This relief applies to individuals who are 55 years or older and are disposing of qualifying business asset(s). However, the relief differs if you dispose of your business asset to a child or any person other than a child.
The Finance Bill 2023 introduced changes to the limits and age restrictions for retirement relief that will take effect from 1 January 2025.
1. Disposals to Children
- Currently, there is no upper limit on the relief if you are between 55 and 65 years. From 66 years onwards the relief is restricted to €3m per individual.
- From 1 January 2025, there is an upper limit of €10m, if disposing of a qualifying asset to a child between the ages of 55 to 69 years. Once you reach 70 years, the relief will be further restricted to €3m per individual.
2. Disposals to Persons other than a Child
- Currently, where a person between 55 and 65 years disposes of a qualifying asset to anyone other than their child, for consideration not exceeding €750K, the gain accruing is exempt from tax. Once a person reaches age 66, the relief is restricted to €500K.
- From 1 January 2025, the €750K limit will apply up to the age of 69. From 70 years onwards, if you are making a qualifying disposal to anyone other than your child, the relief will be restricted to €500K.
These are lifetime limits and where the consideration is more than €750K/€500K, marginal relief may apply.
What do these changes mean for you?
If planning to dispose of a qualifying business asset, you should consider if you should make the disposal in 2024 before the changes come into effect or wait until after.
1. Disposal to Children
- If the disposing asset(s) will have a market value of greater than €10m and you are 65 years or younger, you should make this disposal before 1 January 2025.
- If the disposing asset(s) will have a market value of less than €10m but greater than €3m and you are between the ages of 66 and 69 years, you should wait to make this disposal until after 1 January 2025.
2. Disposals to Persons other than a Child
- If you are currently aged between 66 years and 69 years, you could wait until 1 January 2025 to make your disposal (if the market conditions allow), when the €750K limit will apply instead of the €500k limit.
Other considerations
What should you do if the value of your business is currently under €10m but you are not ready to pass your business to the next generation just yet? What happens if the value then increases to over €10m in the future before you pass it on?
In this instance, you should discuss what options are available with your tax advisor.
