For many individuals selling or liquidating their business, a capital gains tax rate of 33% is likely to arise on the exit.  With proper planning in advance of any exit it may be possible to achieve a lower rate of capital gains tax – 10% if entrepreneur relief is available.

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Where this relief is available the first €1 million of any gain will be liable to tax at 10%, therefore resulting in maximum tax saving of €230,000.

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There are a number of conditions which must be met in order to ensure that the relief is available.  We have listed below, in the context of a disposal of shares, the main conditions which need to be satisfied.  

• The shares must have been held for a continuous period of three years prior to the disposal.  The individual must also own at least 5%  of the ordinary share capital of the company.
• The company in which the shares are held must carry on a “qualifying business” i.e. a business other than the holding of assets as investments, the holding of development land or the development or letting of land. 
• The individual disposing of the assets must have worked for the company in a managerial or technical capacity for at least 50% of their workings time for three of the last five years prior to the date of disposal.

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Where an individual is considering disposing of their interest in a business it is important that the structure of the business is reviewed in advance of any exit to determine if it is possible to avail of entrepreneur relief.

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If you are considering exiting your business the tax team at Cooney Carey would be delighted to meet and review your business to determine if a more tax-efficient outcome can be achieved.