0 Presentation to FTMTA Preparing to hand over business – tax effects everything Donal Bradley, Senior Tax Manager Friday 20 November 2015

1 MOVING METAL!

2 1.Tax in 2015 – new landscape 2.The basic taxes on transfer 3.CGT – Issues and reliefs 4.CAT – Issue and reliefs Topics

3 Capital taxes have increased significantly in recent years in particular gift / inheritance taxes (CAT) Huge changes – However there are reliefs for business owners passing on business 1 - Tax in 2015 – new landscape Details CAT on 1 April 2009 CAT on 20 Nov 2015 Value of gift2,000k Tax free threshold (3 children)(1,627k)(840k) Taxable gift373k1,160k 22% / 33%82k383k

4 Capital gains tax (“CGT”) – payable by current owner Business / Company and Premises – Chargeable assets only Market value less base cost (connected parties) Tax rate 33% Reliefs and losses NOTE! Debt not taken into account NEW - Debt written off by bank – reduce base cost (for disposals on or after 1 January 2014). Issue if previous equity release 2 - Taxes on transfer

5 Capital Acquisitions Tax (“CAT”) – payable by successor Assets passing at less than market value Dependent on relationship between disponer and successor (tax free threshold) Tax rate 33% on excess over tax free threshold Taxes on transfer (continued) GroupRelationship to DisponerTax free Threshold A Son/Daughter (since 14 Oct 2015) €280,000 B Parent/Brother/Sister/ Niece/Nephew/Grandchild €30,150 COther€15,075

6 Miscellaneous Stamp duty – 2% (Consanguinity relief - 1% pre 31 December 2014 on non residential property. Farmland until end VAT – complex, certain reliefs on transfer of business. Asset value low Future tax law changes? Glass half full now? Taxes on transfer (continued)

7 CGT Retirement Relief – no need to leave business

8 1 - Retirement relief 55+, owned business for 10 years, working full time. Chargeable business assets only – any investment assets? No need to retire! Six year claw-back period if to child / “favourite nephew” Premises also if at same time. Important if land held personally. Market value (not price paid) – no account of debt! Limits on allowable relief if +66 NO NEED TO ACTUALLY RETIRE 3 – CGT issues and reliefs

9 Facts: Long term owner, 60, transfers company to child worth €1,200k, no investment assets. Transfers premises (worth €300k) to same child at the same time. Premises acquired for €250k (after indexation) CGT – example of Retirement Relief (“RR”) CGT on transferFull RRNo RR Value of company1,200,000 Value of premises300,000 Base cost of premises-250,000 Taxable gain1,250,000 Retirement Relief-1,250, %Nil412,500

10 2 – Miscellaneous Capital gains tax incentive – property acquired pre 31 December 2014 and held for 7 years – pay at least 75% of value. Group restructure? Entrepreneur Relief - NEW Spouse exemption Annual exemption Timing of disposal – NB losses Debt write-down CGT issues and reliefs (continued)

11 1 – Business Assets Relief Reduces value of taxable gift by 90% (No limit on value passing – future changes?) Relevant business property – can be sole trade or an unquoted trading company. If company, must satisfy certain shareholding requirements (family company) Includes premises held personally by disponer, if used by company controlled by disponer and transferred at same time (NB is timing if multiple transfers) Investment assets excluded from value – Vital to restructure now to ensure maximum relief available on transfer Minimum ownership period in relation to person making the gift – Inheritance (2 years) or gift (5 years). Claw-back period of six years 4 – CAT issues and reliefs

12 2 – CGT / CAT offset Any capital gains tax arising on a disposal can be offset against a gift tax liability arising on the same event. Two year holding period to avoid claw-back 3 – Favourite Niece / Nephew In certain circumstances if a niece / nephew has been working full-time in business for five years - €280,000 tax free threshold regarding business assets. CAT issues and reliefs

13 Facts: Long term owner, 60, transfers company to child worth €1,200k, no investment assets. Transfers premises (worth €300k) to same child at the same time. Premises acquired for €250k (after indexation) CAT – example of Business Asset Relief (“BAR”) Gift to childFull BARNo BAR Value of property1,200,000 Value of business300,000 Total gift1,500,000 Less BAR - 90%-1,350,0000 Taxable gift150,0001,500,000 Less Tax free Threshold-280,000 Taxable amount01,220,000 33%Nil402,600

14 Do I qualify for reliefs? NB Re-structure required to ensure no dilution of reliefs by investment assets. Get advice! Current rules – Commission on Taxation Report 2009 regarding thresholds on CAT Business Asset Relief not yet implemented – possible in future? General election – spring 2016 Do I need to act now?

15 QUESTIONS

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