For many business owners the value they have built up in their business , alongside their pension fund, will form the basis of their retirement plan. The generous tax relief available on contributions to the pension plan are well known and understood but what reliefs are available for your business?
Retirement relief is a relief from capital gains tax (CGT) available to individuals who dispose of all or part of the ‘qualifying assets’ of their business.
Retirement Relief may apply to business owners who either sell or gift their business where a gain has arisen on its disposal. This relief allows an exemption from Capital Gains Tax (CGT) at 33%.
Contrary to its title “Retirement Relief”, you do not actually have to be retiring to avail of this relief. Below is a very high level detail of some of the conditions:
- Owner must have reached their 55th birthday at the time of disposal
- Assets disposed of must be qualifying assets i.e.,
- Must give rise to CGT if sold
- Can be Goodwill, land, buildings or machinery
- Owner must have owned the relevant assets for at least 10 years
Relief from CGT is capped at certain amounts depending on the age of the business owner and the relationship to the recipient as follows:
- Aged 55 to 66 and disposing to a qualifying child – No Limit
- Aged over 66 and disposing to a qualifying child – capped at €3 million
- Aged 55 to 66 and disposing to someone other than a child – capped at €750,000
- Aged over 66 and disposing to someone other than a child – capped at €500,000
These amounts are not tax free thresholds, retirement relief does not apply where these amounts are exceeded and could be subject to CGT on the entire consideration. Marginal Relief however may apply where the sale marginally exceeds these amounts. Also, a clawback may occur where a child disposes of the assets within 6 years.
Retirement Relief can be very valuable and provide an exemption from CGT for many business owners. This relief, alongside the income and corporation tax reliefs available for pension contributions, can help business owners provide for themselves and their families in retirement. The above conditions are not exhaustive and we strongly recommend professional advice if you are considering utilising Retirement Relief.
How do I find out more?
To find out more, please contact us on 01 237 5500 or email firstname.lastname@example.org and one of our advisors will be in touch.