Corporation Tax Relief for Start-Ups

On 15th December 2009, The Minister for Finance signed the commencement order for the corporation tax relief for new start up companies. The relief, first announced in the Budget in October 2008, applies to the profits of qualifying trades and to the disposal of assets used for the purposes of the qualifying trade. The relief works by reducing the corporation tax attributable to such profits to nil. However, the relief only applies where the total amount of corporation tax payable by the company for an accounting period does not exceed €40,000. A marginal relief applies where the total corporation tax payable by the new company is between €40,000 and €60,000.

Subject to meeting certain conditions the company will qualify for the relief from corporation tax for a period of three years beginning on the day the company commences to carry on that qualifying trade, making it important that this date be ascertained precisely. The main conditions are:

• A “qualifying trade” means a trade which is set up and commenced by a new company in 2009 (and the Minister has confirmed that he will extend the relief to companies that commence a new trade in 2010)
• To constitute a new company it must be incorporated anywhere in the EEA (ie the European Union plus Iceland, Liechtenstein and Norway) on or after 14th October 2008.
• A qualifying trade does not include any trade that:

• • was previously carried on by another person and to which the company has succeeded,
  • the activities of which were previously carried on as part of another person’s trade or profession
  • is an excepted trade (e.g. land developers, mining and petroleum activities); 
  • is providing professional services.

Before a company is incorporated and commences to trade with the intention of availing of the tax relief, appropriate tax advice should be obtained to ensure the company is entitled to avail of the relief.

For further information please contact Frances Nolan or visit our tax section.