Transferring your business to the next generation is a significant milestone, both emotionally and financially. In Ireland, recent legislative changes effective from 1st January 2025 have introduced new considerations for business owners planning such transitions. Understanding these changes is crucial to ensure a smooth and tax-efficient transfer.
- Capital Gains Tax (CGT) Retirement Relief Adjustments
Age-Based Relief Caps:
Ages 55 to 69: The relief is now capped at €10 million.
Ages 70 and above: The relief remains capped at €3 million.
This adjustment aims to encourage timely succession planning while acknowledging the extended working lives of many business owners.
Clawback Provision:
If the business is transferred to a child who then disposes of it within six years, the original relief claimed may be clawed back, resulting in a CGT liability for the original owner.
- Capital Acquisitions Tax (CAT) Threshold Increases
Budget 2025 has increased the CAT Group thresholds, allowing beneficiaries to inherit more without incurring tax:
Group A (Parent to Child): Threshold increased from €335,000 to €400,000.
Group B (Other Relatives): Threshold increased from €32,500 to €40,000.
Group C (Non-Relatives): Threshold increased from €16,250 to €20,000.
These adjustments provide some relief amidst rising asset values, but careful planning remains essential to manage potential tax liabilities.
- Strategic Considerations for Business Succession
Given these changes, business owners should:
Plan Early: Early planning allows for strategic decisions that can maximize available reliefs and minimize tax liabilities.
Seek Professional Advice: Engage with tax advisors and legal professionals to navigate the complexities of the new regulations.
Communicate Clearly: Open discussions with potential successors can prevent misunderstandings and ensure alignment of expectations.
A well-structured succession plan not only preserves the business’s legacy but also secures its financial health for future generations.
- Additional Resources
For more detailed information, consider consulting the following:
Revenue Commissioners: Disposal of a Business or Farm (Retirement Relief)
Davy: Budget 2025: Summary and Key Changes
KPMG Ireland: Business Tax – Taxing Times – Budget 2025
Staying informed and proactive is key to navigating the evolving landscape of business succession in Ireland. By understanding and adapting to these changes, you can ensure a seamless transition that safeguards your business’s future.
*Note: This article provides a general overview based on the information available as of February 2025. For personalized advice, please consult a qualified tax professional.*