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Capital Gains Tax (CGT) reliefs

  1. Overview
  2. Indexation Relief
  3. Farm Restructuring Relief
  4. Revised Entrepreneur Relief
  5. Principal Private Residence (PPR) Relief
  6. Property acquired between 7 December 2011 and 31 December 2014
  7. Disposal of a business or farm (Retirement Relief)
  8. Transfer of a site from a parent to a child

Disposal of a business or farm (Retirement Relief)

Note

Although this is referred to as Retirement Relief, you do not need to retire from the business or farming.

If you are 55 or older, you might be able to claim Retirement Relief. This is a relief on Capital Gains Tax (CGT) when disposing of any part of your business or farming assets.

If you are younger than 55, you might qualify for this relief where you:

  • are unable to continue farming or your profession due to ill health (You will need to provide medical evidence of the illness.)
  • reach the age of 55 within 12 months of the disposal.

What is Retirement Relief?

There are two types of Retirement Relief, depending if you dispose of your business or farm to:

  • your child
  • someone outside your family.

The term ‘child’ includes your:

  • son or daughter
  • stepchild or child of a civil partner
  • child adopted under, or recognised as adopted under, the Adoption Act 2010
  • child of a deceased child
  • niece or nephew who has worked full time in the business or farm for at least five years
  • foster child, whom you have maintained for at least five years before they were 18 years old. (This must be supported by the testimony of more than one witness.)

Disposal of a business or farm to your child

The amount of relief that you can claim depends on your age at the time of disposal.

For disposals made:

  • up to 31 December 2013 you may claim full relief if you are 55 or older
  • from 1 January 2014 if you are:
    • between 55 and 65, you can claim full relief
    • 66 or older, the relief is restricted to €3 million.

Clawback

If your child disposes of the asset within six years, we will withdraw the relief. Your child must then pay CGT on the original disposal by you, in addition to the CGT on their own disposal.

Disposal of a business or farm to someone outside of family

You can claim full relief when the market value at the time of disposal does not exceed the threshold of:

  • €750,000 for disposals:
    • made between 1 January 2007 and 1 January 2014
    • on or after 1 January 2014 and you are under 66.
  • €500,000 for disposals on or after 1 January 2014 and you are 66 or older.

If the market value is more than the threshold, marginal relief may apply. This limits the CGT to half the difference between the market value and the threshold.

Clawback

The €750,000 and €500,000 thresholds are lifetime limits. If you exceed this threshold relief will be withdrawn. You will be liable for CGT gains on all disposals.

Marginal relief

Marginal relief may apply to gains that exceed the thresholds. It limits CGT to half the difference between:

  • the sale price or market value
  • and
  • the threshold.

How to claim Retirement Relief

Include the relief when you  calculate your CGT. You must also include details of the gain when you  file your CGT return.

  • Example 1

    Gerry is 59, he sells his farm in October 2018 for €720,000 (the market value). Gerry qualifies for full relief because the he is over 55 and the market value is under the threshold of €750,000.

    He does not need to pay CGT. He files his CGT return with the details before 31 October 2019.

  • Example 2

    Paula, who is 67, sells shares in her company in March 2018 for €570,000 (the market value). The original cost of the shares was €100,000.

    She cannot claim full relief because she is over 66 and the shares were sold for more than €500,000.

    Calculation of Paula’s CGT
    DescriptionCalculationAmount

    Sale price

    		  

    €570,000

    Deduct allowable expenses:

    		  

     

    Cost

    		  

    €100,000

    Solicitor’s fees

    		  

    €120,097

    Chargeable gain

    		  

    €349,903

    Deduct personal allowance

    		  

    €1,270

    Taxable gain

    		  

    €348,633

    CGT due (33% of €348,633)

    €348,633 x 0.33

    €115,048.89

    Paula can claim marginal relief. Her CGT is limited to half the difference between the sale price of the shares and the threshold.

    Marginal relief – CGT limit
    DescriptionCalculationValue

    Sale price

     

    €570,000

    Threshold

     

    €500,000

    Excess

     

    €70,000

    CGT limit (half excess)

    €70,000/2

    €35,000

    As Paula qualified for marginal relief her CGT due is €35,000 (not €115,048.89).

    She pays her CGT before 15 December 2018, and files her CGT return before 31 October 2019.

  • Example 3

    In 2010, when he was 56, James sold part of his business for €670,000. He qualified for full relief because he was over 55 and the sale price is under the threshold of €750,000.

    In 2019, aged 65, James sells the remaining part of his business for €220,000. The total sale price is €890,000.

    The total amount received by James for sale the business is €890,000. This is over the €750,000 threshold. James must now pay CGT on the total gain.

    The CGT due would work out as €90,000, but he can claim marginal relief. His CGT is limited to half the difference between the total amount received and the threshold.

    Marginal relief – CGT limit
    DescriptionCalculationValue
    Total amount received €670,000 + €220,000 €890,000
    Threshold   €750,000
    Excess   €140,000
    CGT limit (half excess) €140,000/2 €70,000

    As James qualified for marginal relief his CGT due is €70,000 (not €90,000).

    James pays his CGT before 15 December 2019, and files his CGT return before 31 October 2020.

Next: Transfer of a site from a parent to a child

Published: 24 June 2021 Print this page

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