Retirement Relief: the €10m cap on passing a business to family

The other way out: give it to the family, not the market

Retirement Relief is the exit route for the owner who wants to pass the business to a child rather than sell it, and used well it removes the Capital Gains Tax on the transfer entirely. It is the mirror image of the third-party sale. Where Revised Entrepreneur Relief gives a 10% rate on a sale to an outside buyer, Retirement Relief gives, in the family case, a nil rate on a transfer to a child, subject now to a cap. The two reliefs answer the same question, how a founder takes value out of a business, with two different answers depending on where the business is going.

The change that makes this urgent is recent. For decades the within-family route was effectively unlimited for owners under 66, so a business worth tens of millions could pass to the next generation with no Capital Gains Tax at all. From 1 January 2025 that is no longer true: a €10 million cap now applies, and the tax on value above it has to be actively managed rather than assumed away. This article sets out how the relief works, what the cap changed, the deferral that softens it, the two separate clawback periods that are constantly confused, and how the decision sits against a straight sale.

How the relief works, and the two routes

Retirement Relief gives Capital Gains Tax relief to an individual aged 55 or over who disposes of qualifying business or agricultural assets, and the name is misleading because the owner does not have to retire to claim it. The relief has been part of Irish tax law for many years, it applies to the assets of a trade or farm and to shares in a family trading company, and it rests on ownership and usage conditions broadly similar to those for other business reliefs. The one thing it always requires is age: the owner must have reached 55 at the date of disposal.

The relief then splits into two routes depending on who receives the assets, and they carry different limits. A disposal to someone outside the family, under section 598, is subject to a lifetime limit on the consideration that can qualify: €750,000 for owners aged 55 to 65, reduced to €500,000 from age 66. A disposal to a child, under section 599, is the family-succession route, and it is the one that historically carried no monetary limit for younger owners and now carries the €10 million cap. Most succession planning runs through section 599, because the whole point is to keep the business in the family, and it is the section the 2025 change rewrote.

The €10m cap: the end of unlimited family transfers

The headline change is that a disposal of qualifying assets to a child is now capped at €10 million for owners aged 55 to 69, where it was previously unlimited for owners under 66. For disposals on or after 1 January 2025, an owner in the 55-to-69 band gets full relief on value passed to a child up to €10 million, and value above that is no longer automatically relieved. Owners aged 70 or over are capped at €3 million, mirroring the long-standing reduced relief for older owners. The reform was aimed at very large intergenerational transfers, on the view that unlimited relief on assets worth tens of millions was hard to justify, and it deliberately concentrates the full benefit on businesses below the cap.

For most family businesses the cap changes nothing, because their value is well below €10 million and the transfer to a child remains free of Capital Gains Tax. For the businesses this cluster is written for, though, the cap is the whole planning problem. An owner whose company is worth €25 million can no longer pass it to a child with no tax; €10 million is relieved and €15 million of value is exposed to Capital Gains Tax on the transfer, at a headline 33%, unless the exposure is managed. That is a charge on a gift, on value the parent is not selling and receives no cash for, which is exactly why the mechanism that defers it matters so much.

The deferral for gains above the cap

The Capital Gains Tax on value above €10 million is not necessarily payable now; it can be a deferred charge that is washed out over time. Finance Act 2024 introduced a deferral for what the legislation calls a "relevant disposal", meaning a disposal of qualifying assets to a child, under section 599(1)(b)(v), where the value exceeds the €10 million limit and Capital Gains Tax is therefore chargeable on the excess. Revenue's eBrief 327/24 confirms the mechanism. Rather than a fixed charge falling due on the transfer, the tax on the excess is deferred, and it is abated, effectively cancelled, if the child retains the assets for a period of twelve years. If the child instead disposes of the assets within that twelve-year period, the deferred Capital Gains Tax becomes payable, by the child, at that point.

The effect is to make the €10 million cap far less punitive for a genuine succession, while still catching a quick onward sale. A family that transfers a €25 million business to a child and keeps it running for the long term can, in substance, still pass the whole value without a Capital Gains Tax cost, because the deferred charge on the €15 million excess abates after twelve years. A family that transfers the business and then sells it to a trade buyer three years later pays the deferred tax. The deferral rewards succession and denies the relief to what is really a sale dressed up as a gift, and it has to be claimed and tracked rather than assumed, so the transfer documents and the child's later intentions both matter.

