Alan Farrell (Dublin Fingal, Fine Gael)
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91. To ask the Minister for Finance the reason the approval process for employment and investment incentive, EII, applications is apparently backlogged by up to four months; if he will provide additional resources to address this matter in view of the fact that this is adversely impacting on businesses pitching to prospective investors and on their fundraising ability; and if he will make a statement on the matter. [30298/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Employment and Investment Incentive (“EII”) scheme, provided for in Part 16 of the Taxes Consolidation Act 1997, is a tax incentive whereby individuals who invest in certain qualifying companies can qualify for tax relief on the amount invested.

A qualifying company is one which:

- is an unquoted SME, meaning it has less than 250 employees and has an annual turnover of up to €50 million or an annual balance sheet total of up to €43 million,

- when its first EII investment is raised, the company (including any companies under the control of the same people) has been trading for less than 7 years or, if the company has been trading for more than 7 years, the EII investment is required to develop a new product, or enter a new market, and the amount of the EII investment required is greater than 50% of the company’s average annual turnover for the preceding  5 years,

- any second or subsequent follow-on EII investments must be foreseen in the business plan the company used to raise its first EII investment.

I am advised by Revenue that they are experiencing some backlog in processing requests for approval under this scheme.  There has been an increase in the volume of correspondence on the scheme partially due to an increase in the number of companies applying for certification but also in relation to the increased complexity brought to the scheme by the changes made in Finance Act 2015.  The Finance Act 2015 changes were necessary to bring the scheme into line with conditions specified in the General Block Exemption Regulation (Commission Regulation (EU) No. 651/2014 of 17 June 2014). The introduction of the 7 year age limit is one such condition, as is the requirement that the possibility of follow-on investment was foreseen in the company’s original business plan.

Revenue further advise me that, as a facility to companies that are considering raising investments under the incentive and as an administrative measure, they provide what is known as “outline approval” to companies in advance of the shares issuing. This is where Revenue is prepared to express the opinion that a company would be regarded as a qualifying company once the conditions of qualification are met.  There is no requirement for a company to obtain outline approval prior to issuing shares however, and the actual entitlement to the relief can only be determined after a company has raised its capital and issued shares. Therefore, until the company has actually issued shares to investors it is not possible for Revenue to determine whether or not relief under the EII scheme is due.

 The current backlog on processing applications for EII outline approvals is 3 months, while the backlog on actual EII claims is about 2 months.  I am informed by Revenue that procedures have been put in place to reduce these backlogs.