Business startup exemption from tax for soletrades

Business startup exemption for soletrades 

Budget 2014 introduced a new business startup exemption for people starting a new business.  This is a significant development as previous similar tax reliefs and exemptions applied only to limited companies.

Who is it for?

To qualify for this you must have been unemployed for at least 12 months.  There’s some guidance on the Revenue website on what is regarded as unemployed.  Basically, if you’ve been unemployed for more than 12 months and in receipt of some sort of benefit, or signing for crediting contributions, you should qualify. 

And, of course you need to start a business.  A major difference between this relief and other similar reliefs is that there doesn’t appear to be any restriction on the type of business you start.  The legislation defines a new business simply as a “trade or profession” that hasn’t been carried on before by anyone.

The business must be “set-up and commenced” after 25 October 2013.  If you started before then you won’t qualify. 

Assuming I qualify what does it mean to me?

If you qualify, it means your profits in the first 2 years will be reduced by €40,000.  In other words if your profits don’t exceed €40,000 you pay no tax.

But don’t get too carried away.  This is a relief from income tax, not PRSI or USC.  So they will still be charged on the full profit.

How do I get it?

There is no pre-approval required for this relief.  It can be claimed by completing the relevant section in your tax return.

Are there any other catches?

There doesn’t appear to be.  Although the corresponding relief for limited companies was changed mid-flow by linking the amount of relief allowed to job creation (using employers’ PRSI). 

Hopefully, that won’t happen here though as the relief appears to be designed for individuals with no employees.

If you don’t have any profits the relief cannot be carried forward and therefore will be lost.  As most start-up soletrades can only dream of profits of €40,000 in their first year then the real value of this relief seems limited.

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