Two clawbacks, two clocks: the six-year and the twelve-year

There are two separate periods that decide whether tax falls due after a family transfer, they run for different lengths, and confusing them is the most common error in this area. They are not the same rule with different numbers; they are two distinct mechanisms.

The first is the long-standing clawback of the parent's relief. Where a child receives assets under Retirement Relief and disposes of them within six years, the relief originally given to the parent is withdrawn and assessed on the child, so the child effectively pays the Capital Gains Tax the parent was relieved from. This six-year clawback has been part of section 599 for a long time and applies to the relieved value, that is, the value up to the cap on which the parent claimed relief. Its purpose is to stop a child being used as a conduit for a quick sale that the parent could not have made tax-free.

The second is the new twelve-year abatement of the deferred charge on the excess above €10 million, described in the previous section. This is a different clock, on a different amount, introduced for disposals from 2025. The six-year clock governs the relief the parent claimed up to the cap; the twelve-year clock governs the deferred tax on the value above the cap. A child who inherits a €25 million business therefore lives with both: a six-year period during which selling triggers the clawback of the parent's relief on the first €10 million, and a twelve-year period during which selling triggers the deferred tax on the remaining €15 million. Advisers who cite a single "clawback period" for Retirement Relief are usually blurring two rules that a large-business succession has to track separately.

Who counts as a "child", and the gift-tax side

The relief defines "child" more widely than the ordinary meaning, and the transfer is a gift-tax event for the person who receives it. A child for section 599 includes a child of the individual or of their civil partner, and in defined circumstances a foster child, and a niece or nephew who has worked in the business, so a succession to the next generation is not limited to a natural son or daughter. The precise definition matters where the intended successor is not a direct child, because it decides whether the family route is available at all.

The Capital Gains Tax analysis is only one side of the transaction. When a parent transfers a business to a child for no consideration, the child receives a gift, and that gift is within Capital Acquisitions Tax, the Irish gift and inheritance tax, in the child's hands. Where the same event gives rise to both Capital Gains Tax for the parent and Capital Acquisitions Tax for the child, a credit is available so that the same value is not fully taxed twice, and business relief for Capital Acquisitions Tax can reduce the child's charge substantially where its conditions are met. The full succession plan therefore has to solve the parent's Capital Gains Tax, the child's Capital Acquisitions Tax, and the interaction between them together. Retirement Relief handles the parent's side; it does not, by itself, deal with the child's.

Sell or succeed: the two reliefs compared

The choice between passing the business to a child and selling it to a third party is a genuine tax decision, not just a family one, because the two routes carry different reliefs and different caps. Passing to a child under Retirement Relief can be a nil Capital Gains Tax event up to €10 million, with the excess deferred and potentially abated, but it gives the parent no cash and it hands the child a gift-tax exposure and two clawback clocks. Selling to a third party under Revised Entrepreneur Relief crystallises a 10% Capital Gains Tax charge on up to €1.5 million of gain and the standard 33% above that, but it gives the parent the proceeds and a clean break.

For an owner who wants to realise cash and step away, the sale route is usually the answer, and the planning is about the Entrepreneur Relief conditions and limit. For an owner whose priority is keeping the business in the family and who does not need the capital, the succession route can pass far more value tax-free, at the cost of the child's continued ownership and the gift-tax charge. Many owners find the honest answer is a combination: extract surplus cash from the company efficiently first, using the pension route set out in the 100% employer PRSA cap, so that the business passed to the next generation is a clean trading company and the parent has taken value out along the way. The reliefs are levers in one plan, not rival answers to be chosen in isolation.

What a business owner should do before the transfer

The relief rewards a transfer that is planned years ahead, because the value, the ages and the clawback clocks all have to line up. The practical steps before a family transfer are to value the business honestly and see where it sits against the €10 million cap; to confirm the owner's age band, because the difference between the 55-to-69 band and the 70-plus band is €10 million versus €3 million and can be worth planning the timing around; to model the deferred charge on any excess and the child's realistic twelve-year horizon; and to solve the child's Capital Acquisitions Tax position at the same time rather than after.

Above all, the two clawback clocks have to be understood by both generations before the transfer, not discovered when the child receives an offer for the business. A child who sells within six years reopens the parent's relief; a child who sells within twelve years triggers the deferred tax on the excess. A succession that is meant to keep the business in the family for the long term sits comfortably with both; a succession that is really a staging post before a sale does not, and should probably be structured as a sale in the first place. Retirement Relief is built for families that intend to keep the business, and it is least forgiving of families that do not.

