Recent adjustments to the EIIS tax-relief incentive programme has brought clarity to the opportunities for investors, a move welcomed by boutique investment company Quintas Capital, a long-time provider of an EIIS fund.
“Last year there was much confusion around the tax relief available, but this year there is very clear messaging behind it,” said Kevin Canning, managing director at Quintas Capital. “This time, the offering is either 35 per cent or 50 per cent relief. It’s also one of the few remaining income tax reliefs available, covering total income tax relief, including rental income and tax due on employee share options.”
As usual, Quintas Capital will be looking for three or four projects, but the company has a clear strategy in mind. “We are going after social infrastructure projects that qualify for 50 per cent relief. We can’t promise that they all will be at 50 per cent but that’s our aim. These are people who are buying a physical asset, such as a premises, and going into a business that will be good for the Irish people, such as a creche or a wind farm. The physical asset is important as to qualify for the 50 per cent relief, you need to be a start-up that hasn’t traded before, and that can be risky if there isn’t a physical asset involved.”
Social infrastructure projects involve the development, construction and maintenance of facilities and systems that support essential services, enhancing the quality of life in our communities – so in simple terms, these are investments in community-based projects with the physical building somewhat mitigating the risky nature of the investment.
“We also only invest in founders that we know and who have put in a significant amount of capital into the business themselves,” said Canning. “We will be investing in three to four businesses, with one, a childcare business, probably taking up 40 per cent of our investment. We will be working very closely with the businesses we invest in for the four years. We’re working on the investors’ behalf, not the founder’s.”
As mentioned, one company supported by Quintas Capital’s EIIS fund is a childcare provider. Zenith Care Group is led by childcare entrepreneur Charlene Roche and Ember Capital Limited owner Stephen Moore. The group is beginning its new journey with the purchase of a flagship facility in Douglas, Cork, a purpose-built 6,300 sq ft creche that will open in early 2025, with a projected first-year EBITDA (earnings before interest, taxes, depreciation, and amortisation) exceeding €400,000.
“We are actually closing our first investment with Zenith today,” said Canning. “We have made a €2.25 million investment, and we hope to make a further investment of €3.25 million with this fund. We are acquiring freehold creche premises from developers and the two founders are then running the business. The target is to have four creches by summer 2025.”
The important consideration for investors is how their investment is used – and this is where a company like Quintas Capital can offer that reassurance by their promise to work closely with the businesses over the course of the investment. “It’s not just about backing the right horse, it’s having regulations and good governance and making sure the company is being run in the right way. After all, the 50 per cent relief is great, but it’s not going to make up for you not getting your investment back after the four years are up.”
Canning has worked with EIIS fundraising for many years now, and says that the benefits for both investors and companies are huge. “The system is amazing; I made an investment myself a short time ago, and I can’t believe I’ll get 50 per cent of it back in a few months’ time,” he said. “You don’t get that sort of tax relief anywhere else. By investing in a social infrastructure project, there is also the added comfort of the physical building to derisk the investment.
“For companies, if you cannot get funding elsewhere, the scheme is a way for the government to incentivise someone else to invest in you. In the example of our creche group, they are offering a 5 per cent interest rate annually, so that’s 20 per cent over the four years. Few banks will lend to an early-stage business, and if they do, the interest rate would be much higher. In this sense, the scheme is very attractive to founders too.”
For more information on the Quintas Capital EIIS Fund, see www.quintascapital.ie/eiis