Estate & Succession Planning
At PKF O’Connor, Leddy & Holmes we have an experienced team of tax specialists who combine their tax expertise with the commercial experience to advise clients on acquisitions, mergers, sales, restructuring and succession planning. We proactively engage with our clients to ascertain their goals and devise solutions to achieve them.
Every business owner should obtain retirement and succession planning in a timely manner to determine a tax efficient exit from their business. We have extensive experience in working with our clients to advise and assist them with their succession plan. This may involve passing on their business to the next generation, MBO’s or a combination both. By understanding our client, the business and the family dynamics we provide a tailored tax plan that embodies our clients’ wishes and to minimise capital taxes arising from the transaction.
There are a number of taxes and reliefs to consider in relation to succession tax planning. Most tax reliefs have time qualifying conditions. Therefore, timely planning is absolutely key for both personal and business assets so that the various tax reliefs can be utilised to minimise capital taxes.
The taxes applicable in relation to estate and succession planning include:
- Capital Gains Tax for the transferor.
- Capital Acquisition Tax for the beneficiary.
- Stamp Duty for the beneficiary on a gift
- VAT, in certain circumstances.
Our tax team can assist you with:
1. Capital Gains Tax on Sale/Gift of Business Assets
Capital Gains Tax (CGT) may arise when you sell or gift an asset. The current rate of CGT is 33%. However, the following reliefs if applicable can reduce your CGT liability.
Retirement Relief reduces the CGT payable on the gain arising from the sale or gift of qualifying assets of your business or farming trade. The qualifying assets can include business premises, business, or shares in your family trade company. This relief can in some circumstances reduce the liability to nil.
There are a number of conditions to be satisfied for the relief to apply. Therefore, an advance detailed review of the circumstances would be required to ascertain whether the relief is available. In brief some of the main conditions for Retirement Relief are:
- The sales of shares in a family trading company (minimum shareholding tests)
- Own the shares for a minimum period – normally 10 years
- Be a director for 10 years including being a full time director for 5 years.
For shareholders between 55 and 66 years of age the Retirement Relief threshold is €750,000 and reduces to €500,000 after 66 years of age. These thresholds do not apply where the transfer is to your children.
This relief can be used efficiently when parents wish to retire from their trading company or farm and gift all or part of the company or farm to their children. There is no threshold limit for the sales proceeds to be tax exempt if gifted to children by a parent who is between 55 and 66 years of age. From 1st January 2014, where a parent disposes of the assets is 66 years or greater, a limit of €3,000,000 applies on the amount of consideration qualifying for the relief.
If your child disposes of the asset within six years, there are clawback provisions for the tax relief claimed.
This relief can give rise to a CGT rate of 10% (normal rate is currently 33%) on gains from the disposal of qualifying business assets, e.g. which may include shares held by an individual in a trading company or assets owned by a sole trader and used in their trade. The relief applies to individuals only.
There is a lifetime limit of €1 million on the taxable gains that you can claim relief on. Only taxable gains on disposals made on or after 1 January 2016 are counted in the limit.
There are a number of conditions (including time related) to be satisfied for the relief to apply. Therefore, a timely detailed review of the circumstances would be required to ascertain whether the relief is available.
2. Business Relief
A CAT relief called ‘business property relief’ exists which, if all of the conditions of the relief are satisfied, will result in the taxable value of the gift being reduced to 10%.
In order for business property relief to apply, the business assets which are the subject of the gift must be business property which include:
- Unquoted shares in certain family companies and,
- Assets used for the purpose of the business carried out by a family company, but not owned by the company.
This relief can be used efficiently when parents wish to retire from the business and also gift the company to their children.
There are a number of conditions to be satisfied for the relief to apply and for the relief not to be clawed back. The conditions include a minimum period of ownership by the vendor and a minimum percentage ownership by the beneficiary, post the gift/inheritance. Therefore, a timely detailed review of the circumstances would be required to ascertain whether the relief is available.
3. Gift of Non-Business Assets
Capital Acquisition Tax applies on the gift or inheritance of assets over the CAT tax free threshold.
The Tax free thresholds for gifts or inheritances on or after 9 October 2019 are as follows:
|B parent/brother/sister/lineal relation
There is an annual gift exemption of €3,000 per annum from each individual. This €3,000 annual gift exemption is independent of the tax free threshold above.
Gifts and Inheritances taken by a Spouse or Civil Partner are exempt from Capital Acquisitions Tax.
Dwelling House Exemption
If you inherit a house and qualify for the Dwelling House Exemption you will not have to pay Capital Acquisitions Tax.
There are a number of conditions to be satisfied for the relief to apply and also for it not to be withdrawn by Revenue. Therefore a detailed review of the circumstances would be required to ascertain whether the relief is available.