What is Marginal Relief?
Marginal Relief is a partial tax relief that may apply when full Retirement Relief does not.
By David Barry
Marginal Relief is a partial tax relief that may apply when full Retirement Relief does not.
Marginal Relief is a partial tax relief that may apply when full Retirement Relief does not apply (because the relevant thresholds have been exceeded).
It is not a separate standalone tax relief, it is associated with Retirement Relief, and may be available when the relevant thresholds are exceeded.
Marginal Relief acts to restrict the capital gain tax liability to half the difference between the sales proceeds of the chargeable business assets, and the relevant retirement relief limit. Third party Retirement Relief on chargeable business assets for persons between the age of 55 and 66 is limited to €750,000, and this limit reduces to €500,000 if the person is over the age of 66.
Example:
Due to the way in which the above formula operates this Marginal Relief can be irrelevant after about the €1,000,000 mark, so let’s take an example of a sale price of €900,000 where single Retirement Relief applies. How much tax will be payable?
Jane, is 62 years old, sells her family trading company shares for €900,000. As this sum exceeds the Retirement Relief threshold full relief is not available. Let’s assume that before considering any relief, the CGT liability would be €200,000. However, as she meets the qualifying conditions, Jane claims marginal relief. The excess of the sale amount (€900,000) minus €750,000 is €150,000. As a result the CGT due would be €75,000 (half of the excess), and not €200,000.
David Barry
David Barry is a Chartered Tax Advisor (CTA) with the Irish Tax Institute and works at TaxAssist Accountants. David trained in Ernst & Young and is a highly experienced tax advisor. He has significant experience in accounts, tax returns and advising clients in the SME sector. He also has a particular interest in the importance of succession planning for businesses.