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Transferring a business within a family

When the annual rush to file income tax returns is finished, it is worth while considering long term issues facing a family business.

One aspect that should be considered is the ownership of close family members of shares in the family business.

There are three main tax heads to consider where shares in family business are gifted from a parent to a child. They are capital gains tax, capital acquisitions tax and stamp duty.

1. Capital gain tax is payable at a rate of 20 % by a parent on the disposal of shares in a family company. Retirement relief is available in some cases, which allows for an exemption from capital gains tax.
The parent gifting the shares must be over 55 years of age, must have held the shares for a ten-year period and have been a full-time director of the company to qualify for this exemption. The firm must also be a trading company and the child receiving the shares must hold onto the shares for at least six years after the gift.

2. Capital acquisitions tax is payable, also at a rate of 20 %, by a child on the receipt of a gift of shares in a family company from a parent. The rate applies to the market value of the shares in the company subject to the exemption of the first €466 ,725 if there have been no previous gifts or inheritances. There is a relief from capital acquisitions tax known as business property relief, which exempts 90% of the market value of the shares.

3. Stamp duty applies to the transfer of shares in a company. A gift of shares from a parent to a child is liable to stamp duty at 1 % of the market value of shares and is payable by the child. It is important that parents and children adopt a planned approach to succession
to shareholding in the business over an appropriate time frame.

We shall be happy to assist you with your tax and financial planning and setting out your plan for exiting your business:

Check out... exitplan have you got one?

 

 




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"I run my own business and after years of struggling with a demanding home life and a hectic work schedule I reached a situation whereby I was functioning poorly with both. I’d missed a couple of VAT payments and had intended to catch up at the end of the year. I missed my own deadlines and tried again to catch-up in the following year. Business became a stressful job of ‘fire-fighting’ each day’s demands, eventually pushing the issue of outstanding taxes out of my mind as much as possible, in order to concentrate on work.

That said, you always know in the back of your mind that these things don’t just go away and that it was just a matter of time before ‘they’ catch up with you. 

After a few years of letting my compliance payments slide altogether, the Revenue made contact with me and gave me an estimate of all PAYE, VAT and tax owed over the years – which ran to over 6 figures- and they wanted the money immediately. I knew I was in big trouble and looked in the Golden pages for an accountant who could help me. The name www.fixmytax.com jumped out of the page and I made contact. I was immediately reassured that they could help me. I was asked for “every bit of paper” concerning the office and all old Revenue correspondence.

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My most valuable lesson in dealing with fixmytax is that it is far more productive and far less stressful to get a good supportive accountant to do what they do best, leaving me free to do business. Thanks, Patrick!

Satisfied Client, name and address with firm. 

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