Retirement Relief

BenEadir

Hi all,

I'm looking for validation that my understanding of Retirement Relief as it applies to the sale of qualifying business assets is correct.

Let's assume the following:-

- I was a co-founder of my Ltd Co in 2002 at which time I received 20% of the ordinary shares for €200.
- In 2007 I purchased the balancing 80% from the other shareholder for €40,000.
- I've been a full time director of the company since 2002.
- I'm 60.

If I agree to sell 100% of the shares in my business today for €500,000 I'll only qualify for Retirement Relief on the 20% shareholding I've owned since 2002. The 80% I've owned since 2007 will be chargeable to CGT.

My after tax proceeds of sale therefore would be

20% X €500,000 = €100,000.
(80% X €500,000 - €40,000) X 67% = €241,200

Total = €341,200. Is that correct?

If so is is possible for me to structure the sale as an asset sale so the Ltd company receives the proceeds now, I keep the cash in the company for the next two years even though it is no longer trading or has any staff etc and after the 10th anniversary of acquiring my old partners shares in 2017 I wind up the Ltd company and take Retirement Relief on the full €500,000?

dogsears

BenEadir wrote: »

Hi all,

I'm looking for validation that my understanding of Retirement Relief as it applies to the sale of qualifying business assets is correct.

Let's assume the following:-

- I was a co-founder of my Ltd Co in 2002 at which time I received 20% of the ordinary shares for €200.
- In 2007 I purchased the balancing 80% from the other shareholder for €40,000.
- I've been a full time director of the company since 2002.
- I'm 60.

If I agree to sell 100% of the shares in my business today for €500,000 I'll only qualify for Retirement Relief on the 20% shareholding I've owned since 2002. The 80% I've owned since 2007 will be chargeable to CGT.

My after tax proceeds of sale therefore would be

20% X €500,000 = €100,000.
(80% X €500,000 - €40,000) X 67% = €241,200

Total = €341,200. Is that correct?

If so is is possible for me to structure the sale as an asset sale so the Ltd company receives the proceeds now, I keep the cash in the company for the next two years even though it is no longer trading or has any staff etc and after the 10th anniversary of acquiring my old partners shares in 2017 I wind up the Ltd company and take Retirement Relief on the full €500,000?

First off, and you probably suspect this already, you absolutely need to discuss this with a professional tax adviser.

Your proposal won't work for several reasons just one of which is that to get retirement relief the company must be a trading company at the time of the disposal of shares by you. There are more reasons that this though, so, if this is a real situation, I suggest not thinking about it any more, and go to see a tax adviser. If the figures are anything close to those you've used above, it'll be well worth it (even if he/she just steers you away from ideas that won't work!;))

NB - Your net cash would be €40k higher than you calculated, I think.

BenEadir

dogsears wrote: »

First off, and you probably suspect this already, you absolutely need to discuss this with a professional tax adviser.

Your proposal won't work for several reasons just one of which is that to get retirement relief the company must be a trading company at the time of the disposal of shares by you. There are more reasons that this though, so, if this is a real situation, I suggest not thinking about it any more, and go to see a tax adviser. If the figures are anything close to those you've used above, it'll be well worth it (even if he/she just steers you away from ideas that won't work!;))

No, not real figures and when/if the time comes (probably another 15 years for me ) I absolutely do understand the value of professional advice.

I was talking to someone who was curious about Retirement Relief and in particular how shareholdings acquired at different times which straddled the 10 year requirement would/could be dealt with. I thought there was some sort of tapering effect whereby if you owned the shares for say 9 years you'd qualify for 90% of the relief, 8 years would qualify for 80% of the relief and so on but apparently no such wriggle room exists. It's a minimum of 10 years on the day of the transaction and the business must be trading etc at that time for the full benefit of Retirement Relief to kick in.

Hypothetical for me at the moment and for a good few years yet!!!

dogsears

There was such a tapering effect in the UK. The version of retirement relief in force a few years ago (it might still be though I doubt it) had such a possibility - indeed it was much more enlightened than the Irish version in several ways - but it definitely isn't possible here.

I note the figures aren't real - but if and when you come to a time when you're ready to do the same thing, I bet there won't be any such thing or else it will be severely limited compared to today.