Capital Gains Tax Act, 1975

Disposal of business or farm on retirement.

26.—(1) (a) Subject to the provisions of this section where an individual who has attained the age of fifty-five years disposes of the whole or part of his qualifying assets—

(i) if the amount or value of the consideration for the disposal does not exceed £50,000, relief shall be given in respect of the full amount of capital gains tax chargeable on any gain accruing on the disposal;

(ii) if the amount or value of the consideration for the disposal exceeds £50,000, the amount of capital gains tax chargeable on the gain accruing on the disposal shall not exceed half the difference between the amount of that consideration and £50,000.

(b) For the purposes of paragraph (a), the amount capital gains tax chargeable in respect of the gain shall be the amount of tax which would not have been chargeable but for that gain.

(2) For the purposes of subsection (1) the consideration on the disposal of qualifying assets by the individual shall be aggregated and nothing in this section shall affect the computation of gains accruing on the disposal of assets other than qualifying assets.

(3) Where a disposal of qualifying assets includes a disposal of shares or securities of the individual's family company, the amount of the consideration to be taken into account for the purposes of subsection (1) in respect of those shares or securities shall be the proportion of the consideration for such shares or securities which is equal to the proportion which the part of the value of the company's assets (including cash) at the time of the disposal which is attributable to the value of the company's chargeable business assets bears to the whole of that value:

Provided that nothing in this section shall affect liability on any gains calculated by reference to the balance of the consideration for the disposal of the shares or securities.

(4) (a) The total of the amounts of relief given under this section for any year of assessment, and all years of assessment before such year, shall not exceed such amount as would reduce the total amount of capital gains tax chargeable for all those years of assessment below the amount which would be chargeable if the disposals of qualifying assets had all been made in the year of assessment.

(b) Where at any time the relief given under this section exceeds the amount of relief which would be given if the disposals of qualifying assets for the year of assessment and all years of assessment before such year had been made in the year of assessment, any necessary adjustment may be made by way of assessment or additional assessment and such assessment may be made at any time not more than ten years after the end of the year of assessment in which the last of such disposals is made.

(c) For the purposes of this subsection, a disposal of qualifying assets other than a disposal of the whole of such assets, by a husband to a wife or by a wife to a husband shall, notwithstanding the provisions of section 13 (5), be taken into account at the market value of the assets.

(5) Subsection (1) shall apply where under paragraph 1 of Schedule 2 an individual is treated as disposing of interests in shares or securities of his family company in consideration of a capital distribution from the company (not being a distribution consisting of chargeable business assets) in the course of dissolving or winding up the company as it applies where he disposes of shares or securities of the company.

(6) (a) In this section and section 27—

“chargeable business asset” means an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of a trade, farming, profession, office or employment carried on by the individual, or as the case may be by the individual's family company, other that a private residence to which section 25 applies;

“family company” means, in relation to an individual, a company the voting rights in which are—

(i) as to not less than 25 per cent., exercised by the individual, or

(ii) as to not less than 75 per cent., exercisable by the individual or a member of his family, and, as to not less than 10 per cent., exercisable by the individual himself;

“family” means, in relation to an individual, the husband or wife of the individual, and a relative of the individual or the individual's husband or wife, and “relative” means brother, sister, ancestor or lineal descendant;

“full time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity;

“qualifying assets”, in relation to a disposal, includes the chargeable business assets of the individual which, apart from tangible movable property, he has owned for a period of not less than ten years ending with the disposal and the shares or securities which he has owned for a period of not less than ten years ending with the disposal being shares or securities of a company which has been a trading or a farming company and his family company during a period of not less than ten years ending with the disposal and of which he has been a full time working director throughout that period:

Provided that there shall be taken into account for the purposes of this definition—

(i) the period of ownership of a spouse of the individual as if it were a period of ownership of the individual,

(ii) where the chargeable business assets are new assets, within the meaning of section 28, the period of ownership of the old assets as if it were a period of ownership of the new assets,

(iii) where the qualifying assets are shares or securities in a family company to which paragraph 6 of Schedule 2 applies, the period immediately before the transfer to the company of chargeable business assets during which those assets were owned by the individual as if it were a period of ownership of the individual of the qualifying assets or a period throughout which he was a full time working director, as may be appropriate, and

(iv) a period immediately before the death of the spouse of the individual throughout which the deceased spouse was a full time working director as if it were a period throughout which the individual was a full time working director;

“trade”, “farming”, “profession”, “office” and “employment” have the same meanings as in the Income Tax Acts;

“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades.

(b) In this section, references to the disposal of the whole or part of an individual's qualifying assets include references to the disposal of the whole or part of the assets provided or held for the purposes of an office or employment by the individual exercising that office or employment.

(7) An individual who has been granted relief under this section shall not be granted relief under section 27.