Entrepreneurs Relief

TAXES CONSOLIDATION ACT

 

597A.

Entrepreneur relief.

(1)In this section –

‘chargeable business asset’ means an asset, including goodwill but not including shares (other than shares mentioned in paragraph (b)), securities or other assets held as investments, where that asset is acquired at a cost of not less than €10,000 on or after 1 January 2014 but on or before 31 December 2018 and which –

(a)is, or is an interest in, an asset used wholly for the purposes of a new business carried on by a qualifying enterprise, or

(b)is a holding of new ordinary shares, issued on or after 1 January 2014 –

(i)in a qualifying company carrying on new business, or

(ii)in a holding company which owns 100 per cent of the ordinary share capital of a qualifying company carrying on new business,

of which an individual claiming relief under this section –

(I)owns not less than 15 per cent of the ordinary share capital of the qualifying company or the holding company, and

(II)is a full-time working director of the qualifying company,

other than an asset on the disposal of which no gain accruing would be a chargeable gain;

‘full-time working director’, in relation to a qualifying company, means a director required to devote substantially the whole of his or her time to the service of the company in a managerial or technical capacity;

‘holding company’ means a company that is not listed on the official list of any stock exchange whose business consists wholly of holding shares in a qualifying company;

‘initial risk finance investment’ means the funding of the qualifying enterprise for the purpose of new business which funding –

(a)must not exceed a total of €15 million,

(b)is provided in full within 6 months of the commencement of the new business, and

(c)includes equity or investment or both;

‘new business’ means relevant trading activities carried on –

(a)by a qualifying enterprise (to which paragraph (a) of the definition of ‘qualifying enterprise’ applies) that were not, prior to 1 January 2014, carried on by that qualifying enterprise or by any person connected (within the meaning of section 10) with that qualifying enterprise, or

(b)by a qualifying enterprise (to which paragraph (b) of the definition of ‘qualifying enterprise’ applies) that were not, prior to 1 January 2014, carried on by that qualifying enterprise or by any person connected (within the meaning of section 10) with that qualifying enterprise,

but shall not include any relevant trading activities the products, goods or services of which are substantially the same as products, goods or services previously provided by any individual claiming relief under this section or by any person connected with that individual;

‘qualifying company’ is a company that is a qualifying enterprise and which, at the time of the making of the initial risk finance investment, is not listed on the official list of any stock exchange;

‘qualifying enterprise’ means an enterprise which, at the time of the making of the initial risk finance investment, is a micro, small or medium-sized enterprise, as defined in Article 2 of the Annex to Commission Recommendation 2003/361/EC of 6 May 2003 and which –

(a)has not been carrying on any business, trade or profession, or

(b)has been carrying on a business, trade or profession for less than 7 years;

‘relevant trading activities’ has the same meaning as it has in section 489 and includes farming (within the meaning of section 654).

(2)An individual who –

(a)on or after 1 January 2010, has made a disposal of an asset on which capital gains tax has been paid, and

(b)on or after 1 January 2014 but on or before 31 December 2018, applies an amount equal to all or part of the consideration received on that disposal (after deducting any capital gains tax paid on that disposal) as an initial risk finance investment in acquiring chargeable business assets,

shall be entitled to a tax credit against capital gains tax liability arising on a subsequent disposal of, or of an interest in, those chargeable business assets made more than 3 years after they were acquired, in an amount equal to the lower of –

(i)that part of the capital gains tax paid on the disposal of the first- mentioned asset in the proportion that the amount applied as an initial risk finance investment bears to the consideration received on the first-mentioned disposal (after deducting any capital gains tax paid), and

(ii)50 per cent of the capital gains tax payable on the disposal of the chargeable business asset.

