Tax Planning for Succession in Irish Business

Effective succession planning is crucial for Irish business owners to minimize tax liabilities and ensure a smooth transfer of wealth to the next generation. Wit proper planning and strategic use of available reliefs, significant tax savings can be achieved while maintaining business continuity.

Key Tax reliefs Available.

Retirement Relief ( CGT)

CGT is available from 55 years, retirement relief can eliminate capital gains tax on qualifying business assets up to 10 million for those aged 55-69 years, with the limit reducing to €3 million from aged 70. The relief applies to business assets and family company shares held for at least 10 years, with specific working directors requirements for company shares.

Business Relief ( CAT)

This relief reduces the taxable value of relevant business property by 90% for inheritance or gift purposes. It applies to sole traders businesses, partnership shares and unquoted company shares where specific control thresholds are met. The relief can result in substantial savings- potentially reducing a €1 million business transfer tax liability from €198,000 to a nil liability, in a parent child transfer situation.

Agricultural Relief ( CAT)

Provides a 90% reduction in taxable value for agricultural property transfers, subject to the recipient satisfying the “farmers test”, where 80% of the assets after taking the gift or the inheritance is of an agricultural nature. This relief supports family farm succession and ensures continued agricultural use.

Strategic Planning Approaches

Early Planning Implementation

Begin succession planning well before retirement age to meet qualifying conditions. Key timing considerations include ownership periods, working directors requirements, maintaining active business operations. The recent changes to retirement relief effective from January 2025 make early planning even more critical.

Optimize CAT Thresholds

The 2025 Group A threshold increased to €400k for parent to child transfers, when combined with business relief’s 90% reduction, this can substantially minimize or eliminate tax liabilities on family transfers.

Lifetime vs Inheritance Transfers

Lifetime transfers may be advantageous to include the next generation early and reduce exposure to future asset appreciation, however inheritance transfers avoid Stamp Duty costs which can be significant at rates of 1% for shares and 7.5% for non residential property. There is currently a 1% rate between blood relatives on farmlands. No CGT liabilities on inheritance transfers.

Professional advice should always be sought given the complexity of qualifying conditions and the potential for significant tax savings through proper succession planning.