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Understanding retirement relief in Ireland is essential for individuals contemplating the sale of their business or farm assets. Despite its name, retirement relief isn’t exclusively for retirees. In this guide, we’ll delve into the qualifying conditions for retirement relief in Ireland, shedding light on who’s eligible and what it entails. As your trusted accountancy firm, we’re dedicated to simplifying the process and offering tailored advice.
Qualifying Conditions for Retirement Relief
Retirement relief in Ireland provides individuals aged 55 or older with an opportunity to claim relief on Capital Gains Tax (CGT) upon disposing of their business or farming assets. However, eligibility extends beyond age; even individuals under 55 may qualify under specific circumstances. For example, those facing ill health or approaching 55 within 12 months of asset disposal may also be eligible.
To qualify for retirement relief in Ireland, individuals must meet certain conditions. When transferring assets to a family member, such as a child, stepchild, or adopted child, relief eligibility is based on specific criteria. Alternatively, if selling to a non-family member, relief eligibility hinges on the market value of the disposal.
To qualify for this relief, specific conditions must be met:
1. Individual Disposal:
The disposal must be made by an individual, not by a company.
2. Age Requirement:
The individual must be aged 55 or over at the time of the disposal. It is important to note that relief may be restricted for individuals older than 66.
3. Qualifying Assets:
The disposal must involve qualifying assets, such as business assets or shares in a family company.
4. Minimum Holding Period:
The qualifying assets must have been held for a minimum period immediately before the disposal, typically ten years.
5. Directorship Requirement:
When the disposal involves family company shares, the individual must have been a working director for at least ten years preceding the disposal, with at least five years on a full-time basis.
6. Family Company Definition:
A company is deemed a family company if the individual holds a minimum of 25% of the voting rights. Alternatively, the individual must hold a minimum of 10% of the voting rights while their family, including them, holds a minimum of 75%.
To learn more about this relief, visit Revenue.ie.
Additional Relief Details
In simplified terms, if the consideration for a disposal is €750,000 or less, relief may be granted for the entire amount of capital gains tax (CGT) chargeable on the disposal. However, this threshold serves as a lifetime limit for disposals of qualifying assets made by individuals aged at least 55, on or after 6 April 1974.
When the consideration exceeds €750,000, marginal relief applies. This limits the tax chargeable on the disposal to one-half of the difference between the consideration and €750,000. This €750,000 limit reduces to €500,000 for those aged 66 or over,
There is no limit on a transfer to a child for those aged 55 but less than 66. Once you reach the age of 66, the relief applies to €3million when passing to a chid (or other family members subject to conditions)
For disposals involving shares or securities of a family company, only a proportion of the consideration relating to the company’s chargeable business assets is considered for relief.
It is essential to note that certain conditions may trigger a clawback of relief, such as when the “child” disposes of the assets within six years of the initial disposal. Additionally, the relief does not impact the computation of gains on disposals of assets that are not qualifying assets.
Budget 2024 introduced two important changes to retirement relief as of 1 January 2025 whereby the €750,000 limited mentioned above extends to those under 70 rather than 66. Also, the €3 million limit for passing children mentioned above does not apply until you reach the age of 70. However, for those under 70 passing qualifying assets to their children will only be eligible for relief where the values are less than €10million.
Navigating retirement relief and tax planning in Ireland can be complex, but it is vital for securing your financial future. At Cronin & Co, we specialise in simplifying the process and offering tailored advice to ensure you make the most of retirement relief opportunities. Contact our expert accountancy firm today to start planning for a financially stable retirement.