(3)Where on a subsequent disposal of the chargeable business assets referred to in subsection (2), an amount equal to all or part of the consideration (after deducting any capital gains tax paid on that disposal) applied as initial risk finance investment is, in turn, applied as an initial risk finance investment on or after 1 January 2014 but on or before 31 December 2018, in acquiring other chargeable business assets (in this subsection referred to as ‘the new chargeable business assets’), the individual shall similarly be entitled to a tax credit against capital gains tax liability arising on a subsequent disposal of, or of an interest in, those new chargeable business assets made more than 3 years after they were acquired, in an amount equal to the lower of –

(a)that part of the capital gains tax paid on the disposal of the first- mentioned chargeable business asset in the proportion that the amount applied as an initial risk finance investment bears to the consideration received on that disposal (after deducting any capital gains tax paid), and

(b)50 per cent of the capital gains tax payable on the disposal of the new chargeable business asset.

(4)Where for bona fide commercial reasons, a person making a disposal of a chargeable business asset first transfers that asset to a wholly owned company followed immediately by the disposal of the shares in that company to the person making the acquisition, the tax credit under subsection (2) or (3), as appropriate, shall apply to the disposal of the shares in the company to which the chargeable business asset was transferred as it would have applied if the chargeable business asset had been disposed of directly to the person making the acquisition.

(5)Subsection (4) shall not apply where the transfer of the chargeable business asset to a wholly owned company is an arrangement or part of an arrangement the main purpose or one of the main purposes of which is to secure a tax advantage within the meaning of section 546A.

(6)Subject to section 597AA(5) –

(a)subsection (2) shall not apply where the subsequent disposal referred to in that subsection is made on or after 1 January 2016, and

(b)subsection (3) shall not apply where the second-mentioned subsequent disposal in that subsection is made on or after 1 January 2016.

597AA.

Revised entrepreneur relief

(1)

(a)In this section –

’51 per cent subsidiary’ has the same meaning as it has in section 9(1)(a);

‘development land’ has the same meaning as it has in section 648;

‘group’ means a holding company and all companies which are 51 per cent subsidiaries of the holding company;

‘holding company’ means a company –

(i)that holds shares in other companies, all of which are its 51 per cent subsidiaries, and

(ii)whose business consists wholly or mainly of the holding of shares in the subsidiaries referred to in subparagraph (i);

‘qualifying business’ means a business other than –

(a)the holding of securities or other assets as investments,

(b)the holding of development land, or

(c)the development or letting of land;

‘qualifying group’ means a group, the business of each 51 per cent subsidiary (other than a holding company) in which consists wholly or mainly of the carrying on of a qualifying business;

‘qualifying person’ means an individual who is or has been a director or employee of a company (or companies in a qualifying group) who –

(a)is or was required to spend not less than 50 per cent of that individual’s working time in the service of that company (or those companies) in a managerial or technical capacity, and

(b)has served in that capacity for a continuous period of 3 years in the period of 5 years immediately prior to the disposal of the chargeable business assets of which the disposal of shares in the company (or one of those companies) forms the whole or part;

‘relevant company’ means a company (including a company in a qualifying group) the disposal of shares in which forms the whole or part of the disposal of chargeable business assets;

‘relevant individual’ means an individual –

(a)who has been the beneficial owner of an asset or an interest in an asset to which subparagraph (i) of the definition of ‘chargeable business asset’ in subsection (2)(a) applies for a continuous period of not less than 3 years in the 5 years immediately prior to the disposal of that asset, or

(b)who has been the beneficial owner of a holding of ordinary shares to which subparagraph (ii) of the definition of ‘chargeable business asset’ in subsection (2)(a) applies for a continuous period of not less than 3 years at any time prior to the disposal of those shares;

‘working time’ means any time that an employee or director is –

(a)at his or her place of work or, in the case of an employee, at his or her employer’s disposal, and

(b)carrying on or performing the activities or duties of his or her work.

(b)

(i)For the purposes of the definition of ‘qualifying person’ in paragraph (a), any period during which the individual was a director or employee of –

(I)a company that was treated as being the same company, for the purposes of section 586, as a relevant company, or

(II)a company involved in a scheme of reconstruction or amalgamation under section 587 with a relevant company,

shall be taken into account in calculating the periods during which the individual was a director or employee.

