herald

Friday 17 November 2017

Business leaders rush to transfer assets to family as Lenihan threatens to slash tax relief

THE NUMBER of business owners transferring their companies to other family members in Ireland has risen in the last year, as many take advantage of the €414,000 tax-free gift available to children.

Accountancy firm Russell Brennan Keane said it had noticed "significant" activity in terms of family business owners passing their assets to their wives and children.

The firm said the rush may be due to fears that the Minister for Finance Brian Lenihan will restrict generous tax reliefs.

Derek Andrews, Director of Tax with Russell Brennan Keane said that business owners are taking advantage of the low values which are attached to shares in family companies and other trading assets.

"Children can take a lifetime gift totalling €414,799 from a parent tax-free," he said. "If the gift comprises shares in a family trading company or trading assets, and the children qualify for 'business property relief', the value of those assets may be reduced by up to 90pc for CAT purposes."

But Mr Andrews said that some business owners are also concerned that the Minister will implement the Commission on Taxation recommendations and restrict generous tax reliefs.

At the moment, full exemption is available from capital gains tax (CGT) on the transfer of assets to children provided that the current owners qualify for "retirement relief" -- which coincidentally has nothing to do with retirement.

The Commission has recommended that retirement relief should apply only to asset values up to €3m and that CGT would be payable on the excess.

It also recommends that inheritance tax (CAT) business property relief be reduced to 75pc of the value of the business subject to an overall monetary limit of €3m.

"These provisions would significantly increase the tax cost of transferring family businesses to the next generation", Mr Andrews said.

The firm said that it is critical that family businesses contemplating a transfer to the next generation take advice to ensure that they will qualify for and make best use of the reliefs available".

"Parents will have a number of concerns when contemplating the transfer of a family business to the next generation," said Mr Andrews.

"However, a number of mechanisms can ensure that they continue to have significant input into the business."

clairemurphy@herald.ie

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