Business tax relief & retirement
Retirement planning is not all about pensions
Planning your business exit, is a key component of your financial plan. If you are aged 45 or over, then you should get financial and tax planning advice to ensure that you have all qualifying factors considered, particularly age related conditions.
It is critical to consider and review your exit plan or retirement - this could be a business transfer to children, business sale to a third party or even working until death.
Pensions are a valuable mechanism to extract wealth from your business
- however, pensions should not be considered in isolation.
We want you to also consider and prepare to maximise other reliefs and how these potentially could be utilised.
Firstly, on the death of a business owner, where business assets are transferred under Will there is no charge to Capital Gains Tax. So, we always advocate that a business owner has an up to date Will.
Currently, the next two most significant reliefs some of our customers have benefited from are "Retirement Relief" and "Entrepreneurial Relief"
Retirement Relief
Retirement Relief provides for complete exemption OR reduction in Capital Gains Tax payable on the disposal of certain "qualifying assets" by individuals who are aged 55 or more on the date of disposal.Importantly, the relief is available even if the owner remains actively engaged in the business after the disposal.
Retirement relief conditions checklist;
Claimant must be an individual
Must be aged 55 at date of disposal.
Relief applies to "Qualifying Assets" (rental property, investment assets are non qualifying)
The Claimant must have owned the "Qualifying Assets" and used those assets for the purpose of the business for the last 10 years.
Where shares in a family company, the individual holds either (a) at least 25% of the voting rights of the company OR (b) at least 10% of the voting rights, and not less 75% of the voting rights are controlled by members of his/her family.
Disposals to a child:(may include certain grandchildren, nephew/niece who has worked in business full time for 5 years and foster child)
Where the individual is 55 or over they will receive full exemption from CGT on disposals of "Qualifying Assets" to child.
NB If the individual is 66, the exemption is restricted to "Qualifying Assets" with a market value up to €3,000,000.00 The excess over €3,000,000.00 is subject to CGT.++relief will be clawed back if child disposes of the asset within 6 years. Parents pre relief liability will then become payable by the child.
Disposals to persons other than a child: If aged 55 to 65, full CGT retirement relief available if the gain on the disposal of the "Qualifying Assets" is no more than €750,000.00
*NB If the individual is 66, the ceiling for the relief on "Qualifying Assets" is limited to €500,000.00
**there is potentially scope for "Marginal Relief", where CGT may not exceed 50.00% of the difference between "proceeds" and €750,000.00 (or €500,000.00).
IMPORTANT PLANNING FOR RETIREMENT RELIEF: Businesses owner by married couple of civil partners could potentially have "Qualifying Assets" of up to €1,500,000.00 (or €1,000,000.00) WITHOUT incurring any CGT liability
Entrepreneurial Relief
From 01 January 2017, a reduced rate of 10.00% CGT may be applied to gains arising from the disposal of the whole or the part of the "chargeable business assets" by a "relevant individual".
The reduced rate only applies on a lifetime limit of €1,000,000.00. The higher 33.00% CGT rate will apply on any gains arising in excess of €1,000,000.00Chargeable business assets = asset used by the qualifying business, including goodwill.
Entrepreneurial relief qualification checklist;
Owned the chargeable assets for 3 years prior to disposal
Own more the 5.00% of the ordinary share capital in the "Qualifying Company"
Be a "Qualifying Person", where individual has been a director or employee of the Qualifying Company in a managerial or technical capacity, required to spend 50.00% or more of their time working in managerial or technical capacity in the company, and served in that capacity for a continuous period of 3 out of the 5 years immediately prior to the disposal of the chargeable business assets.
Want to know more? We are available to discuss your options, and we look forward to hearing from you.
Our job is to help you choose a product and structure that will help you meet your goals.
telephone | 091441188 and/or email | office@nelsonlife.ie
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