Capital Gains Tax - Transfer of a business to a company (Section 600 TCA 1997)

Section 600 of the Taxes Consolidation Act 1997 provides that where a business, together with the whole of its assets (or the whole of its assets other than cash) is transferred to a company by a person other than a company as a going concern wholly or partly in exchange for shares, relief from Capital Gains Tax (CGT) is given to the extent that the consideration for the transfer is in the form of shares. The charge to CGT on any gain arising on the disposal of the assets of the business referable to the shares can be deferred until the shares are disposed of. This relief is not available unless the transfer is effected for bona fide commercial reasons and does not form part of a tax avoidance scheme.

A long standing concession is available where an individual transfers a business to a company in exchange for shares, the assets of the business exceed the liabilities of that business and the only other consideration is the assumption by the company of liability for bona fide trade creditors. In such a case, bona fide trade creditors will not be treated as other consideration for the transfer.

This eBrief clarifies that the concession applies to genuine trade creditors who supply goods or services to a business (e.g. a supplier of food to a restaurant business). The concession does not apply to business debts such as bank loans or tax liabilities taken over by the company. See IT-CGT-CT Manual 19-06-04 for further information.

24 December 2014