The upper age limit by which a person can claim full retirement relief under the Capital Gains Tax (CGT) will be raised to 70.
Outlining taxation changes as part of Budget 2024 today (Tuesday, October 10), Minister for Finance Michael McGrath said that retirement relief “supports the intergenerational transfer of businesses and farms and works to ensure their smooth transition so that they continue to play their important role in the Irish economy”.
“In line with government policy on the age of retirement, I am extending the upper age limit for the relief from 65 until the age of 70,” the minister said.
The reduced rate of relief that currently applies for disposals of assets by persons aged between 66 and 70 will apply from the age of 70 after the change comes into force.
The changes will come into effect from January 1, 2025, to allow for an appropriate transition period, Minister McGrath said.
This change will be accompanied by the introduction of a limit on disposals to a child, up to the age of 70.
Retirement relief
Despite the name, a person does not have to retire from working on a farm or in a business in order to avail of this relief.
The relief can be availed of by persons aged 55 or older when disposing of any part of a business or farm asset.
If a person is aged under 55, they may qualify for the relief if they are unable to continue farming or working in their business due to ill health, or if the reach the age of 55 within 12 months of the disposal.
There are two types of relief, depending on who the asset is disposed to:
- A ‘child’ (including natural child; stepchild; child of a civil partner; adopted child; child of a deceased child; niece or nephew that has worked at the business for five years; or foster child who the disponer has maintained for at least five years before they turned 18);
- Someone outside the family.
For disposals to a ‘child’, the full relief can currently be claimed if the disponer is between 55 and 65. If the disponer is over 66 the relief is restricted to €3 million (the full relief can be claimed up to the age of 70 once the new budgetary measure comes into effect).
If the recipient of the asset disposes of the asset within six years, the relief is withdrawn and the recipient must then pay CGT on the original disposal, in addition to the CGT on their own disposal.
For disposals to someone outside the family, full relief can be claimed when the market value of the disposal at the time it is made does not exceed €750,000 if the disponer is under 66 (under 70 from 2025); or does not exceed €500,000 if the disponer is 66 or older (70 or older from 2025).
If the market value of a single disposal is more than the threshold, marginal relief may apply, which limits the CGT to half the difference between the market value and the threshold.