A relief from capital acquisitions tax for all gifts and inheritances taken on or after 11 April, 1994 of relevant business property was introduced in the Finance Act, 1994. The relief only applies to mainstream gift and inheritance tax. It does not apply to discretionary trust tax. Subsequent Finance Acts have amended the original provisions.
The relief was introduced for a variety of reasons viz.
(i) to encourage and reward enterprise, thereby countering the perception that CAT is a punitive tax which penalises successful entrepreneurs and discourages expansion of businesses;
(ii) to prevent the sale or break-up of businesses in order to pay the CAT liability;
(iii) to answer the demands of the business sector who wanted a relief similar to agricultural relief to be made available to it and who were pointing to the existence of business relief in the UK.
The relief amounts to a flat 90% reduction in respect of the taxable value of relevant business property.
This reduction can be taken in context of today’s Capital Acquisitions Tax regime: by reducing the taxable value of a gift or inheritance by 90%, the beneficiary has significantly reduced the amount of their exposure.
Please see www.bjdennehy.ie/taxation/succession-retirement-planning for further commentary on this area.