Retirement Relief

I am 68 years old and continue to run my own company. I now want to sell my business and retire. Can you please advise me of the tax implications of same?

Firstly, I would like to wish you well in your impending retirement, I’m sure it’s well earned. You are absolutely correct to consider the potential tax consequences of selling your business. Shares in a private limited company are chargeable assets for Capital Gains Tax (CGT) purposes and as such CGT will apply to any gain made.  The current rate of CGT in Ireland is 33%.

That being said, current Irish tax legislation, subject to certain conditions, allows individuals over 55 to dispose of their business, valued at up to €750,000, tax free. This relief is known as retirement relief. In broad terms retirement relief is a relief given to an individual on the disposal of all or part of the qualifying assets of his business, this includes shares in a family company, provided he is aged fifty-five years or more at the date of disposal. In order for the sale of shares to qualify for this relief, the shares in question must be shares in a family company.

A family company in relation to an individual for the purpose of retirement relief, means, a company in which the voting rights are not less than 25 per cent, exercised by the individual, or not less than 75 per cent, exercisable by the individual or a member of his or her family where not less than 10 per cent, exercisable by the individual himself or herself. Further conditions also apply in relation to the length of ownership of these shares and the role of the individual within the company during this time. As you have managed your own company for a number of years, these conditions are likely to be met in this instance.

Importantly, with effect from 1 January 2014, individuals aged 66 years and over, such as yourself, are subject to a ceiling limit of €500,000 for full CGT retirement relief. Also, as things currently stand, a parent can dispose of or gift qualifying assets to their child and avail of retirement relief in respect of the full value of the property. However, Finance Act 2012 introduced a limit of €3,000,000 for individuals who reach the age of 66 and transfer assets on or after 1^st January 2014.

Given these upcoming changes, I would advise that you now consider the value of the shares you wish to dispose of, with a view to availing of the limits as they currently stand. Particularly, as the limits outlined are lifetime limits and CGT will apply to the full amount, subject to marginal relief, should these limits be passed.

This is a very complex area, and it is important to ensure it is dealt with correctly and in a tax efficient manner. With this in mind, I would advise that you seek professional advice from a qualified tax consultant to allow you to best avail of all potential reliefs currently available to you.