Are you considering liquidating your company or disposing of your business assets? Understanding the tax implications of such actions is crucial for any entrepreneur. One important relief to be aware of is Entrepreneurial Relief, which offers favourable tax treatment for qualifying individuals.

Entrepreneurial Relief 

Entrepreneurial relief is a tax relief scheme designed to encourage entrepreneurship and reward business owners for their hard work and investment. Under ER, eligible individuals may benefit from a reduced rate of Capital Gains Tax (CGT) on the disposal of qualifying business assets. Specifically, entrepreneurial relief imposes a tax rate of 10% on gains, subject to a lifetime limit of €1 million.

Liquidation of a Company

One scenario where entrepreneurial relief can apply is during the liquidation of a company. To qualify for ER in a liquidation scenario:

1. The company must have been carrying on a qualifying business up to the time the liquidator was appointed.
2. The liquidation must be completed within a reasonable period of time, with Revenue considering a period of 2 years as reasonable.

Normal Disposal:

Entrepreneurial relief also applies to normal disposal scenarios, subject to certain requirements:

1. The qualifying business assets must have been owned by the individual for a continuous period of 3 years in the 5 years immediately prior to disposal.
2. The individual’s shareholding must be greater than 5%.
3. The individual cannot remain connected to the company following the disposal.
4. The individual must have been a director or employee who spent not less than 50% of their time in the service of the company.

Exclusions:

It’s important to note that certain assets are excluded from ER eligibility, including:

• Shares or securities held as investments.
• Development land.
• Assets on the disposal of which no chargeable gain would arise.
• Goodwill disposed to connected companies.

Entrepreneurial Relief offers a valuable tax advantage for entrepreneurs looking to liquidate their company or dispose of their business assets. By understanding the eligibility criteria and requirements for claiming ER, individuals can optimize their tax position and maximise the rewards of their entrepreneurial endeavours. If you’re considering company liquidation or disposal, it’s advisable to seek professional advice to ensure compliance with tax regulations and to explore available relief options.

For further information on Entrepreneurial Relief and its application to your specific circumstances, please reach out to us at Gallagher Keane.