Seek trusted advice before taking on EIIS investment
MGR provides a full suite of tax advisory and tax structuring services with regard to the EIIS scheme, both to investors and investee companies
Investors should give due consideration to the commercial aspects of an EIIS investment as well as to the tax savings, said McKeogh Gallagher Ryan (MGR) tax partner, Mary McKeogh.
“While the EIIS investment has to fall more than 40 per cent in value before the investor is actually at a loss, it is still important that the investment stacks from a commercial perspective,” she said.
“Investors should also be mindful of exit options for the investment as, while it is important that the investment retains its value, or grows in value, it is also important to have a mechanism to realise that value.”
EIIS is a very important source of funding for SMEs in Ireland and the legislation surrounding this relief has been revamped in recent years, making it more user friendly – which is a very positive move, said McKeogh.
“The EIIS rules do, however, remain quite complex, and it is important that any company thinking of taking on EIIS investment would seek professional advice. Since January 1, 2019, the company is now liable for the tax clawback (as opposed to the investors) should the company breach the EIIS rules – and this could be a hefty tax bill for the unsuspecting investee company.”
MGR is the largest independent group of accounting and tax professionals in the midwest, and recently celebrated ten years in business. The firm was established in 2012 by Mary McKeogh, Eoin Gallagher and Eoin Ryan.
All three partners had many years’ experience in practice and with their loyal client base they quickly grew the firm. Today MGR comprises nearly 60 professionals with vast experience and knowledge. A fourth partner, William Lomasney, joined the firm in 2017.
The firm now has three offices, including the original Limerick one. The Nenagh office was established when Quinlan Holohan Chartered Accountants joined the firm in 2017, and the Ennis office when Clune Lynch Accountants joined in 2018.
MGR has taxation, audit and accounting, and advisory and insolvency divisions. “EIIS has been a cornerstone of the tax services offered by the firm since it started,” said McKeogh.
McKeogh became highly experienced in tax-based fundraising through her career as a tax partner in two Top 10 firms in Limerick. “Together with the tax department I fundraise EIIS monies, advise on structuring the highly complex EIIS investments and oversee these EIIS private placings. I have seen many changes to the environment in which EIIS operates and funds are raised,” she said.
This year the firm is fundraising for Clooncon East Single WTG Ltd to develop a 1.5 MW single turbine wind farm to be installed on a two-hectare site in Co Galway. MGR primarily focused on the renewable sector in the majority of their EIIS fundraisings.
McKeogh said that wind farms represent solid straightforward investments with the majority of the variables known, and the development costs also usually known in advance. “There is a reliable market for their output (the current energy crisis only highlighting this further) and investors like the simplicity of the offering,” McKeogh said.
“The promoters in Clooncon are established and experienced professionals who are seeking the funds to develop a wind farm in a good location. They also have full planning permission in place, a number of possible routes to market (including RESS, Corporate PPA and Merchant Market), a lease in place with the landowner, an existing track from the local public road network, and they have a signed and accepted a grid connection offer from ESB networks.
“All these things matter to EIIS investors and provide comfort around the strength of the project.”
MGR provides a full suite of tax advisory and tax structuring services with regard to the EIIS scheme, both to investors and investee companies.
“It is a highly complex area with many technical requirements governing the criteria under which companies may raise EIIS funds, and also how they can behave once the funds are in place in the company,” said McKeogh.
“Many investee companies seek our assistance in structuring their company to facilitate EIIS investment. With the self-certification rules there is a risk companies may raise EIIS funds without following all the criteria fully, which could create problems for them in future with the Revenue Commissioners.
“We typically raise €5m in EIIS funds each year and have a large database of interested investors whom we target as part of the fundraising services we provide to the low-risk companies who engage us to raise EIIS funds. We have built good relationships with many of these investors, who thoroughly investigate each project we fundraise for – keeping both our firm and the promoters on their toes.”
McKeogh said that as the firm has a business advisory division, it also performs extensive due diligence on each project before fundraising for it, ensuring it commercially stands on its own two feet. “We fundraise for low-risk projects and have to ensure both the tax and commercial offering meets the expectations that the investors who go into these projects have,” she said.
“Our clients see us as a trusted and experienced advisor in the EIIS sector. Feedback from investors to date has been hugely positive due to the successful exits of the projects we have fundraised for to date, and we also take great satisfaction from seeing the contribution the EIIS investment makes to the success of the SME companies that benefit from the funds.
“The investors want a low-risk investment that will deliver the tax relief with no complications and ideally also exit at the full cap at the end of the investment term. We know this and this is what we aim to deliver on.”
She added: “On the other side, our promoters want to know we can raise the target amount of funds and how the investment will operate in the company during the investment term, and the associated costs. We provide clarity to both sides of this equation,” she said.
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