Have You Been Unemployed & now Starting Your Own Business? There may be Tax Relief Available for
Thinking of Starting Your Own Business? Are you unemployed > 12 months? Then you can get tax relief for the first two years? The Start Your Own Business scheme provides relief from income tax for long term unemployed individuals who start a business and it provides an exemption from income tax up to a maximum of €40,000 per year for two years provided:
1. The business must be set up between the 25th October 2013 and 31st December 2016 by a person that qualifies for the relief
2. It must be a new business and not a business that is bought, inherited or otherwise acquired
3. You must be a sole trader, trading under your own name or a business name i.e. it must not be registered as a company.
You qualify if you have been unemployed for 12 months or more, and during that period, you were in receipt of job seeker’s allowance, job seeker's benefit, the one parent family payment, partial capacity payment or crediting contributions.
Periods of time spent on certain training courses and schemes, such as FAS, Community Employment Schemes, Job initiative or Back to Education schemes will be treated as part of a period of unemployment.
An example of how the relief will be calculated (assuming a start date of the 1st September 2014) is as follows:
• In year 1 (2014), profits are relieved from income tax once they are less than the cap. With a start date of the 1st September, the cap for 2014 will be €13,333 (4 months). The cap is reduced proportionately according to the month you start. Therefore, you can earn up to €13,333 in 2014.
• In year 2 (2015), profits are relieved from income tax once they are less than the cap but there is no need for a reduction in the cap as the accounts for year 2 will always be of 12 month’s duration. So you can earn up to €40,000 in 2015.
• In year 3 (2016), profits for any part of this year which fall into the first 24 months of the business are relieved provided they are less than the cap. So, assuming a start date of the 1st August in year one (2014), you can earn up to €26,667 (8 months) in year 3 (2016).
There is no application to be made or pre-approval to obtain this relief. As long as you are a qualifying person, the relief is claimed by just completing the relevant section of your income tax return, along with the accounts of the business, each year.
This relief only applies to income tax and there is no exemption to the Universal Social Charge (USC) and PRSI that you may owe. USC and PRSI will be payable on any profits earned in the new business.
If you have any other questions or queries on any of the above, please feel free to contact me.
Timothy Kelliher Chartered Accountant