Company Directors can avail of various reliefs which can amount to more tax free money being extracted from the business.
There are numerous reliefs open to Directors and Shareholders and because the staff of Walfrid Private have backgrounds in various financial sectors, such as accountancy and tax, we can discuss, liaise and advise on these reliefs with our clients.
Some of the tax efficient reliefs available to Shareholders and Directors include;
When disposing of the shares of a business, it may be possible for Shareholders to extract up to €750,000 from the sale proceeds, once certain criteria are met. This is an age dependent relief that must be availed of between the ages of 55 and 66. After the age of 66, the amount that can be taken tax free is diluted to €500,000 so planning is essential to be able to avail of this particular relief. Other criteria need to be met and Walfrid Privates financial advisors would discuss these terms with clients to ascertain whether or not they qualify and if the relief would be applicable to them. Don’t let the name confuse you. You do not have to “Retire” in the traditional sense, but you do have to dispose of your shares in that particular business.
Entrepreneurs can avail of a relief known as Entrepreneur Relief when they sell their business and dispose of their shares in that business. In essence, Entrepreneur Relief is a reduced rate of Capital Gains Tax from the usual 33% down to 10% up to the value of a €1,000,000 sale price or to simplify, the Entrpreneur can sell the business for a seven figure sum and walk away with €900,000 personally. It is a very tax efficient structure that should be explored as and when any business owner has the potential opportunity to avail of it. Unlike Retirement Relief, this is not age dependent but other criteria around shareholding and business enterprise value applies.
As referenced in the “accumulation” section earlier, pension relief is limited at €200,000.
If you retirement account is at the maximum allowable threshold, of €2,150,000, you can still only avail of €200,000 tax free. The next €300,000 is taxed at a lower threshold of 20% (meaning you get €240,000) and the remainder (€1,500,000) goes to purchase an ARF/AMRF.
As such, it should be reiterated, that pensions are not the only tax efficient relief available to business owners and Walfrid Private look at the other reliefs in conjunction with pensions to maximise the extractable wealth for each situation.