Favourite Niece/Nephew Relief

Q: My nephew has been working with me as a mechanic for the past number of years and I am thinking of passing on the business to him when I retire. Will he be liable for any gift tax?

25th August 2017

A. As your nephew will be receiving a gift of assets from his uncle this gift will fall into the Category B Threshold meaning your nephew can only receive €32,500 tax-free (assuming he has never received any inheritances/gifts previously). If the business assets gifted are valued higher than this he will pay tax at a rate of 33% on the excess over the threshold e.g. if the business was valued at €132,500 he would have a tax bill of €33,000

However, there is a relief from gift tax known as Favourite Nephew relief which can potentially relieve this burden in respect of business assets being gifted to your nephew.

If your nephew qualifies for the relief he can use the Group A tax-free threshold, usually granted to children of the person making the gift, of €310,000 in respect of any business assets received through a gift from their uncle.

Your nephew must have worked for you for the five years immediately before they receive the gift either:

for 15 hours per week in a small business (run by you and your spouse or civil partner)

or

for 24 hours per week in a larger business (that is, a business where there are other employees).

The relief applies only to assets used in the business.

It does not include investment assets which are taxed under normal rules.

Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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1890 98 76 09

Or submit an enquiry