Qualifying Individuals

There is a reduced rate of capital gains tax on disposal of chargeable business assets or shares by a qualifying individual. The purpose is to incentivise entrepreneurs.

Entrepreneurs relief provides a reduced capital gains tax of 10% applicable to disposals made after 2016.there is a lifetime limit of €1 million per person. All disposals after 1 January 2016 are taken into account for the purpose of this €1 million limit.

Chargeable business assets include assets (and goodwill) used for the purpose of a qualifying business carried on by the individual. They include or ordinary shares in a company carrying on a qualifying business or in a holding company of a qualifying group.

The individual selling the shares must own 5% or more of the ordinary share capital in the company being sold and must be a qualifying person in respect of the company or a member of its group.

Qualifying Individual

A qualifying  individual in this context is one who has beneficially owned the business assets for at least three years before disposal. Where they are acquired in a reconstruction or amalgamation, the period of ownership of the earlier shares is taken into account. The period of employment or director with the previous company is taken into account for those purposes.

A qualifying person is an individual

  • who is or has been a director or employee of a company or companies in a qualifying group
  • who is or was required to spend 50% or more of his working time in the service of that company or companies in a managerial or technical capacity,
  • has done so for a continuous period of three of the previous five years immediately preceding the disposal.

Working time is time that the employee or director is at the place of work or at their employer’s disposal carrying on or performing the activities or duties of their work. There are no continuity provisions where a sole trader or partnership incorporates.

The requirement  that the individual has owned a holding of at least 5% of the ordinary share capital for a continuous period of 3 years in the 5 years immediately prior to the disposal was amended in 2020. The shares can qualify for relief if they were held for a continuous period of 3 years at any time prior to the disposal of those shares. This applies to disposals of chargeable business assets made on or after 1 January 2021.

Qualifying Business

A qualifying business is a business other than

  • the holding of securities or other assets as investment,
  • the holding of development land or the development of or letting of land.

A qualifying group is a holding company and one or more 50%+ subsidiaries providing that the holding for each 50%+ subsidiary other than the holding company wholly or mainly carries out a qualifying business.

Reduced Rate

The relief provides a reduced rate of 20% applicable to the gain on the disposal by the individual of the chargeable business assets (whether shares or business assets).

There is a lifetime limit of €1 million of such gains, after 1 January 2016. The higher rate capital gains tax applies on the excess over €1 million.

The rate is 10% after 1 January 2017. It had formerly been 20%.


The relief does not apply to disposals of:

  • shares (other than shares that qualify for relief under this section), securities or other assets held as investments
  • development land
  • assets on the disposal of which no chargeable gain would arise
  • assets personally owned outside a 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.

Reinvestment Relief

There is relief which to encourage entrepreneurs who have disposed of assets after 2010 to reinvest all or part of the consideration in the new productive trade up to the end of 2018.  Where the individual disposes of his or her  investment after a three-year period, capital gains tax on the disposal is reduced by the lower of the capital gains tax on the previous disposal or 50% of the tax due on the new disposal.

A chargeable business asset is

  • an asset including goodwill where the assets is acquired for less than at least €10,000 on or after 1 January 2014 and before the end of 2018 and which has an interest in or is an asset used wholly for the purpose of new business carried on by a qualifying enterprise or
  • is a holding of new shares issued after 2014 in a qualifying company carrying on a new business or a holding company of a company not listed, which owns 100% of the ordinary share capital of a qualifying company, of which the individual owns not less than 15% of the ordinary share capital of the qualifying company and is a full-time working director of the qualifying company other than an asset of the disposal of which no gain would be chargeable.  Shares other than the above securities or other assets which are held for investment do not qualify.

Company Conditions

A qualifying company is one that is a qualifying enterprise.  This is an enterprise, which at the time of making the initial risk finance investment is a micro, small or medium sized enterprise and which has been carrying on any business, trade or profession for less than seven years and which at the time of the initial risk finance investment is not a listed company.

The new business for the purpose of entrepreneur relief means relevant trading activities carried on by a qualifying enterprise that was not carried on, prior to 1 January 2014 by the enterprise or any person connected with it.  It does not include any relevant trading activities, the products, goods or services which are substantially the same as products, goods or services previously provided by an individual claiming relief by any person connected with such individual.

Tax Credit

Where a person, who after 1 January 2010 has made a disposal of an asset on which capital gains have been paid and who between 2014 and 2019 applies and the amount the equal to all or part of the consideration as an initial risk investment in acquiring charge of a business assets, is entitled to a tax credit against any capital gains tax liability, arising on a subsequent disposal of the interest in those shares made within three years.

The tax credit is the lower of the capital gains tax paid on the disposal of the first asset times the total consideration applied towards the second asset as a proportion of the total consideration for the sale of the first asset and 50% of the capital gains on the disposal of a second asset, if lower.

Where for bona fide commercial reasons a person who makes a disposal or transfers that asset to a wholly owned company before the sale, the tax credit continues to be available.  It must not be an arrangement the main purpose or one of the main purposes of which is to secure a tax advantage.


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