597AA Revised Entrepreneur Relief

This section provides for a reduced rate of Capital Gains Tax (‘CGT’), initially 20% for disposals on or after 1 January 2016, and 10% for disposals made on or after 1 January 2017, to apply to a chargeable gain or chargeable gains arising on the disposal or disposals of chargeable business assets made by a relevant individual.

The relief is subject to a lifetime limit, such that where the requisite conditions are satisfied, the reduced rate of CGT applies to the first €1 million of chargeable gains arising on disposals of chargeable business assets made in the period 1 January 2016 to 31 December 2025.

Section 51 Finance Act 2025 increases the lifetime limit, from €1 million to €1.5 million, in respect of a chargeable gain or chargeable gains arising on the disposal or disposals of chargeable business assets by a relevant individual on or after 1 January 2026.

Where disposals of chargeable business assets give rise to chargeable gains exceeding the relevant lifetime limit, either as part of the same disposal or when aggregated with any prior disposal of such assets on or after 1 January 2016, the standard rate of CGT applies to the excess.

Aggregation

The reduced CGT rate applies to any chargeable gain or chargeable gains accruing to a relevant person on their disposal of chargeable business assets in the period 1 January 2016 to 31 December 2025, when added to the aggregate amount of any chargeable gain or chargeable gains accruing on any previous disposal or disposals of chargeable business assets made by that relevant individual in the same period, that does not exceed €1 million.

Where a relevant individual makes a disposal or disposals of chargeable business assets on or after 1 January 2026, the reduced CGT rate of 10% applies to that part of the current chargeable gain or chargeable gains which, when aggregated with any chargeable gain or chargeable gains accruing on any previous disposal of chargeable business assets made by the relevant individual since 1 January 2016, does not exceed €1.5 million. Where a chargeable gain or chargeable gains arising on a disposal or disposals of chargeable business assets made by a relevant individual in the period 1 January 2016 to 31 December 2025 has exceeded €1 million, then the amount of the chargeable gains in respect of such disposals to be aggregated for the purpose of the €1.5 million lifetime limit is limited to €1 million.

Example

In March 2026, a relevant individual disposed of chargeable business assets, being shares in a company, giving rise to a gain of €500,000. The relevant individual had made one prior disposal of chargeable business assets in December 2025, which gave rise to a gain of €1.2 million.

To calculate the CGT liability on the March 2026 disposal, the relevant individual must consider all gains on prior disposals (i.e. from 1 January 2016 onwards) which qualified for the relief.

As such, the relevant individual is required to aggregate the following amounts:

1. the current gain accruing (€500,000),
2. previous gains accrued in respect of disposals since 1 January 2026 (nil), and
3. previous gains accrued in respect of the period 1 January 2016 to 31 December 2025 (€1.2 million). However as this is greater than €1 million, the gain to be aggregated is limited to €1 million.

As the gain arising on the March 2026 disposal, when aggregated with all previous disposals of chargeable business assets by the relevant individual in the manner outlined above, does not exceed €1.5 million, the reduced rate of CGT applies to the full amount of the March 2026 gain. As such, the CGT liability arising in respect of the March 2026 gain is €50,000 being the gain of €500,000 at the reduced CGT rate of 10%. As the lifetime limit has been reached, any future gains arising on the disposal of chargeable business assets by the relevant individual will be subject to CGT at the standard rate.

Qualifying Criteria

As noted above, the relief applies a reduced rate of CGT to chargeable gains arising on the disposal of chargeable business assets by a relevant individual where the requisite qualifying criteria are met.

A chargeable business asset is an asset, including goodwill which;

1. is, or is an interest in, an asset used for the purposes of a qualifying business carried on by an individual, or
2. is a holding of ordinary shares in —
   • a company whose business consists wholly or mainly of carrying on a qualifying business, or
   • a holding company of a qualifying group.

A qualifying business is a business other than the holding of securities or other assets as investments, the holding of development land or the development or letting of land.

A holding company, for the purposes of the relief, is one that holds shares in other companies, all of which are its 51% subsidiaries, and whose business consists wholly or mainly of the holding of shares in those subsidiaries.

A qualifying group is a group, the business of each 51% subsidiary (other than the holding company) in which consists wholly or mainly of carrying on a qualifying business.

The relief applies to a relevant individual that has owned the chargeable business assets for a continuous period of 3 years in the 5 years immediately prior to the disposal of those assets. Where the chargeable business assets consist of ordinary shares in a company or a holding company in a qualifying group, individuals seeking to qualify for the relief must own not less than 5% of the ordinary shares in the relevant company. An individual can qualify for relief in respect of disposals made on or after 1 January 2021 where the shares were owned by an individual for any continuous period of 3 years prior to the disposal of those shares.

The relief will 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, or assets on the disposal of which no chargeable gain would arise. In addition, the relief will not apply in respect of goodwill which is disposed of to a connected company or shares or securities where the individual remains connected with the company following the disposal, unless it is 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 tax.

The relevant individual must be or have been a director or employee of a relevant company – being a company carrying on a qualifying business or a holding company of a qualifying group – or of companies in the 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 3 years in the 5 years immediately prior to the disposal of the chargeable business assets.

Any period during which an individual owned shares in or was a director or employee of a company that qualified for relief under section 586 or 587 will be taken into account for the purpose of the 3-year ownership requirement and for the purpose of determining whether an individual was a director or employee of a company for the relevant period.

Relief under section 597A will apply where the amount of relief available under that section would be greater than the amount of relief available under this section.

Relief may be restricted where an individual transfers a business to a company pursuant to section 600. Relief is not available in respect of the proportion of the gain which relates to non-share consideration received out of the assets of the company in respect of the disposal.

Relevant Date: Finance Act 2025