Sale of Property & Shares >> Disposal of a Business upon Retirement

This relief is available to individuals who have reached the ripe old age of fiftyfive and are disposing of all or part of their business assets. The business may have been carried on either in their sole name, in partnership or through the medium of a limited company. While it is called retirement relief you do not have to actually retire to avail of the relief. This means that the relief could be used by somebody trading in their own name or in partnership and deciding to trade through a limited company. The sole trader or partnership business could be sold to the limited company and provided all qualifying conditions are satisfied exemption from tax claimed under these rules.

Needless to say there are various rules and regulations attaching to the operation of the relief and we briefly outline the principal ones below.
For disposals to children there is no limit on the consideration involved. This means a total exemption from Capital Gains Tax is available. However, the child or children receiving the business must continue to carry on the business for a period of six years to maintain the relief. For the purposes of this exemption a child also includes a nephew or niece who has worked in the business substantially on a full time basis for five years preceding the date of disposal.

There is a limit on the consideration where disposals are outside the family. Where the consideration does not exceed €500,000 for years up to 2006 and €750,000 for 2007 onwards in respect of qualifying business assets a complete exemption from Capital Gains Tax applies. Where the consideration exceeds this amount relief is available which restricts the Capital Gains Tax payable to one half of the difference between the consideration and the limit of €500,000/€750,000 as applicable.

To qualify for the special exemption the individual concerned must have owned the assets for a minimum period of ten years up to the date of disposal. Where the business is carried on through the medium of a limited company the individual must have been a working Director for ten years up to the date of disposal out of which five years must have been spent as a fulltimeworking Director.  The Revenue view a 42.5 hour week as meeting the full time requirement.  Similar businesses carried on by the same person through separate limited companies can in certain cases be viewed in effect as one business for the purposes of the relief. This could allow for a disposal of one of the businesses to a stranger and claim the relief subject to the monetary limit and at the same time dispose of another business to a child and also receive the family exemption without monetary limit for this transfer.

The relief can also apply to the consideration received for property being disposed of in conjunction with the business.

The rules and regulations governing this relief are complex and independent professional advice should be sought before making any final decision. We can provide more detailed advice on this matter on a consultancy basis for which a charge will be made.