Frequently asked questions

What is Retirement Relief in Ireland?

It is a Capital Gains Tax relief under sections 598 and 599 of the Taxes Consolidation Act 1997 for an individual aged 55 or over who disposes of qualifying business or agricultural assets. Despite the name, the owner does not have to retire. A disposal to a child (section 599) is the family-succession route and can be free of Capital Gains Tax up to a cap; a disposal to someone outside the family (section 598) is subject to lower monetary limits. It is the main relief for passing a business to the next generation.

What is the €10 million cap on Retirement Relief?

For disposals of qualifying assets to a child on or after 1 January 2025, Retirement Relief is capped at €10 million for owners aged 55 to 69, and at €3 million for owners aged 70 or over. The within-family route was previously unlimited for owners under 66, so this is a significant change for businesses worth more than €10 million. Value passed to a child above the cap is chargeable to Capital Gains Tax, subject to the deferral described below.

Can I defer the tax on value above €10 million?

Yes. Where the value passed to a child exceeds €10 million, the Capital Gains Tax on the excess is a deferred charge rather than an immediate one. If the child retains the assets for twelve years, the deferred tax is abated and effectively falls away. If the child disposes of the assets within twelve years, the deferred tax becomes payable by the child at that point. The mechanism was introduced by Finance Act 2024 and confirmed in Revenue's eBrief 327/24, and it has to be claimed and tracked.

What is the six-year clawback, and is it the same as the twelve-year period?

No, they are different rules. The six-year clawback is long-standing: if the child disposes of the assets within six years of receiving them, the relief originally given to the parent is withdrawn and assessed on the child. The twelve-year period is new and separate: it governs whether the deferred tax on value above the €10 million cap is abated or becomes payable. A large-business succession is subject to both, on different amounts, so they must be tracked separately rather than treated as one clawback.

Do I have to actually retire to claim Retirement Relief?

No. The relief requires the owner to be at least 55 at the date of disposal, but there is no requirement to stop working or to retire in any real sense. The name is historical. What matters are the age condition, the ownership and usage conditions on the assets, and, for shares, that the company is a family trading company in which the individual holds the required interest. An owner who continues in business after transferring one company can still have claimed the relief on that transfer.

Who counts as a "child" for the relief?

More people than the ordinary meaning suggests. For section 599 a "child" includes a child of the individual or of their civil partner, and in defined circumstances a foster child and a niece or nephew who has worked in the business. This matters where the intended successor is not a direct son or daughter, because it determines whether the family route, and its more generous treatment, is available at all. A transfer to a successor who does not fall within the definition is treated as a third-party disposal under section 598, with the much lower limits.

Does the child pay any tax on the transfer?

Potentially, yes, but under a different tax. When a parent transfers a business to a child for no consideration, the child receives a gift that is within Capital Acquisitions Tax, Ireland's gift and inheritance tax. A credit is available where the same event also gives rise to Capital Gains Tax, so the same value is not fully taxed twice, and Capital Acquisitions Tax business relief can reduce the child's charge substantially where its conditions are met. The succession plan has to address the parent's Capital Gains Tax and the child's Capital Acquisitions Tax together.

Should I pass the business to my children or sell it?

It depends on whether you need the cash and whether the business is to stay in the family. Passing to a child under Retirement Relief can be free of Capital Gains Tax up to €10 million, with the excess deferred, but gives you no proceeds and hands the child a gift-tax charge and two clawback clocks. Selling to a third party under Revised Entrepreneur Relief gives you the cash and a 10% rate up to €1.5 million, with 33% above. The two reliefs answer different objectives, and a full plan often uses cash extraction before either.

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Retirement Relief is the route for the owner who wants the business to outlive their involvement in the family rather than be sold, and for most families it still passes the whole business to the next generation free of Capital Gains Tax. For the larger business the €10 million cap has changed the exercise from an assumption into a plan: the value above the cap is a deferred charge to be managed, the six-year and twelve-year clocks have to be tracked separately, and the child's gift tax has to be solved alongside the parent's. Retirement Relief is not a way to sell a business through a child. It is a way to keep one in the family.

Critical advisory. The jurisdictional frameworks set out above carry strict liability and retroactive tax exposure. Executing these structures without institutional-grade tax architecture is a primary trigger for Revenue and HMRC audits. To mitigate systemic risk and discuss bespoke structuring, initiate a confidential briefing with our Managing Partners.