Starting a business
If you are thinking of setting up a business there are a number of issues you need to consider. Different supports and regulations apply, depending on your particular situation. You may be employed, unemployed or someone who is coming from outside Ireland to set up a business. This document highlights some of the important information you need to know with links to relevant topics. You can read more in our documents, Sources of information on starting a business and Becoming self-employed.
Budget 2019: changes to the Earned Income Tax Credit
The Earned Income Tax Credit for self-employed people will increase from €1,150 to €1,350.
Local Enterprise Offices provide supports to local businesses that are starting up or in development. Their role is to stimulate economic activity at local level and to promote microenterprises (10 or fewer employees). You can find information about their training programmes and start your own business courses as well as mentoring and financial supports on localenterprise.ie.
New Frontiers is a development programme for potential entrepreneurs, funded and coordinated by Enterprise Ireland, which is delivered locally by Institutes of Technology.
If you are unemployed you may be eligible for the Back to Work Enterprise Allowance (BTWEA) or the Short-Term Enterprise Allowance (STEA). If you are starting a business, you also may get extra supports under these schemes, such as grants for training, market research and business plans as well as access to loans to buy equipment.
The Start Your Own Business Relief provides relief from income tax to people who are unemployed for at least 12 months and who set up a qualifying business. It runs from 23 October 2013 to 31 December 2018.
Nationals of the European Economic Area (EEA) or Switzerland do not need permission to set up a business in Ireland. If you are a non-EU/EEA and non-Swiss national and you wish to open a business or invest in the State, you may apply for permission under the Immigration Investor Programme and Start Up Entrepreneur Programme. You can read more in our document on coming to set up a business or invest in Ireland.
You can set up a business as a sole trader, as a partnership or as a limited company. The type of structure you choose depends on the kind of business you are running, with whom you will be doing business and your attitude to risk. It is advisable to get the advice of a solicitor or accountant when considering the structure for your business. The Companies Registration Office (CRO) has information about these different structures on its website, cro.ie.
It is relatively simple to set up as a sole trader but if your business fails, your personal assets could be used to pay your creditors. Your main legal obligation is that you must register as a self-employed person with Revenue (see ‘Tax and PRSI’ below). If you wish to use a business name you must register your business name with the Companies Registration Office (CRO).
This is where 2 or more people agree to run a business in partnership with each other. The partnership agreement should be drawn up by a solicitor. The partners are jointly responsible for running the business and if it fails all partners are jointly responsible for the debt.
If you set up your business as a limited company, the business is a separate legal entity. If the company gets into debt, the creditors generally only have a claim on the assets of the company. The company must be registered with the Companies Registration Office (CRO) and the company reports and accounts must be returned to the CRO each year.
Companies Act 2014
The Companies Act 2014, which replaced the Companies Acts 1963-2013, came into effect on 1 June 2015. Under the Act, private companies limited by shares can be registered as an LTD (private company limited by shares) or a DAC (Designated Activity Company). You can read more about the requirements for different types of companies under the Companies Act 2014.
You can register your business name and file company returns online with the CRO using CORE (Companies Online Registration Environment).
Microfinance Ireland provides loans to small businesses with no more than 10 employees, including sole traders and start-ups. The loans of between €2,000 and €25,000 are for commercially viable proposals. Since September 2015, under the Microenterprise Loan Fund Scheme 2015, there is no longer a requirement to have been refused credit by the banks. Forms and details of how to apply are available on microfinanceireland.ie.
JobsPlus is an employer incentive which encourages and rewards employers who employ jobseekers on the Live Register. JobsPlus has replaced the Revenue Job Assist and Employer Job (PRSI) Exemption Schemes.
Under the Trading Online Voucher Scheme vouchers of up to €2,500 may be available to businesses who demonstrate that they have a credible plan for trading online. Further details are available from your Local Enterprise Office.
If you have a small or medium business and your application for credit is refused by one of the participating banks you may apply to the Credit Review Office to have your case reviewed. To be eligible for a review your application must have been in writing. There is an application form on the website of the Credit Review Office. The fee for the review ranges from €100 up to a maximum of €250.
The Credit Guarantee Scheme aims to encourage additional lending to small and medium businesses who are commercially viable but have difficulty in accessing credit. Under the Scheme eligible applicants will be assisted in obtaining a loan and in establishing a favourable credit history. You can find out more in the information booklet about the Scheme. There are also Customer Frequently Asked Questions (pdf) and eligibility criteria. Since 3 March 2017, changes to the Credit Guarantee Scheme extend the definition of loan agreements to include certain non-credit products such as overdrafts. The scope of the scheme also extends to cover other financial product providers for example lessors.
If you are having difficulties with your creditors the Chartered Accountants Voluntary Advice service - CAVA (pdf) can give free advice and assistance on your business affairs. Contact your local Citizens Information Service or Money Advice and Budgeting Service (MABS) to see if they offer the service.
Tax, PRSI and employing staff
How your business is taxed depends on whether it is incorporated as a company. If it is a company then it is liable for corporation tax. If your business is not incorporated you are considered to be a sole trader and you pay tax under the self-assessment system. Further information on tax is available in our document on tax for self-employed people and from Revenue.
Earned Income tax credit: In 2018, self-employed people can claim an Earned Income tax credit of €1,150 (increased from €550 in 2016 and €950 in 2017). It is also available for business owners or managers who are not eligible for a PAYE credit on their salary income. If a taxpayer also qualifies for the PAYE tax credit, the combined value of these 2 tax credits cannot exceed €1,650.
SURE tax refund: The Start Up Refunds for Entrepreneurs (SURE) is a tax refund scheme that allows eligible people to get a refund of up to 41% of the capital they invest in starting a business. Under the SURE scheme you may be entitled to a refund of PAYE income tax that you paid over the 6 years before the year in which you invest. You can read the Revenue guide IT15 for further details of the SURE scheme. You can use the online calculator on sure.gov.ie to estimate your potential refund.
Start-up companies: New companies may get tax relief on the first 3 years of corporation tax and the value of the relief will be linked to the amount of employers’ PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee. In the Finance Act 2013, the tax relief was extended to allow any unused relief arising in the first 3 years of trading to be carried forward for use in subsequent years. The relief was extended to companies that started trading in 2012, 2013, 2014 or 2015 and, in the Finance Act 2015, to companies that start trading in 2016, 2017 or 2018.
Capital Gains Tax (CGT) relief: If you sell your business on or after 1 January 2016, a lower CGT rate of 20% will apply to the net chargeable gains arising from the sale of all or part of your business, up to a lifetime limit of €1 million. If you sell your business on or after 1 January 2017, a CGT rate of 10% will apply to the net chargeable gains described above.
If you are starting up a business and decide to recruit staff you must register for PAYE and PRSI with Revenue. You can find information in our document about your obligations and duties as an employer and what are the rights of employees. There is a guide for employers who are starting a new business with a paid employee (pdf). You can also read our documents on topics such as the minimum wage, social insurance (PRSI), leave and health and safety.
Action Plan for Jobs
The Action Plan for Jobs 2018 includes the following measures:
- Enterprise Ireland to focus on regional development
- A Brexit Loan Scheme for businesses that Brexit may affect
- A Business Finance Advisory hub for SME’s
- A focus on increasing participation in employment and meeting skills needs
- A new Youth Employment Support Scheme (YESS)
- Increased support for apprenticeships