We take a look at some of the ‘not so obvious’ supports for starting a business that might help you get your business off the ground.
From social welfare schemes to tax relief for your Startup business here are five supports you might have missed.
Allowances & business startup grants for the unemployed
If you are unemployed and on Jobseeker’s Allowance, or you are in receipt of the Pandemic Unemployment Payment (PUP), and you would like to start your own business the Back to Work Enterprise Allowance or Short-Term Enterprise Allowance might be for you.
You should note that you will need to have a solid business plan in place to be considered for either of these schemes.
Back to Work Enterprise Scheme
The Back to Work Enterprise Allowance is a two-year scheme. If you qualify for the Back to Work Enterprise Allowance, then you will receive:
- 100% of your current social welfare payment in the first year
- 75% of your current social welfare payment in the second year
You won’t pay tax, Pay Related Social Insurance (PRSI), or Universal Social Charge (USC) on the payment, but you will need to pay tax on any income you make from the business.
Short-Term Enterprise Allowance
Back to Work Enterprise Scheme
The Short-Term Enterprise Allowance replaces your Jobseeker’s Allowance and ends when your entitlement to the benefit ends. It will be paid at the same rate as your current social welfare payment. You won’t pay Pay Related Social Insurance (PRSI) or Universal Social Charge (USC) on the payment, but you will be subject to tax.
“The difference between the Short-Term Enterprise Allowance and the Back to Work Scheme is the Short Term is for people who are just newly unemployed, and the Back to Work Scheme is for people who have had at least nine months on Jobseeker’s Allowance,” says Julie Byrne, Enterprise & Social Enterprise at Dublin South City Partnership.
Can PUP recipients apply?
Recipients of the Pandemic Unemployment Payment (PUP) who want to start a new business can get the Back to Work Allowance or the Short-Term Enterprise Allowance by transferring to a jobseeker’s payment. You may not need to be on Jobseeker’s Allowance for the 9-month period usually required to receive the Back to Work Allowance if you receive the Pandemic Unemployment Payment (PUP).
To learn more about the Short-Term Enterprise Allowance and Back To Work Scheme, check out gov.ie.
Training and supports are on offer to help you prepare a business plan for your application. Attending training such as a Start Your Own Business course can also help your application. Check out the Irish Local Development Network directory to locate your nearest partnership or development.
“The best advice I can give is to avail of all the training and support. We are here to support you, and we do review all the business plans before they submit them to Intreo,” said Julie.
“We can support our clients the minute they come to us throughout the process,” she adds.
Enterprise Support Grant
Applicants who have successfully applied for the Back To Work Enterprise Scheme or the Short-Term Enterprise Allowance and have started their own business may be eligible for an Enterprise Support Grant (ESG). To be eligible for this business grant, you must prove to your caseworker that you can make a matching contribution of at least 20% of the funding.
You can read more about the Enterprise Support Grant on gov.ie.
Tax relief schemes
Startup Relief for Entrepreneurs (SURE)
The Start-up Relief for Entrepreneurs (SURE) is an income tax refund scheme. If you are starting your own company, you may be entitled to an income tax refund of up to 40% of the capital funding you invest into your company under SURE. The relief can be claimed on your Income Tax Return.
To qualify for the Start Up Relief for Entrepreneurs (SURE), you should:
- Have had income mainly from employment over the last four years
- Take up full-time employment in the new company within 6 months of the investment being made
- Invest in the new company by purchasing new shares (the minimum investment under the scheme is €250 and the maximum investment is €100,000 per year
- Keep these new shares for a minimum of 4 years
How much of a refund can you get?
The refunds depend on the gross pay you have received and the tax you have paid over the previous six years. Individual circumstances, such as the amount of tax credits you are eligible to claim, can also affect the amount of SURE refund you are entitled to.
- You leave your employment to set up a new company
- You purchase 70,000 €5 shares in the company on 31 May 2020 (tax year 2020) costing €350,000. You now own 75% of the company’s ordinary share capital.
- You must take up employment in the new company on or before 31 December 2020.
- You can take the €350,000 relief in any of the tax years: 2020, 2019, 2018, 2017, 2016, 2015, and 2014, up to a maximum claim of €100,000 per year.
Find our more about how you can avail of this tax refund scheme by visiting revenue.ie.
Corporation Tax relief
While starting a new company you may also be eligible for Corporation Tax relief for the first five years.
A new Startup company which has employees and pays employer’s Pay Related Social Insurance (PRSI) can get a five-year exemption which effectively reduces the company’s annual Corporation Tax charge from €40,000 to nil. This tax relief comes in the form of a reduction of your Corporation Tax for the first five years you trade.
The relief is calculated based on the employer’s PRSI paid during the year and is claimed on your annual Corporation Tax return (CT1). It’s based on the profits from your new company and the full relief is available when your Corporation Tax bill is €40,000 or less in a tax year. You may be entitled to partial relief if your Corporation Tax bill is between €40,000 and €60,000 in a year.
Who can apply?
Startup companies that were incorporated on or after 14 October 2008 and set up and began trading between 1 January 2009 and 31 December 2021.
There are some trades excluded from this scheme. If your company is carrying out trade or activities previously carried out by another person, you won’t qualify for the relief.
Companies involved in land development, exploration and extraction of petroleum or minerals, certain service companies, fishery, aquaculture, production of agricultural products, and the coal sector will not qualify for this tax relief scheme.
How is the relief calculated?
The relief is directly linked and limited to the amount of Employers Pay Related Social Insurance (PRSI) you pay during the tax year. The maximum amount of relief you can receive is €5,000 per employee based on the PRSI paid. For example, if you pay an employer’s PRSI of €7,000 for one employee, only €5,000 will be considered when calculating the relief
To learn more about tax relief for your startup company, check out the Revenue website.
Larissa is a Fellow Chartered Accountant (FCA) and is the CEO of Accountant Online, which specialises in company formation, company secretarial, annual accounting services, bookkeeping, tax, and payroll services for micro and small companies in Ireland and the UK.