed by all three parties, the Ireland Strategic Investment Fund expects to participate with its €30m as a co-investor, leading to potential investments of up to €90m for predominantly seed-stage Irish SMEs,” Donohoe said.
This fund is expected to be launched in early 2022 and will boost the availability of early-stage funding for Irish SMEs.
“It will also be consistent with other priorities such as promoting regional development, supporting female entrepreneurship, and climate change initiatives,” Donohoe added.
Start-up supports
One of the other big announcements for Irish start-ups today is that the Employment Investment Incentive scheme is being extended for another three years and changes will be introduced to make it more attractive to investors.
The EII allows investors to claim tax relief, and industry representatives have said for several years that enhancing the scheme could enable more SMEs to avail of suitable funding for business growth.
“The Employment Investment Incentive scheme has the potential to become a real driver of investment in early-stage companies and high-potential start-ups,” Donohoe said. “In recent years, positive changes have been made to the scheme but it has yet to reach its potential.”
The Government is now planning to open the scheme up to a wider range of investment funds and relax the rules around the ‘capital redemption window’ for investors, subject to certain conditions. The 30pc expenditure rule is also being removed, with Donohoe describing it as “unduly restrictive in the context of the self-assessment principles that now apply to the relief”.
Donohoe also announced an extension of the Section 486C corporation tax relief for certain start-ups to the end of 2026, which he said would provider “greater certainty” to newer companies and those looking to get off the ground as the country recovers from the pandemic.
Additionally, the Government will introduce a new tax credit for the digital gaming sector, as announced in last year’s Budget. This will give companies a refundable corporation tax credit for spending on the design, production and testing of a game.
“This sector has seen exponential global growth in the past decade,” Donohoe noted in his speech. “However, employment growth in the sector in Ireland has not matched this global trend. The relief will support digital games development companies.”
The moves to support early-stage Irish businesses have been welcomed by the Irish Venture Capital Association (IVCA).
“With pending changes in taxation of multinationals in Ireland, now is a highly appropriate time to review measures to create the right environment for indigenous, innovative companies which have the potential to become global players,” said Nicola McClafferty, investor at Draper Esprit and chair of the IVCA.
“Now is the time to build an equity culture in Ireland, allowing early-stage investment in private businesses to become an attractive asset class for not only institutions but individuals as well.”
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