Entrepreneur Relief from Capital Gains Tax

Entrepreneur relief overview

Relief from Capital Gains Tax (CGT) is available for individual entrepreneurs disposing of certain business assets. The relief provides that a 10% rate of CGT applies in respect of chargeable gains on disposals or part disposals of qualifying business assets, on or after 1 January 2017, up to a lifetime limit of €1 million.

Qualifying assets:

  • shares held by an individual in a trading company
  • assets owned by a sole trader and used in their trade

The relief does not apply to the following assets:

  • shares, securities or other assets held as investments
  • the holding of development land or letting of land
  • assets owned personally, outside the company, even where such assets are used by the company
  • goodwill which is disposed of to a connected company
  • shares or securities in a company where the individual remains connected with the company following the disposal.

Conditions of the relief

The qualifying business assets must have been owned by that individual for a continuous period of three years in the five years immediately prior to the disposal of those assets. Where a business is carried on by a company, individuals seeking to qualify for the relief must own not less than 5% of the ordinary shares in the qualifying company or 5% of the ordinary shares in a holding company* of a qualifying group**.

The individual must have been a director or employee of the qualifying company (or companies in a qualifying group) who is or was required to spend not less than 50% of his or her time in the service of the company or companies in a managerial or technical capacity and has served in that capacity for a continuous period of three years in the five years immediately prior to the disposal of the chargeable business assets.

*A holding company means a company whose business consists wholly or mainly of the holding of shares of all companies which are its 51% subsidiaries.

**A qualifying group means a group where the business of each 51% subsidiary (other than a holding company) consists wholly or mainly of carrying on a qualifying business.