(ii)For the purposes of the definition of ‘relevant individual’ in paragraph (a), any period during which the individual owned shares in –

(I)a company that was treated as being the same company, for the purposes of section 586, as a relevant company, or

(II)a company involved in a scheme of reconstruction or amalgamation under section 587 with a relevant company,

shall be taken into account in calculating the periods during which the individual was a beneficial owner.

(2)

(a)Subject to paragraph (b), ‘chargeable business asset’ means an asset, including goodwill which –

(i)is, or is an interest in, an asset used for the purposes of a qualifying business carried on by an individual, or

(ii)is a holding of ordinary shares in –

(I)a company whose business consists wholly or mainly of carrying on a qualifying business, or

(II)a holding company of a qualifying group,

in respect of which an individual –

(A)has owned not less than 5 per cent of the ordinary shares for a continuous period of not less than 3 years at any time prior to the disposal of those shares, and

(B)is a qualifying person in respect of the company or, if the company is a member of a qualifying group, of one or more companies which are members of the qualifying group.

(b)’Chargeable business asset’ does not include –

(i)shares (other than shares mentioned in paragraph (a)(ii)), securities or other assets held as investments,

(ii)development land,

(iii)assets on the disposal of which no gains accruing would be chargeable gains,

(iv)subject to subsection (8), goodwill which is disposed of directly or indirectly to a company, where, immediately following the disposal, the individual is connected with the company, or

(v)subject to subsection (8), shares or securities in a company which are disposed of directly or indirectly to another company, where, immediately following the disposal, the individual is connected with the first-mentioned company.

(3)Subject to subsection (4), the rate of capital gains tax chargeable on a chargeable gain or chargeable gains accruing in respect of a disposal or disposals of the whole or part of chargeable business assets made by a relevant individual shall be 10 per cent.

(4)

(a)The rate of capital gains tax referred to in subsection (3) shall be chargeable only on so much, if any, of the chargeable gain or chargeable gains accruing, when added to the aggregate amount of any chargeable gain or chargeable gains accruing in respect of any previous disposal of the whole or part of chargeable business assets made by the relevant individual in the lifetime of that individual on or after 1 January 2016, that does not exceed €1,000,000.

(b)The rate of capital gains tax referred to in section 28(3) shall be chargeable on so much, if any, of the chargeable gain or chargeable gains accruing, when added to the aggregate amount of any chargeable gain or chargeable gains accruing in respect of any previous disposal of the whole or part of chargeable business assets made by the relevant individual in the lifetime of that individual on or after 1 January 2016, that exceeds €1,000,000.

(5)This section shall not apply, and section 597A shall apply, to a disposal of the whole or part of chargeable business assets made by a relevant individual where the amount of capital gains tax payable in respect of the disposal under this section is greater than the amount of capital gains tax payable in respect of the disposal were section 597A to apply.

(6)Subject to section 600 and subsection (8), this section shall not apply to such portion of the chargeable gain or gains accruing in respect of a disposal or disposals by a relevant individual of chargeable business assets which form part of a transfer to which section 600 applies as bears the same proportion to the total of such gains as the value of the consideration received by the relevant individual out of the assets of the company in respect of the transfer bears to the value of the consideration received by the relevant individual other than by way of shares or securities in respect of such transfer.

(7)Where a relevant individual enters into arrangements, the main purpose, or one of the main purposes, of which is to secure that the relevant individual is not connected with a company for the purpose of either or both of subparagraphs (iv) or (v) of subsection (2)(b), this section shall not apply.

(8)Subsections (2)(b)(iv), (2)(b)(v) and (6) shall not apply in relation to a disposal of assets where it would be reasonable to consider that the disposal is made for bona fide commercial reasons and does not form part of any arrangement or scheme the main purpose or one of the main purposes of which is the avoidance of liability to tax.