If you are at least 55 years of age or are approaching this age you should bear in mind that significant relief from Capital Gains Tax is available for gains on disposal outside the family of certain types of business assets.
Retirement Relief is a useful method of minimising CGT however it’s something of a misnomer. To qualify for this Relief you don’t have to retire, you merely have to dispose of what are known as qualifying assets on or after the date you reach the age of 55.
Qualifying assets include assets, including goodwill, used for the purposes of a trade or profession or for farming which the individual claiming the relief has owned for a period of at least 10 years together with shares in a trading company, a farming company or the individual’s family company that the individual has owned for at least 10 years. Throughout this time the company concerned must have been carrying on a trade or have been farming and the individual must have been a working director for a period of at least 10 years during which he had been a full-time director for at least 5 years. Where the qualifying assets are shares, the individual must hold at least 25% of the voting rights of the company or at least 10% in a case where the company is 75% owned by his or her family.
The relief is calculated by reference to the level of the consideration that you obtain from the disposal of qualifying assets outside the family. The separate amounts of consideration for all such disposals over the lifetime of the individual are aggregated and relief is available up to a threshold. For disposals made on or after 1 January 2014 until 31 December 2024 there are different thresholds of consideration that qualify for relief depending on the age of the person making the disposal:
- Full relief on consideration of up to €750,000 may be claimed where the individual is less than 66 years of age, or
- A reduced relief on consideration of up to €500,000 can be claimed if the person making the disposal is 66 years of age or older.
In recognition of the fact that people are delaying their retirement and continuing to work for longer the thresholds with effect from 1 January 2025 will be:
- Full relief on consideration of up to €750,000 may be claimed where the individual is less than 70 years of age, or
- A reduced relief on consideration of up to €500,000 can be claimed if the person making the disposal is 70 years of age or older.
Tax Tip: If you are 66 years or older in 2024 but will be less than 70 years in 2025 then it may make sense to delay disposing of business assets that will qualify for retirement relief until 2025. In 2025 consideration of €750,000 will qualify for retirement relief compared to €500,000 in 2024.
Typical Problems that we come across
The availability of retirement relief is subject to detailed conditions as regards the type of assets, the length of ownership and the usage of the assets. It sometimes happens that a disposal is made and a gain is realised at a time when one or more of the conditions for relief has not been met and that, in consequence the claim for retirement relief is lost.
How We Can Help
It never pays to assume that retirement relief is a given. The conditions for relief require careful examination before a disposal is made. Our tax team has an in depth understanding of the legislation and practice surrounding retirement relief. We can guide you through the legislation and help you to plan your disposal and ensure that the conditions for the best possible claim to retirement relief are satisfied.
