If you're 55 or older, you may be able to claim relief on disposing any part of your business or farming assets. Although this is called Retirement Relief, you don't need to retire to avail of it. The relief takes the form of a reduction in the CGT payable on gains accruing on the disposal of the qualifying assets.
In order for the disposal to qualify for the retirement relief, the following conditions must be met:
- You must be an individual
- You must be at least 55 years of age at the date of disposal
- The relief is available in respect of qualifying assets
- You must have owned the qualifying assets and used those assets for the purposes of your business for at least 10 years prior to the date of disposal
Qualifying assets are:
Business assets - the chargeable business assets which an individual has owned for at least 10 years ending with a disposal.
A chargeable business asset is an asset (including goodwill but not shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of farming, or a trade, profession, office or employment, carried on by an individual. This condition does not extend to moveable chattels which qualify for relief irrespective of the period of ownership. Items such as debtors, stock, bank balance etc are not included in the term chargeable business asset, as no chargeable gain would result from their disposal.
Shares in a family company - where the assets being disposed of are shares in a 'family company' which is either a trading company, a farming company or a holding company of a trading group, the shares of which have been owned by the individual for at least 10 years ending with the disposal and in which the individual has been a working director for at least ten years and a full-time working director for at least five of those years.
Shares in a company include value relating to goodwill but do not include value relating to other shareholdings, securities or other assets held as investments.
A family company is a company where the individual holds either:
- at least 25% of the voting rights in the company;
or - at least 10% of the voting rights and not less than 75% of the voting rights are controlled by members of his/her family (including the person making the claim)
'Family' includes spouses and civil partners, direct relatives (siblings, ancestors or lineal descendants) and direct relatives of spouses and civil partners.
Land, machinery or plant owned by the individual for at least 10 years and used by his 'family company' throughout that period are also eligible provided these assets are disposed of by the same individual at the same time and to the same person as the shares in the family company.
Land used for the purposes of farming carried on by the individual which they owned and used for a period of at least 10 years (ending with the transfer of an interest in that land for the purposes of complying with the schemes of early retirement from farming operated by the Department of Agriculture, Fisheries and Food).
Farm land that is subject to a compulsory purchase order by a local authority for the purposes of road widening - if at the time of the compulsory purchase (or at any time in the preceding 5 years) the farmer had let out the land then the farmer must have used the land for the purpose of farming for at least 10 years immediately before the time the land was let.
Land which has been owned and used by the individual for the purposes of farming carried on by the individual for not less than 10 years, and subsequently the land is set for up to 25 years may qualify for the relief. Where there is a disposal to a third party of let land, each letting of the land must be for a period of not less than 5 consecutive years. Land let under a conacre arrangement may, in certain circumstances, also qualify for retirement relief. Land that is let under conacre prior to the disposal to:
- A child at any time, or
- A third party where the disposal occurs on or before 31 December 2016
will qualify for retirement relief.
Where retirement relief is claimed in a tax year, you are prohibited from claiming the annual exemption of €1,270 in that same year (even against other disposals arising in that year).
There are some circumstances in which you may qualify for this relief before 55:
- You're unable to continue farming due to ill health
- You reach the age of 55 within 12 months of the disposal
For disposals made up to and including 31 December 2013, you can claim full relief if the market value at the time of disposal doesn't exceed €750,000.
The threshold is €500,000 if both of the following apply:
- The disposal takes place on or after 1 January 2014,
and - you're 66 or older
If the market value is more than the above threshold, marginal relief may apply which limits the CGT to half the difference between the market value and the threshold.
The threshold of €750,000 (€500,000 after 1 January 2014 for persons aged 66 or older) is a lifetime limit. If you exceed this threshold, relief will be withdrawn on earlier disposals.
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