Capital Gains Tax (CGT) reliefs

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 years of age 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 satisfy all the following conditions:

• You are unable to continue to run your farm or business due to ill health (you will need to provide medical evidence of the illness).
• You reach the age of 55 within 12 months of the disposal.
• At the time of disposal, all conditions for relief, other than the age requirement, are satisfied.

Relief may also be allowed in respect of certain payments made under the Brexit Voluntary Permanent Cessation Scheme. To qualify for relief, the individual must:

• have owned and used the fishing vessel and related licence for the purpose of fishing for at least six years prior to receiving the compensation
• and
• be at least 45 years old at that time.

What is Retirement Relief?

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

• your child
• or
• 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 up to the date of the disposal
• 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).

Transfer of a business or farm to your child

The amount of relief that you can claim depends on the date of transfer, your age at the time of transfer, and the aggregated value of assets transferred.

For transfers made:

• up to 31 December 2013, you may claim full relief if you are 55 years of age or older
• from 1 January 2014 to 31 December 2024 (inclusive), if you are:
  • between 55 and 65, you can claim full relief
  • 66 or older, the relief is restricted to €3 million.
• from 1 January 2025, if you are:
  • between 55 and 69, the relief is restricted to €10 million
  • 70 or older, the relief is restricted to €3 million.

Clawback of relief

The relief is clawed back:

• if you claim relief on the transfer of a business or a farm to your child
• and
• your child disposes of the asset within six years.

Your child must pay CGT on the original disposal by you, in addition to the CGT on their own disposal.

Deferral of CGT liability

You may claim relief on the transfer of a business or farm to your child. Where a CGT liability remains due on such a transfer, you may defer the CGT liability arising if:   

• you are aged 55 years or older
• you transfer qualifying assets to a child
• the transfer(s) takes place on, or after, 1 January 2025
• and
• the value of such assets exceeds the €10 million limit on CGT relief available in respect of such transfers. 

If you wish to defer the CGT liability, you must claim the CGT deferral when you file your CGT return for the year in which the transfer to your child takes place. 

If your child disposes of the assets within 12 years of the transfer, the CGT liability deferred will crystalise. Your child must pay the deferred CGT liability in addition to the CGT liability arising on their own disposal.  

Disposal of a business or farm to someone outside your 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:
  • from 1 January 2014 to 31 December 2024 (inclusive) and you are between 55 and 65
  • or
  • on, or after, 1 January 2025 and you are between 55 and 69.
• €500,000 for disposals made
  • from 1 January 2014 to 31 December 2024 (inclusive) and you are at least 66
  • or
  • on, or after, 1 January 2025 and you are at least 70 years old.

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 on the disposal of your business or farm to someone outside your family. Relief is not available on the disposal of qualifying assets, the value of which exceed the lifetime limits. You will be liable for CGT on such disposals.

Marginal relief

If you qualify for relief on the disposal of a business or farm to someone outside your family, but exceed the lifetime limits, CGT will be chargeable. However, marginal relief may apply to gains that exceed the thresholds on such disposals. 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 and claims to relief and, or deferral of CGT when you file your CGT return.

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