An individual may claim Business Relief for Capital Acquisition Tax purposes if the business is transferred to the next generation. This can reduce the taxable value of qualifying business assets to 10% of their value if the relevant conditions are satisfied.
These conditions include:
- The business qualifying as relevant business property.
- The business has been carried on for a certain minimum period.
- Ownership is maintained for 6 years or for development land 10 years.
However the relief will be clawed back within the 6 year period if:
- The business/shares cease to qualify as relevant business property or
- The recipient sells or redeems the shares and does not replace them with other qualifying business property within 12 months.
To avoid a possible clawback advice should be sought on:
- The purchase of non-trade assets such as investment property and other investments.
- Investing in trade assets and the use of cash which existed at the time of the transfer to acquire these assets.
- The use of cash existing as part of the relief claim for later business purposes to avoid it being taken as an excepted asset.
- The keeping of cash in a current account for the trade and not transferred into a deposit account to avoid it being taken as an excepted asset.
Professional advice should be taken