A Guide to Entrepreneurs Relief in Ireland
[postdate] Facebook-f Twitter Linkedin-in [catslist] [postdate] Facebook-f Twitter Linkedin-in
If you’re a business owner with assets to sell, you might be concerned about Capital Gains Tax (CGT) or the tax you need to pay on any profits after selling those assets.
Without a clear understanding of CGT, small business owners may face unexpected tax burdens and miss out on the opportunity to capitalise on available tax reliefs, such as Entrepreneur Relief.
As the name suggests, Entrepreneur Relief can help reduce your tax liability. If you qualify, you can claim this “relief” (or tax benefit) on the profit you make from selling your assets. This can be a tax-efficient way to maximise your returns – but only if you meet Revenue's conditions and file the required paperwork accurately and on time (that’s the hard part).
This guide provides an explanation of Entrepreneur Relief, including information on when and how it can be claimed. We’ll cover:
What Is Capital Gains Tax?
Capital Gains Tax is a tax you pay when you sell an asset, like property or shares, for more than what you paid for it. The tax is applied to the profit you make from the sale.
In Ireland, the standard rate of CGT is 33% of the profit (chargeable gains).
What Is Entrepreneurs Relief?
Entrepreneurs Relief is a tax relief program that allows qualifying individuals to pay a reduced rate of 10% on the gains they make from the sale of qualifying business assets. It’s applicable to gains of up to €1 million in an individual's lifetime.
With Entrepreneurs Relief, you can significantly minimise your tax liabilities and extract more cash from your business.
How Do You Qualify for Entrepreneurs Relief?
To qualify for Entrepreneurs Relief in Ireland, you must meet certain conditions.
The business asset you want to sell must have been owned for a continuous period of three years, and these three years should fall within the five years just before the sale.
If the business is carried on by a company, the relief-seeking owner must meet the following criteria:
- Own more than 5% of the company shares.
- Have been a director or employee of the qualifying company.
- Spend more than 50% of their time in the company.
- Hold a managerial or technical position for a continuous period of three years in the five years prior to disposing of the chargeable business assets.
What is a Qualifying Business and Qualifying Business Asset?
A qualifying business refers to any business other than holding securities or other assets as investments, holding development land, or letting of land.
A qualifying business asset can be:
- Assets used by a sole trader in their trade.
- A share of assets held by an active partner in a trading partnership.
- Shares held by an individual in a trading company.
When Should the Relief Be Claimed?
To claim Entrepreneurs Relief in Ireland, you need to be mindful of specific time periods set by Revenue for Capital Gains Tax (CGT).
There are two CGT periods:
- "Initial period" from 1st January to 30th November.
- "Later period" from 1st December to 31st December.
If your gains fall within the initial period, the CGT payment is due by 15th December of the same tax year.
For gains in the later period, the CGT payment is due by 31st January of the following tax year.
Remember: you must declare the gain details in your personal tax returns, even if you don't need to make the payment by those dates.
For many business owners, that’s usually the most tedious part. Unless they’re good with numbers, the process of organising financial records, calculating taxes, and ensuring tax compliance can take away valuable time they could spend on their business.
Some of them scramble with the paperwork at the last minute, swearing that next time will be different (it often isn’t). Others seek help from experienced accountants, even if that means paying a hefty fee.
A small portion, however, knows there’s a better solution: a faster, data-driven finance team that’s 50% more cost-effective than a traditional accountant. Meet Outmin!
Getting Help with Tax Returns
We created Outmin to make it easier for anyone to operate a small business without having to worry about tax and compliance. This involves getting rid of the time-consuming work of accounting for those who really don’t want to deal with that.
With Outmin, you have the efficiency of AI and the personal touch of expert accountants in your favour. This way, you can relax knowing you won’t miss a single filing deadline ever again. Not because you’ll be doing it on time, but because our platform and professionals will handle the whole process for you.
All you’ll have to do is drag and drop your documents to our platform and pay a monthly fee of €199/month for the timely completion of necessary filings like:
- Entrepreneur Relief
- VAT returns
- Corporation Tax
- PAYE
- VIES
- Company Constitution
- And more!
On a side note: you’d be paying at least €500 to over €1,000/month when hiring a traditional accountant to file your tax returns. Not to mention, you’d have to pay higher fees for services like bookkeeping, balance sheets, up-to-date business KPIs, and year-end accounts. That’s all included in Outmin’s subscription fee.
While most accounting firms aren’t set up to focus on small businesses, Outmin is all about small businesses. Get a demo with one of our experts to learn how we can take accounting and finance stress off your to-do list. For good.
Related Articles
More Articles [am_post_grid pagination_type="none" posts_per_page="3"]
.png)
.svg)
.svg){kind=small}
