The Hardware Journal asked Liam Lynch, Tax Partner, KPMG to comment on the looming retirement issue for family firms. His comments were as follows:
In October 2023 the Minister for Finance announced major changes affecting the transfer of family businesses to the next generation. As these changes were deferred until 1st January 2025, they are now approaching somewhat like a steamroller for those affected.
To set the context, there is currently full relief from capital gains tax on the transfer of a family business from a parent aged between 55 and 66 to a child (with some extensions), provided certain conditions are met. The main conditions refer to the assets qualifying, and that they are not disposed of by the child within six years.

The purpose of the relief is to provide for the long-term growth and stability of family firms in Ireland. It allows for the orderly intergenerational transfer of such firms so that they and the jobs they provide are sustainable over the longer term. In some cases, it can provide the space to grow large Irish based global businesses, rooted in their local Irish communities.
But this will all change on 1st January next. The relief will then apply from age 55 to 70 but be capped at a value of €10m. This is to say that it is capped at the technical definition for a small enterprise. If this describes your family firm you can stop reading now and be content that now you can plan your retirement up to age 70.
However, if you are the owner of a larger family firm, you will from next year have to pay capital gains tax on any lifetime transfer of that firm to your children. For example, if you have worked hard, reinvested all your profits and are lucky enough to have built a business worth over €10m from scratch, it will cost you an additional 20% of that value to transfer to your children now. Indeed, after you have extracted the amount to pay that tax from your family company you will have paid that amount again in income tax and gutted your business in the process.
So, most people will not do this. Suddenly the sensible thing to do is to hold onto ownership of your business until you die and pass it in your will. You then delay harnessing the energy and innovation of the next generation, and risk seeing the business you built diminish as you get older. And any thought of actually retiring becomes nothing more than a fantasy.
The really strange thing about this abolition of retirement relief for larger family enterprises is not just the evident economic damage that is invites, but it actually has a tax cost for the exchequer. It will stop lifetime transfer of these businesses. Because of this there will be no stamp duty collected on such transfers, and any capital acquisitions tax will be delayed by probably about 25 years. It really is hard to see the logic in the move.
If your business is likely to be affected by this change, it might be time to talk with your financial advisor or local TDs before Budget 2025 is locked into place over the summer.

For further information you can contact Liam Lynch, Tax Partner, KPMG, liam.lynch@kpmg.ie