Changes are to be introduced in respect of retirement relief with effect from the 1 January 2014, which will reduce the level of retirement relief available to individuals who are 66 or over on the date of the disposal.  Currently, if the sales proceeds do not exceed €750,000, the gain is exempt from Capital Gains Tax.  This ceiling for disposals to third parties will be reduced to €500,000. 

 
At present, if the disposal is to a child, there is no limit and this will continue to apply where the disposal of the business property takes place before the disponer reaches the age of 66.  From the 31 December 2013, if the parent is 66 years of age or over, a ceiling of €3 million on the value of assets transferring, be it a business or shares in a private trading company, will apply.

The amendments are designed to encourage the early passing on of business assets to the next generation.  The important point to remember is that the restrictions will not be introduced until 1 January 2014 and this gives anyone who may be affected by the restrictions ample time to consider their options and put in place a strategy to pass the assets onto the next generation.

The cost of not taking action will be that there will be an exposure to Capital Gains Tax at 30% on any gain.   There will be marginal relief where the disposal is just in excess of the ceiling.  This tax cost could put a considerable strain on business assets passing to the children especially where a significant portion of the value may be tied up in illiquid business assets such as property.

The important thing for individuals who may be affected is, that with forward planning it may be possible to reduce the charge to Capital Gains Tax.  If you are approaching 66 or if you will be over 66 on the 31 December 2013, then you will need to consider taking action now.  You will need to consider carefully the pros and cons of passing assets to the next generation in the near future as whilst property values are low, there are many other matters to consider other than taxes when one is passing assets to the next generation.


If you have any queries on the proposed changes please do not hesitate to contact us.