Review Of Business Expansion Scheme Published By Irish Government

by Jason Gorringe, Tax-News.com, London

21 February 2007

Irish Minister for Finance, Brian Cowen, has published the results of the 2006 Review of the Business Expansion Scheme (BES) and Seed Capital Scheme (SCS).

The review was conducted in 2006 as part of the on-going policy of reviewing tax reliefs to ensure that such reliefs meet their socio-economic objectives. The review sought to inform the Minister on how the schemes have operated to date and assist in making decisions in relation to their future, if any.

In Budget 2006, on the basis of the review, the Minister announced that the schemes would be extended for a further seven years. The company limit for both schemes would be increased to EUR2 million, with the annual investor limit for the BES being increased to EUR150,000, and EUR100,000 in the case of the SCS.

The review was carried out by the Department of Finance in conjunction with the Department of Enterprise, Trade & Employment and the Office of the Revenue Commissioners. It took account of the findings of the report of the Small Business Forum, 'Small Business is Big Business,' the Survey of SME Finance/Equity carried out by Forfas, and the PricewaterhouseCoopers report 'Strategic Advisory Services – Enterprise Ireland Seed and Venture Capital Funds Programme 2006', as well as a range of submissions from interested parties.

Commenting on the review's publication, Cowen observed: “There is a continuing need for these schemes and a strong case for extending their scope given the clear market failure in providing equity capital for small firms in their start- up and early development phase and the evidence of how vital the schemes have been in the past for such firms. I am glad to be able to make the Review available at this stage and to inform public debate on the matter."

The Minister highlighted the importance of the SME sector to the Irish economy and noted that there is strong support for the continuation of the schemes from a large number of representative and other bodies in the public and private sector.

As the schemes are approved State aids, their continuation and the changes proposed require the approval of the European Commission in accordance with the Community Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium Sized Enterprises. The process of seeking Commission approval is underway.

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