A complete guide to Retirement Relief in Ireland

Taxes can significantly reduce the value of your life's work, so Retirement Relief is in place to prevent this. Despite the name, Retirement Relief is available to anyone who meets specific criteria when selling on their business or farm, so you don’t actually need to have reached retirement age. The scheme is designed to incentivise the timely transfer of business and farming assets, reducing or eliminating the tax burden so owners can pass the baton and keep businesses active. 

Retirement Relief reduces or eliminates Capital Gains Tax (CGT) on the sale or transfer of qualifying business and farming assets. You do not necessarily have to retire from working to claim Retirement Relief. The name simply reflects that it’s designed for long-term business owners aged 55 or over who want to pass on their assets. The relief encourages owners to transfer their assets and keep businesses running, which is beneficial for the Irish economy. It can also reduce inheritance tax liabilities which would apply if your business remains part of your estate when you die. 

The relief applied to the sale or transfer depends on who is receiving the assets. There are two main pillars of relief:

1. Business transfer to a Child
   
   Transferring your business or farm to your child offers the most generous tax relief. If you are between 55 and 69 years of age, you can transfer assets tax free up to the value of €10,000,000. If you are 70 or over, the maximum value you can transfer tax-free is capped at €3,000,000.

   
   The definition of a child is not limited to your biological sons and daughters. You can also claim this higher relief threshold if you transfer your assets to stepchildren, adopted children, and children of a deceased child. Transfers to nieces and nephews can also qualify if they have worked full time in your business or farm for at least five years up to the date of the disposal. Foster children may also be included if you looked after them for at least five years before they turned 18.
   

2. Business transfer to a Third Party
   
   Selling or transferring your assets to someone outside your immediate family has stricter financial limits. If you are between 55 and 69 years of age, you can claim full relief on disposals up to €750,000. If you are 70 years of age or older, this limit reduces to €500,000. Marginal relief is available if the sale price slightly exceeds these thresholds.

To qualify for Retirement Relief in Ireland, you must satisfy all criteria set out by Revenue:

• You must be at least 55 years of age at the time of the disposal.
• The assets must be considered qualifying assets. This includes agricultural land, business assets, or shares in a family company.
• You must have owned the qualifying assets continuously for at least 10 years.
• If you own shares in a family company, you must have been a working director for at least 10 years. You must have spent at least five of those years working full-time for the company.

Investment properties or assets held purely for rental income do not qualify.

Entrepreneur Relief provides a reduced Capital Gains Tax rate of 10% on the sale of qualifying business assets up to €1,500,000. You can claim both reliefs during your lifetime, but you can’t apply both to the exact same portion of an asset.

Here is a clear comparison of the two options:

If your business is structured as a company, you can still claim Retirement Relief when you sell or transfer your shares. However, Revenue applies specific rules to ensure the relief only benefits active owners. The shares must be in what is considered a family company, where you must personally have at least 25% of the voting rights. Alternatively, it’s possible to claim relief if you hold at least 10% of the voting rights as long as 75% of them are held collectively by your family.

In addition, you need to be actively involved in running the business. You must have been a working director for at least 10 years up to the date you dispose of the shares, and you must have worked as a full-time director for at least five of those 10 years. The company must also be a trading company, meaning investment or property holding companies generally do not qualify.

If you operate as a sole trader and personally own your business assets, you will be able to claim Retirement Relief directly if you sell or transfer qualifying assets, including machinery, equipment, or commercial buildings. You must have owned and used these assets for a continuous period of at least 10 years.

If your business is a limited company, the company itself cannot claim Retirement Relief on assets it owns. Instead, you claim the relief on the disposal of your company shares.

There is also a special provision for assets you own personally but allow your family company to use. For example, you might own the warehouse where your company operates. You can claim Retirement Relief on the disposal of this warehouse, but strict conditions apply. You must dispose of the warehouse at the exact same time, and to the exact same person, as your shares in the family company.

If your primary business is agriculture, Retirement Relief covers farming assets like agricultural land and machinery. The standard condition requires you to have owned and farmed the land yourself for a continuous period of at least 10 years. However, Revenue understands that many farmers step back and lease their land as they grow older. You can still claim Retirement Relief on land that has been let or leased for up to 25 years before the sale or transfer. To qualify for this specific exemption, you must have actively farmed the land yourself for at least 10 years before the first letting arrangement began.

Managing your wealth effectively involves looking at your tax obligations and your savings strategies. Maximising your tax efficiency during a business sale can leave you with more capital to build a strong financial foundation, which you may choose to save or invest. All partner banks on our platform offer deposit protection, so deposits of up to €100,000 per person, per bank are legally protected by the national deposit guarantee scheme of the country where the bank is headquartered.

If you have any questions, feel free to contact us and speak to our customer service team.