Fergus O'Dowd (Louth, Fine Gael)
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154. To ask the Minister for Finance the position regarding a tax issue (details supplied); and if he will make a statement on the matter. [14418/15]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that this question relates to an issue that has arisen with a company owned and controlled by the person concerned.  The issue relates to a refusal by Revenue to grant relief under Section 486C, Taxes Consolidation Act, 1997 as amended by Section 34(2) Finance Act 2011.  The original enactment, providing relief from tax for certain start-up companies, was amended by the Finance Act 2011.  The effect of the amended legislation was that the company no longer qualified for the relief with effect from 1 Jan 2011. 

The matter is scheduled for hearing by the Appeal Commissioners in June 2015.  The legal arguments for both parties have been exchanged and forwarded to the Appeal Commissioners.

I am precluded from discussing the tax affairs of any particular individual or company.  However I note that this question relates to the three-year tax relief for certain start-up companies, and to the effect of Finance Bill 2011 amendments on that legislation.

A 3-year tax relief for start-up companies commencing a new trade was introduced in 2009, and extended in subsequent Finance Bills, as a support to encourage new business development. The relief is granted in respect of the profits of a new trade and chargeable gains on the disposal of any assets used for the purposes of the new trade. The relief is granted by reducing the corporation tax on profits relating to the trade to nil where the total amount of corporation tax payable by the company for an accounting period does not exceed €40,000. Marginal relief is granted on a tapering basis where the total amount of corporation tax liability for the accounting period is between €40,000 and €60,000. No relief applies where corporation tax payable for an accounting period is €60,000 or more.

The relief was first introduced in 2009 and originally applied to certain companies commencing to trade in that year.  This qualifying period has been extended in subsequent Finance Acts, and the relief is now available to qualifying companies commencing to trade up to and including 2015.  As part of one of the early extensions of the relief, in Finance Act 2011, the basis on which relief is computed was changed to link the reduction in corporation tax to the amount of employers' PRSI paid in an accounting period, subject to a limit of €5,000 per employee and an aggregate limit of €40,000. The purpose of this change was to better target the relief at companies generating employment. The changes introduced in Finance Act 2011 apply to all qualifying companies for accounting periods beginning on or after 1 January 2011. However, companies which set up and commenced a qualifying trade in 2009 or in 2010 were able to obtain relief on the previous (i.e. pre-Finance Act 2011) basis for profits earned in accounting periods commencing before 2011.

Subsequent amendments have also extended the relief to provide that, where a start-up company does not have sufficient profits to claim the relief in a given year, any relief unclaimed in the first three years can be carried forward into future years for use against future corporation tax liabilities.  

A review of the operation of this relief is taking place this year, to ensure that it meets the policy objectives of creating jobs and activity in Ireland and provides value for money for the Irish taxpayer.