Government set to climb down on €10m tax threshold for transfer of family-run businesses

The Government is expected to perform a U-turn in the budget by scrapping plans to impose a capital gains tax (CGT) liability on the transfer of family businesses worth more than €10 million.
Minister for Enterprise Peter Burke said changes to the retirement relief system – due to come in next year – would generate huge tax bills for family businesses where ownership is being transferred from one generation to the next.
From the start of next year, a limit of €10 million will apply to the value of business assets that family business owners aged 55-69 could pass free of CGT to their children, and a €3 million cap to those aged over 70.
But Mr Burke has been lobbying hard for the plan to be abandoned on the grounds that such a liability would stall the natural transfer of family-run businesses between generations and “inhibit the indigenous sector” from investing.
“You have people in their 60s and 70s staying in senior management positions and the business being denied the opportunity for a younger generation to come through,” he said.
He also noted that many businesses with €10 million in assets may not have the cash required to pay the tax and/or that such a charge would restrict many SMEs from investing at a time when the Government was encouraging them to invest in digitalisation and decarbonisation.
He said the capacity of businesses to bring in revenue did not always mirror the value of the capital infrastructure particularly with margins diminishing due to increased costs.
“The principle needs to be that if you’re passing your business on to the next generation – it’s a non-cash transaction – that should not be taxed,” Mr Burke said.
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The Government is expected to abolish the €10 million threshold altogether or bring in some sort of deferral mechanism whereby the tax would only apply if the business was later sold on to interests outside the family.
Speaking ahead of a Fine Gael-hosted conference on small business in Westmeath on Saturday, Mr Burke said speculation that the budget would precede a November general election was “a question beyond my pay grade”.
Mr Burke, who was elevated from the junior ministerial ranks in the wake of Simon Harris becoming Taoiseach, said the budget would contain a significant package of measures aimed at reducing the cost of doing business for SMEs, particularly those in hospitality, a sector that has seen a spate of business closures in recent months.
He said he would not rule out a return to the reduced rate of VAT for a certain section of hospitality but that was a collective decision for government. Business groups have been calling for a reduced rate of VAT for restaurants and cafes, as distinct from hospitality in general, to be reinstated.
Mr Burke said he was pushing for the conditions attached to the Government’s main energy efficiency and digitalisation grants for SMEs to be lessened amid a lower-than-expected take-up.
“I have huge concern that a number of onerous conditions are being imposed on businesses that they have to comply with in order to draw down this grant aid,” he said, noting he was in favour of self-assessment method of grants below €40,000 or €50,000.
Mr Burke also gave a strong indication that the VAT rate on household broadband connections could be reduced from the standard 23 per cent rate to 13.5 per cent as part of a cost-of-living package. The move could save consumers more than €40 on their internet bills.