Tax Tip: Business Relief from CAT

If you intend to transfer business assets to a family member, be aware that you can reduce the taxable value of these assets by up to 90% by making maximum use of Business Relief from Gift and Inheritance Tax (CAT)

For successful business clients Business Property Relief is one of the most important reliefs on the statute book. By using it the value of business property for gift or inheritance tax purposes can be reduced by up to 90% i.e. the taxable value of a qualifying business with a market value of €100,000 would be €10,000.

This can enable valuable business assets to pass to a business owner’s successors without the crushing burden of tax that would otherwise arise. The relief should be considered in conjunction with other tax reliefs such as retirement relief for Capital Gains Tax purposes. Careful tax planning is required in advance of any business transfer to ensure that no unnecessary tax liability will arise in relation to same.

Only relevant business property will qualify for the relief. “Relevant business property” is defined as the business or an interest in the business in the case of a business carried on by a sole trader or by a partnership. “Business” is defined as one which is carried on for gain. Relevant business property includes unquoted shares in a family company. Importantly, individual assets used in the business, such as a factory, will not qualify for the relief if transferred to the beneficiary without the business.

To qualify for the relief the relevant business property must have been owned for a continuous period of 5 years prior to the date of the gift or inheritance. However, if the inheritance is taken on the death, the relevant period is 2 years prior to the date of the inheritance.

The relief can be clawed back if the business, or any business which replaced it, ceases to trade within a period of 6 years after the date of the gift or inheritance. The clawback can be avoided if the business is replaced within one year by other relevant business property.

To find out more about Business Relief from CAT, please arrange a consultation with one of our advisors.

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Joe McAvoy

Director

Tax Services

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Dara Burke

Director

Tax Services

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Shane Carroll

Director

Business Advisory

Call: +353 21 432 1321

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