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For business owners in Ireland, selling a company or shares can bring a significant Capital Gains Tax (CGT) bill. To support entrepreneurship and reward those who’ve built successful businesses, the government offers specific tax reliefs designed to ease that burden, one of the most notable being Entrepreneur Relief.
In this article, we’ll explain how Entrepreneur Relief works, who qualifies, the limits involved, and some practical tips to help you make the most of it when it’s time to sell your business.
What is the Revised Entrepreneur Relief?
- The Revised Entrepreneur Relief replaced an earlier version (for 2014–2015) and has applied from 1 January 2016 onwards.
- It allows a lower CGT rate of 10% on gains arising from the disposal of qualifying business assets. This is significantly lower than the standard CGT rate of 33%.
However, there is a lifetime limit: up to €1 million for disposals made on or after 1 January 2016. This limit will increase to €1.5 million for disposals from 1 January 2026.
While it doesn’t remove CGT entirely, it can significantly reduce your tax liability in many cases.
Who Qualifies for Entrepreneur Relief?
To benefit from Entrepreneur Relief, several conditions must be satisfied.
Qualifying business
A “qualifying business” is generally a trade (i.e., active business), not just passive investments. Certain activities are explicitly excluded, such as:
- Holding shares, securities, or assets purely as investments
- Holding development land
- Development or letting of property
Suppose your business is structured as a company. In that case, additional rules apply: you must own at least 5% of the ordinary shares in the company (or in a holding company of a qualifying group).
Also, within a group of companies, dormant companies or non-trading subsidiaries may interrupt qualification.
Qualifying business assets
These are the assets whose gains may qualify for the reduced CGT rate, provided other criteria are met. Examples include:
- Shares held by an individual in a trading company (meeting the qualifying business test)
- Assets used in a sole trader’s trade
Certain assets are excluded, including development land, shares where you remain “connected” to the company after disposal, and assets held purely as investments (not used in trade), among others.
Goodwill is also excluded if it is sold to a connected company.
Period of ownership/service
To prevent abuse, there are minimum period requirements:
- The business assets must have been owned for a continuous period of 3 years within the 5 years immediately before disposal.
- In the case of shares, the 3-year period can be any time before disposal (i.e., not necessarily immediately preceding).
- If the business is conducted through a company, the person disposing must have held a managerial or technical position for at least three years, devoting at least 50% of their time to the company (or group) in that capacity.
These rules ensure the relief is reserved for genuine business participants, not passive shareholders.
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How Entrepreneur Relief Works and Its Key Limits
Lifetime limit
Under the Entrepreneur Relief, the lifetime cap on qualifying gains is €1 million for disposals made on or after 1 January 2016. This limit will increase to €1.5 million for disposals from 1 January 2026.
Any gains above these thresholds will be subject to the standard Capital Gains Tax rate of 33%, meaning only the qualifying portion benefits from the reduced 10% rate.
Tax rate
If all conditions are met, the gain qualifies for the 10% CGT rate.
Interestingly, for disposals in the year 2016 (i.e., from 1 January to 31 December 2016), the rate was 20%. (This was transitional, before the 10% rate taking full effect.)
What cannot qualify
Some common pitfalls or exclusions:
- Assets held purely as investments (not trading assets)
- Development land
- Assets where no chargeable gain arises (i.e. disposals that generate no gain)
- Where the individual remains “connected” to the company after disposal (i.e. continues to hold shares or the like)
- Goodwill sold to a connected company
How to claim
If you meet the eligibility criteria, you’ll need to calculate your gain, apply the 10% CGT rate to the qualifying portion, and include the details in your Capital Gains Tax return. The Revenue website provides clear guidance on how to make a claim and the documentation required.
Why Having a Business Exit Strategy Is Important
Having a business exit strategy isn’t just about planning for the end; it’s about protecting the value you’ve built and ensuring a smooth transition when the time comes. A well-thought-out exit plan helps you maximise the return on your investment, minimise tax liabilities, and avoid unnecessary stress or financial loss.
It also gives you greater control over how and when you leave the business, whether that means selling to a third party, passing it to family, or winding down operations. In short, an exit strategy allows you to leave on your own terms, financially secure and with your legacy intact.
With a well-structured exit plan, you can take advantage of valuable tax reliefs that help reduce the overall tax cost when selling or transferring your business. This not only protects the wealth you’ve built but also ensures greater financial security for your family, allowing more of your hard-earned value to stay where it belongs, with you and your loved ones.
For guidance on creating an appropriate and tax-efficient business exit strategy, read our full article, or talk to one of our financial advisors for personalised advice tailored to your business goals.
Practical Tips & Considerations
Plan ahead
Don’t leave qualification to chance. Review your shareholdings, role, and asset utilisation in the trade well in advance of selling your business to ensure they meet the relief criteria.
Review your group structure
If your business operates within a group, make sure all subsidiaries are actively trading — dormant or non-trading companies could affect your eligibility.
Avoid being “connected” after the sale
Continuing to hold shares or maintain a connection with the company after disposal may disqualify you from claiming relief.
Keep thorough records
Document your share ownership, time spent working in the business, and how assets were used. Clear evidence will support your claim if Revenue seeks clarification.
Mind the timing
The three-year ownership and service requirements must be met within specific timeframes before the disposal; careful planning here is crucial.
Seek professional advice
Given the complexity and potential tax savings involved, it’s wise to consult a financial advisor before completing any sale.
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Get a Business Owner Financial Planning Quote
Every business owner’s financial journey is unique, from managing company profits to planning a future exit. At True Wealth, we offer tailored financial planning solutions designed to help you protect your assets, reduce tax, and grow your wealth efficiently.
Whether you’re preparing to sell your business, invest through your company, or plan for retirement, our advisors can guide you every step of the way. Get a personalised financial planning quote today and take the first step towards a more secure financial future.
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All our content has been written or overseen by a qualified financial advisor. However, you should always seek individual financial advice for your unique circumstances.
