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What is the most tax effective way to pass the family business onto my daughter? Should I wait or act now?

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Passing on the family business is probably the most significant decision in the lifetime of all business owners and they need to be happy that the timing is right for them and for the child. The right time will depend on family circumstances however, from a tax viewpoint, now is the time to start planning for it. 

The value of most businesses has fallen significantly in the current economic climate and obviously the lower the value of the business being passed on, the lower the associated tax cost. There are numerous tax reliefs currently available which significantly reduce or eliminate altogether the tax costs arising on the transfer of a business. The two main reliefs of Capital Gains Tax (CGT) Retirement Relief and Capital Acquisition Tax (CAT) Business Relief are now topical because it is expected that these reliefs will be reduced in upcoming budgets.  

Therefore, if these tax reliefs are now available and if the timing is right for the transfer, then consideration should be given to passing the business. Obviously parents will have a number of concerns when contemplating a transfer but there are mechanisms to ensure that they continue to have an input into the business.  

Mairead O’Grady, Taxation Partner, Russell Brennan Keane mogrady@rbk.ie