Revenue Note for Guidance
This section provides that a reduced rate of CGT of 20% will apply in respect of a chargeable gain or chargeable gains in the case of a disposal or disposals of qualifying business assets made by an individual on or after 1 January 2016 up to a lifetime limit of €1m. (The CGT rate applicable to disposals of qualifying assets on or after 1 January 2017 is 10%.)
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. The qualifying business assets must have been owned by that individual for a continuous period of 3 years in the 5 years immediately prior to the disposal of those assets. Where the qualifying business assets consist of ordinary shares in a qualifying company or group of companies, 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, assets on the disposal of which no chargeable gain would arise, goodwill which is disposed of to a connected company or shares or securities where the individual remains connected with the company following the disposal.
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. 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.
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 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 nonshare consideration received out of the assets of the company in respect of the disposal.
Where an individual enters into arrangements to secure that they are not connected with a company for the purpose of the connected party restrictions in subsection (2)(b)(iv) or (2)(b)(v), relief will not be available.
Relevant Date: Finance Act 2021