Capital Acquisitions Tax – Business Property Relief

We have provided below a quick synopsis of the recent changes in Finance Act 2014 to Business property Relief.

Under Chapter 2 (sections 90 to 102) of the Capital Acquisitions Tax Consolidation 2003, relief is available on gifts and inheritances of business property, subject to certain conditions, in order to encourage the inter-generational transfer of businesses. The relief reduces the taxable value of certain gifts or inheritances by 90% and this is a substantial benefit for the recipient.  

It is often commercially desirable for shareholders in private trading companies to personally own the land or buildings and other assets used in the business of their company rather than transferring those assets to the company. In these circumstances, business property relief can also apply if immediately before the gift or inheritance, these assets were used wholly or mainly for the purposes of a business carried on by a company controlled by the disponer or by a partnership of which the disponer was then a partner.

This generous relief has been amended in Finance Act 2014 to take account of some difficulties in practice when assets are owned personally but used by a trading company.

In family-run trading companies, spouses or civil partners can each hold 50% of the share capital in the trading company. Without a modification to the existing legislation, business property relief might not apply to land, buildings, machinery or plant used by such a trading company, as neither spouse nor civil partner can control a majority of the votes and consequently neither of them controls the company.

Finance Act 2014 tackles this issue by permitting shareholdings held by spouses or civil partners to be aggregated in determining whether the disponer had control of the company. The above change takes effect from 23 October 2014.

The above is a general commentary on the recent changes in Finance Act 2014 to CAT Business Property Relief.  The tax implications of specific cases will depend on individual circumstances. If you think the above might be relevant for you, specialist advice should be obtained.


CAG Chartered Accountants has considerable experience in this area and we would be happy to discuss the various issues with you.