Navigating Ireland’s recently introduced angel investor’s relief

Relief for investment in innovative enterprises, more commonly known as angel investor relief, was introduced in Finance Act 2024 and came into effect on 1 March 2025. The relief aims to encourage investors to acquire minority shareholdings in early-stage innovative enterprises, by allowing them to take advantage of a significantly reduced rate of capital gains tax (CGT) on sale of the shares.

The scheme is subject to a lifetime cap of €10 million and the relief is for gains up to twice the value of the initial investment. It does not apply if the investor takes advantage of a relief for investment in corporate trades’ schemes on the same shares and is also unavailable in tandem with revised entrepreneur relief or retirement relief – in those cases, the other schemes/reliefs are likely to be more favourable.

Where all the relevant criteria are satisfied, the investor can take advantage of a reduced CGT rate of 16%, or 18% in the case of investments made by a partnership, when the shares are sold on the condition that they have been held by the investor for at least three years.

The relief is claimed in the investor’s income tax return. The investor must provide the name and address of the qualifying company which issued the shares, the date on which the investment was made, the value and number of shares claimed as the investment and the unique identification number of the certificate of commercial innovation provided by the company whose shares are being claimed.

Accessing the relief

For the relief to apply, there must be a qualifying investor, a qualifying company and a qualifying investment.

Qualifying investor

For an investor to access the scheme on shares that they own, they cannot be connected with the company. This includes situations where the individual or an associate of the individual is in a partnership, is a director or employee of the qualifying company or, subject to certain conditions, has an interest in the capital of the company.

Qualifying company

A company which holds a certificate of going concern and a certificate of commercial innovation qualifies for the scheme. To be eligible to make an application to Irish Revenue for certificates of qualification, it must:

• be incorporated and tax resident in Ireland, another European economic area state or the UK;
• carry on, or intend to carry on, certain trading activities from a fixed place of business in Ireland;
• hold a valid tax clearance certificate;
• not control any company other than a qualifying subsidiary and not be under the control of any other company, or any other company and any persons connected with that company;
• exist wholly for the purposes of carrying on relevant trading activities or holding shares in certain subsidiaries;
• be an innovative enterprise; and
• have a business plan for the investment sought and it is reasonable to consider that the company will implement that business plan.

In addition, the company must meet certain eligibility criteria:

• it must be an unlisted company with no arrangements in place at the date the eligible shares are issued to become listed in the future;
• it must not be the subject of an outstanding recovery order following a decision of the European Commission that declared an aid illegal and incompatible with the internal market, known as the ‘Deggendorf rule’;
• it must have all of its issued shares fully paid up;
• it must be less than seven years old at the date of application for the relevant certificates of qualification; and
• it must be an SME and cannot be an undertaking in difficulty.

The company should provide copies of its certificates of qualification to the investor to ensure compliance.

Qualifying investment

Eligible shares for the scheme are newly issued and do not carry preferential rights to a dividend or on a winding up, although they can be redeemable.

The investment must:

• be made for eligible shares issued prior to 31 December 2026 in the company;
• be for at least €20,000 or, in the case of an individual investor, €10,000 where the investment results in an acquisition of 5% or more shareholding in the company;
• be held for a period of at least three years, during which the investor does not hold more than 49% shares in the company or any member of the relief group;
• be made as part of the initial risk finance funding round by the company; and
• be an arm’s length transaction made for bona fide commercial reasons and not to secure a tax advantage.

From the company’s perspective, the investment will only qualify if it is based on a business plan, it is not an expansion risk finance investment or a follow-on risk finance investment, and the qualifying company provides copies of the certificates of qualification to the investor at the time of the investment.

An investment will not qualify for the relief if:

• there exists an arrangement that substantially reduces the risk associated with the investor’s shares, such as an arrangement which guarantees a repayment of capital or the payment of a dividend;
• within three years from the date of the investment, the company carries on a business, or acquires the assets of a business, which was previously carried on by the investor, an associator of the investor or by a company owned or controlled by either an investor or their associates; or
• the company acquires another company that investor, or a person connected with the investor, owned or controlled within three years from the date of the investment.

Investment through qualifying partnerships

Investment in eligible shares may also be made through a qualifying partnership. This partnership must be established under a valid written agreement and adhere to a defined investment policy for the benefit of its investors.

To be eligible, the terms of the partnership agreement must ensure the funds are to be invested in eligible shares without undue delay. Prior to the investment, the funds must be held in a separate deposit account in a bank licensed to operate in Ireland and any dividends and interest paid to the partners, subject to a commission at a specified rate. An audited partnership account must be prepared annually and submitted to Irish Revenue on request.

The management fees or other expenses associated with the establishment, running, winding down or termination of the partnership may not exceed the rates specified in the partnership agreement. There must also be a defined investment policy with which the investment aligns, and there are further stipulations as to how bank accounts are to be operated.

Partnerships cannot access the reduced minimum investment, which allows for as low as a 5% stake where the investment is for at least €10,000. The lifetime limit applies for each individual investor, including both investments as individuals and those made through a qualifying partnership.