BES - Business Expansion Scheme

FDC Accountants and Consultants have been actively engaged with Property Tax Incentive schemes since the seventies. Many FDC consultants have specialised in large-scale projects and have been well positioned to identify good projects and with over 10,000 clients and 20 offices are best positioned to team up investors with the promoters of such projects. The result has been that many projects are now thriving with good returns for both the investors and promoters.

Many investors, such as for the BES schemes, have been passive investors and have benefited from successful exit mechanisms after a number of years. The original promoters continue to be free to continue on with successful ongoing businesses having got over the hurdle of raising the initial capital. Even in many cases, when bank funding was available, the cost of funding was substantially less when raised from investors. When the cash flow effect is factored in the benefits are even more pronounced as investors do not expect repayments during the first number of years when every cent of cash flow is needed to consolidate the business.

Various Governments have introduced Tax based schemes to help kick start stagnant industries and/or provide incentives to investment in projects to improve social or environmental conditions. Most of these projects would never have got off the ground due to the perception that they were risky or that the return on investment would be too slow. The banks would not provide the initial capital in many cases. However for tax payers at the high rate of tax the risks are almost half and especially when property is involved huge amounts of funds have ended up in property linked tax incentive schemes. There is now a review of such schemes, as the public in general regard many of them as a waste of the nation’s tax revenue potential and the original intention for the State to support only risk takers was forgotten.
 

However there is an expectation that some will still remain but with greater emphasis that the tax foregone by the state will be put towards projects that are more transparently in the national interest and therefore we expect that many new projects will continue to qualify for BES TYPE tax relief, which we expect to be extended in future Budgets.
 
Currently there is confusion between the old BES and the new bes replacement the EII scheme etc.
 
BES = Business Expansion Scheme
 
EII scheme = Employment and Investment Incentive Scheme
 
In the new scheme there will greater monitoring of increase in employment with some tax relief postponed until the employment numbers increase is verified currently after 3 years. The old BES scheme continues until approval for the new measures announced in the budget are approved by the EC in Brissels.
 

So FDC consultants expect to continue to be active in tax based incentive schemes in the years ahead and expect Governments to continue to look for more development  and employment by allowing tax relief for projects including corporate structures that allow for both active and passive investors to avail of tax based funding and attractive exit mechanisms. We also expect that the Minister will continue and increase support for energy and environmental related BES type Projects.

FDC’s most recent BES schemes was for a clients to manufacture wood logs from wood/miscanthus  and another client who has built a very modern and large Mushroom Factory to produce organic Mushrooms. These projects cost millions of euro and funded by many FDC clients. 

 

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