Taxation reliefs on sale of your business or retirement

Structure

The legal structure for your business e.g. sole trader, single company, holding company or cross border group and the detail of how the structure is implemented and operated are key ingredients in achieving a tax efficient sale. This can be the difference between qualifying for a tax-exempt disposal or paying capital gains tax at 33%.

Tax reliefs

There are reliefs which reward entrepreneurs and business owners on sale of the business.  These reliefs may eliminate tax on a sale or retirement or may provide for a significant reduction in the tax at exit.

“S626B relief”

The sale by a company of a qualifying trading subsidiary or company owned by a trading group may qualify for complete exemption from capital gains tax.

Retirement relief

The sale of a qualifying business or shares in a family company may qualify for complete exemption from capital gains tax for disposals up to €750k per shareholder. In the case of a disposal to a child the exemption is uncapped up to age 66 (a €3M cap applies thereafter).

Entrepreneur relief

The sale of shares in a qualifying trading company or holding company may qualify for entrepreneur relief at the reduced 10% rate of capital gains tax for gains up to €1M.

There are qualifying conditions and tests that need to be met for the above reliefs to apply. These conditions may apply at a point in time or may need to be met throughout qualifying periods.

The time frame for meeting the conditions can be as short as 12 months in the case of S626B CGT relief, three years in the case of the reduced 10% rate of CGT for entrepreneur relief or as long as 10 years in the case of qualifying for exemption from CGT in the case of retirement relief.

Exit event and strategic plan

It is important to consider which of these reliefs or which combination of these reliefs are appropriate to your exit within your strategic tax plan (by the way you need a strategic tax plan but that is another story).

Apart from the changes in tax legislation flowing from the annual Finance Acts which may make changes to these reliefs it is noteworthy that published Revenue practice in this area has been updated a number of times during 2017 and 2018. You should keep your tax structure and exit plans under review on an ongoing basis and if it has been some time since it was examined it is advisable consider if it is still fit for purpose.

What questions do you have?

We are happy to help. Please post your comment below or call John Comerford, Tax Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: jcomerford@cooneycarey.ie

Share This Post:
  • email
  • Facebook
  • LinkedIn
  • Twitter
    Posted on September 5, 2018 by John Comerford

    VAT on property: Revenue updated guidance on Transfer of Business

    When you buy, sell or let property it is critical to consider the VAT implications and ensure that you include the appropriate wording in the relevant contract for sale or lease to manage your VAT position.

    Before this update

    Revenue have recently updated their guidance on the application of transfer of business provisions to property transactions. Before this change where a VAT registered purchaser was purchasing property, which had previously been let then transfer of business generally applied. Accordingly, if the property was “new” VAT was deemed to have applied on the sale price and if the property was an “old property” the purchaser took over the remaining VAT capital good obligations of the vendor.

    The new guidance

    The new guidance requires that there is a current letting or agreement for letting for transfer of business to apply. If the property is vacant on sale then transfer of business may not apply and further analysis is required to determine if VAT is chargeable, the sale is exempt or if a joint option to tax the sale should be sought.

    What questions do you have?

    We are happy to help. Please post your comment below or call John Comerford, Tax Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: jcomerford@cooneycarey.ie

    Share This Post:
    • email
    • Facebook
    • LinkedIn
    • Twitter
      Posted on September 4, 2018 by John Comerford

      Budget 2019: Entrepreneurs seek improvement in tax relief to support investment in Irish economy

      With Brexit, international market and general economic risks looming the role of the Irish entrepreneur is more important than ever to maintain Ireland’s economy.

      As Irish entrepreneurs invest the economy grows, employment numbers are maintained and increased, and the driver of Irish economic activity is diversified to compliment multinational investors.

      When entrepreneurs invest they take commercial risk motivated in part by the financial reward that follows business success. The Irish CGT rate is 33% and such a high CGT rate can discourage investment by entrepreneurs.

      The special entrepreneurs CGT rate

      The special entrepreneurs CGT rate of 10% partly addresses this but has two key downsides:

      • It is limited to gains of €1M.

      This compares with the UK relief which applies to gains up to €10M.

      • The full time working requirement means that entrepreneurs can generally only qualify in one business even if they invest in many businesses.

      It makes sense to encourage investment in business of scale and to invest in more than one business. Entrepreneurs will be watching Budget 2019 closely.

      If the limit on the relief is increased closer to the UK limit of €10M and the full time working relief requirement can be relaxed there will be more reason than ever for Irish entrepreneurs to invest with the benefit that brings to the Irish economy and employment.

      What questions do you have?

      We are happy to help. Please post your comment below or call John Comerford, Tax Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: jcomerford@cooneycarey.ie

      Share This Post:
      • email
      • Facebook
      • LinkedIn
      • Twitter
        Posted on August 29, 2018 by John Comerford

        ← Older Posts