AT Grant Thornton, we are committed to long-term relationships. Our tax team in Kildare are located less than 5km from the Curragh racecourse and are always available to take queries or provide guidance to assist this rural industry.

Grant Thornton is delighted to provide key insights to those operating in the equine eector with the launch of the renewed Guide to Taxation for the Equine Industry.

The collaboration with Irish Thoroughbred Breeders Association (ITBA) and Horse Sport Ireland (HSI) provided the opportunity to work in partnership and give unique insights and deliver on shared learnings. We are keen to ensure this document becomes the ‘go-to guide’ for all involved in the equine business and continue our support in the development of a sector that is so vital to the Irish economy. In the coming weeks, our team will be producing articles for The Irish Field which will assist equine businesses throughout the lifecycle of their business.

Our articles are to act as a guide. However, should readers have specific questions which they would like us to provide guidance on please email conor.phelan@ie.gt.com and we will include relevant queries and provide advice in the articles. We hope you enjoy the articles and if you do have any queries our team are always happy to take a call.

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OVER the past four months, everyday life for many has changed dramatically. As the country begins to reopen, many obstacles remain which businesses must navigate.

It appears closing the economy was a slightly more straightforward process than reopening particularly for business owners. The state’s budget deficit is in excess of €6 billion as opposed to €63 million for the same period in 2019. The spending on Covid-19 related supports means that the government may seek to review tax rates and thresholds in the 2021 budget.

The deficit which currently exists will need to be serviced and with the pandemic supports unlikely to disappear overnight, taxable income for the government will be vital in servicing the debt. With this in mind, where else can income be created to assist with servicing the existing debt?

Pre the 2008 recession, capital gains tax was at 20%. However, in the intervening years the rate has slowly creeped up so that that the rate of CGT currently stands at 33% on chargeable gains. While CGT accounted for less than 2% of the 2019 income for Revenue, given its nature, it creates significant income for Revenue on limited transactions.

With this in mind, it is easier to monitor for Revenue and raise enquires to validate its accuracy. As such early planning and accurate filing is a necessity for the taxpayer particularly with potential increases arising in the near future as the Government seeks to services its Covid debt. So how can a taxpayer seeking to retire maximize their reliefs and reduce their charge to CGT?

Retirement relief

Retirement Relief is an opportunity for individuals over 55 to plan for the future in a tax efficient manner. Depending on who the individual disposes their assets to, exemptions and reliefs exist which can reduce the quantum of CGT payable where the qualifying conditions are satisfied.

Full relief from CGT may be available on disposals of qualifying assets to the individuals qualifying children. It is important to note however that disposals to connected persons, i.e. children, will be deemed to take place at market value regardless of the consideration paid for the assets. This is particularly relevant for individuals over 66 years of age.

Based on diagram 1, it is vital for a taxpayer to decide if their assets are chargeable business assets.

So once this has been established, what relief applies to an individual who qualifies for retirement relief?

It is important to consider the qualifying conditions in order for retirement relief to apply and also the timing around transferring the assets in order to maximize available reliefs. By carefully planning your retirement, you can protect the family wealth by minimising the tax exposure on yourself. Control of assets While the equine trade is not only a livelihood for many it is also their way of life. However, with the potential reliefs in place and the ability to maintain control of assets through a farming partnership structure more and more individuals are considering their retirement options earlier. While the term retirement relief suggests retiring, there is no requirement for the owner to retire from the business and this is where the terms around the transfer of assets should be considered when disposing of the assets.

Figure 1 is an example as to the impact of a 2% increase in the CGT rate from 33% to 35%, on disposing of a trade valued at €5,000,000. The amounts below are based on an individual over 66 with no reliefs other than retirement relief being available and are to act as a guide to assist with understanding the costs involved for an individual who is considering passing their trade to the next generation.

Pre Finance Act 2012, no distinction existed between an individual over 55 and under 66 years of age for retirement relief as noted above. However, this along with the increasing rates of CGT which occurred during Ireland’s last recession show that CGT is an area on which government legislation is focused in recessionary times. With this in mind, ensuring you are prepared in advance and capable of minimising your charge to CGT is vital.