Entrepreneur Relief - Personal

LTD Company

Entrepreneur Relief
Entrepreneur Relief relates to a reduced rate of Capital Gains tax you
pay on the sale of your business or the shares in your business

Capital Gains Tax

This is a tax on the profits you make on the sale of Assets, including
Property and Shares.

The prevailing rate of CGT is 33%

When you avail of Entrepreneur Relief the rate is reduced to 10%

Features of Entrepreneur Relief

• The value of the gain on sale must be less than €1,000,000
otherwise marginal relief applies

• You must own more than 5% of the company shares

• You must have owned the shares for a continuous period of 3

out of previous 5 years

• You must be a director or employee of the company for a

continuous period of 3 out of previous 5 years and have spent more
than 50% of your time working in the company.

• Entrepreneur Relief can be claimed whilst liquidating your

limited company

• Qualifying trading company

• Non trading assets, investments and securities are not allowed

to be taking into account when calculating?

Can a Contractor working through their own Private limited company avail of this
reduced rate of CGT?
Yes Contractors would be classed as having a relevant trading company
 Can I liquidate my Company and avail of the
10% rate
Yes, it is possible to avail of this on any funds that you have left
in the Company

How does a liquidation work?

You need to appoint a liquidator who will wind up your company and
organize the legal aspects of this and distribute funds to the
Shareholders. The cost is approximately €2500 - €3000 + VAT! This can
be written off as a business expense.

Does it work for all contractors?

No it Is only tax efficient for those who have built up excess funds in
the company

Do I still have to pay Corporation tax?

Yes you still have to pay Corporation Tax on your company profits

How much tax will I save?

Personal Marginal Tax rate 52%
V’s
Corporation tax 19% (12.5% + 6.5%) + 10% CGT

Could I see an example of how this works?

Yes please see a scenario below.

Scenario
Below we do a comparison on a Contractor over 5 years who:
Day rate of €400 per day @ 231 days per annum
Takes set Salary of €50,000 per annum
Company expenses €7,000 per annum
Retained Profit in Company is €35,400 per annum

Based on the calculations below, you will see that based on leaving €35,400 per annum or €177,000 over
5 years the effective rate of tax is 27%, meaning you pay €45,773 in tax.

If you paid Income tax on the same €35,400 per annum or €177,000 over 5 years then you would pay
€88,783.

Your tax savings would come in at €43010

 Entrepreneur Relief
Liquidate
Year 1 Year 2 Year 3 Year 4 Year 5
Profit
€35,400 €35,400 €35,400 €35,400 €35,400 €177,000
CT 12.5%
€4,425 €4,425 €4,425 €4,425 €4,425 €22,125
PS Surcharge
€2,322 €2,322 €2,322 €2,322 €9,289
Retained Profit
€28,653 €57,306 €85,958 €114,611 €145,586 €145,586

Liquidation Fee
€2,500
Available for Distribution
€143,086
CGT @10%
€14,309

Net Distribution
€128,777
Total Income
€177,000
Total CGT +CT +Liquidation
Fee €48,223

Effective Rate of Tax 27%

Income Tax
Profit
€35,400 €35,400 €35,400 €35,400 €35,400 €177,000
Salary
€35,400 €35,400 €35,400 €35,400 €35,400 €35,400
PAYE/PRSI/USC
€17,757 €17,757 €17,757 €17,757 €88,783

Effective Rate of Tax 50.16%

Tax paid under CGT/CT on €177,000 €48,223

Tax paid under Income Tax on €177,000 €88,783

Savings €40,560