PKF O’Connor, Leddy & Holmes will provide tax advice specifically tailored to our clients requirements. We work closely with our clients and together with our expertise, develop solutions to achieve their objectives.
There are a number of taxes and reliefs to consider in relation to Estate & Succession Tax planning. Timely planning is key for both personal and business assets so that the various tax reliefs are utilised and that the capital taxes are minimised. Most tax reliefs have time qualifying conditions.
The taxes applicable in relation to Estate and Succession planning would include:
- Capital Gains Tax for the disponer
- Capital Acquisition Tax for the beneficiary
- Stamp Duty for the beneficiary
- VAT implications
Capital Gains Tax and Stamp Duty only apply on the transfer by way of gift and not an inheritance.
Some examples of Estate and Succession planning would include:
- Capital Gains Tax – Sale/Gift of Business assets
- Capital Acquisition Tax – Gift of business assets to children
- Capital Acquisition Tax – Gift of non-business assets to children
- Long term tax planning
Capital Gains Tax on Sale/Gift of Business Assets
Capital Gains Tax may arise on the sale or gift of assets. Retirement Relief is a relief from Capital Gains Tax on the disposal of qualifying assets. The qualifying assets can include; business premises, business, or shares in your family trade company.
Retirement Relief reduces the CGT payable on the gain arising on the disposal of qualifying assets. This relief can in some circumstances reduce the liability to nil.
This relief can be used efficiently when parents wish to retire from their trade company and also wish to gift all or part of the company to their children.
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. This is in relation to transfers excluding the shareholder’s 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.
There are a number of conditions to be satisfied for the relief to apply and also for the relief not to be clawed back. Therefore a detailed review of the circumstances would be required to ascertain whether the relief is available.
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 also 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 detailed review of the circumstances would be required to ascertain whether the relief is available.
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 2015 are as follows:
|B parent/brother/sister/lineal relation||€30,150|
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.
The dwelling house exemption can provide that an individual can receive a gift or inheritance of their principal private residence with no gift or inheritance tax subject to satisfying certain qualifying conditions. The gift/inheritance which qualifies for this relief dose not reduce the CAT tax free threshold. There are other taxes to consider for the parties to such a transaction.
Long Term Tax Planning
We can provide longer term tax planning to families to minimise the Capital Taxes on the transfer of assets to beneficiaries.