Ireland Business Succession Planning: New CAT Thresholds After Budget 2027

Ireland’s Budget 2027 increased the tax-free thresholds for Capital Acquisitions Tax (CAT), changing the amount that beneficiaries can receive as gifts or inheritances before CAT becomes payable. For business owners preparing to transfer company shares, a family enterprise or other qualifying business property, these changes are worth reviewing before making a transfer.

Finsoul Ireland helps businesses assess the tax and practical considerations involved in ownership transfers and succession decisions. The higher thresholds may reduce a beneficiary’s CAT liability, but they do not remove the need to check previous gifts, business relief eligibility, asset values and other tax obligations.

What Are the New CAT Thresholds in Ireland After Budget 2027?

Budget 2027 increased all three CAT group thresholds for gifts and inheritances taken on or after 7 October 2026. The applicable threshold depends on the relationship between the person giving the benefit and the person receiving it.

The new thresholds apply to the total taxable benefits a person receives within the relevant group. They are not separate allowances for every gift or inheritance. Previous taxable gifts and inheritances received in the same group since 5 December 1991 must also be considered.

For example, a child receiving shares in a family company may qualify for the Group A threshold. A nephew receiving shares from an uncle will generally fall within Group B, while a beneficiary with a more distant relationship may fall within Group C. The precise relationship and circumstances should be checked before calculating the tax due.

The standard CAT rate remains 33%. The threshold increase does not mean that every business transfer is tax-free; CAT may still apply to the taxable amount above the available threshold after relevant reliefs are considered.

What Is Capital Acquisitions Tax (CAT) in Ireland?

Capital Acquisitions Tax is the Irish tax that may apply when someone receives a gift or inheritance. The person transferring the benefit is known as the ‘disponer’, while the person receiving it is the beneficiary. The beneficiary is generally responsible for assessing and paying any CAT due.

CAT can apply when a beneficiary receives company shares, a business interest or other assets. The tax calculation depends on the taxable value of the benefit, the relationship between the parties, previous benefits received in the same group and any relief or exemption that applies.

A gift and an inheritance are treated differently in some circumstances. For instance, Revenue states that a gift becomes an inheritance if the disposer dies within two years of making the gift. This is one reason why the timing and structure of a proposed transfer need careful review.

Business owners should also distinguish CAT from Capital Gains Tax (CGT). CAT concerns the person receiving a gift or inheritance. CGT may arise for the person disposing of an asset, depending on the transaction and the reliefs available. A transfer can therefore require consideration of both taxes, rather than CAT alone.

How Do the New Thresholds Affect Business Succession Planning?

The increased thresholds may give some beneficiaries more room before CAT becomes payable. However, the actual benefit depends on the value being transferred, the recipient’s relationship to the owner and whether tax relief applies.

Transferring a family business to children

A child receiving a parent’s business shares will generally fall under Group A. The €420,000 threshold may reduce the amount subject to CAT, but the child’s earlier gifts and inheritances within Group A must be included in the calculation.

For example, suppose a parent transfers shares worth €500,000 to a child. If the child has received no previous taxable benefits in Group A and no relief applies, €80,000 would remain above the €420,000 threshold. At the standard 33% rate, the illustrative CAT would be €26,400.

This example assumes the full threshold is available and excludes Business Relief and other possible adjustments. The actual liability may differ depending on the facts.

Passing shares to other relatives

Where an owner plans to transfer shares to a sibling, niece, nephew or another relative, the applicable CAT group may be different. The lower Group B or Group C thresholds can make the tax position more significant, even when the value of the shares is relatively modest.

Owners should identify the intended recipient early and assess the likely tax consequences before agreeing to the transfer.

Planning for owners without direct descendants

Not every business owner intends to pass a company to their children. A co-owner, employee, sibling or other beneficiary may be the preferred successor. In these cases, the recipient’s relationship to the owner and eligibility for business relief can have a substantial effect on the overall cost.

Business succession planning should therefore consider who will take ownership, how the transfer will be funded and whether the proposed arrangement supports the company’s continued operation.

How Is CAT Calculated When a Business Is Transferred?

The CAT calculation starts with the taxable value of the gift or inheritance. The recipient’s available group threshold and any relevant reliefs must then be considered. A practical assessment generally involves these steps:

1. Value the business interest. Obtain a defensible valuation of the shares or business property being transferred. The value should reflect the interest transferred and the circumstances at the relevant valuation date.
2. Identify the CAT group. Confirm the relationship between the disposer and the beneficiary.
3. Check previous benefits. Calculate the threshold already used by earlier gifts and inheritances within the same group since 5 December 1991.
4. Assess reliefs. Determine whether Business Relief, Agricultural Relief or another relevant provision applies.
5. Calculate the remaining taxable amount. Apply the available threshold and relevant reliefs before calculating CAT at the applicable rate.

The order and detail of the calculation depend on the circumstances and the relief being claimed. Revenue’s CAT guidance explains the rules for thresholds, rates and aggregation.

A valuation should not be treated as a formality. A difference in the assessed value of company shares can change the amount subject to tax and affect how the recipient funds the transfer. Where ownership is divided between several beneficiaries, each person’s position may also need separate consideration.

How Can Business Relief Reduce CAT on a Business Transfer?

Business Relief can reduce the taxable value of qualifying business property by 90%, subject to the relevant conditions. It may apply to the transfer of a business, an interest in a business or qualifying shares in a company carrying on a business. It does not automatically apply to every asset used by a business.

For example, if qualifying business property has a value of €1 million, a 90% reduction could leave €100,000 as the value taken into account for CAT purposes before the available threshold and other applicable rules are considered. This is an illustration, not a guarantee that the transfer qualifies.

Revenue’s conditions include requirements relating to the type of property transferred, how long the business has been carried on and how long the beneficiary retains the property. Certain company share transfers must also meet ownership or control conditions. The rules differ according to the type of business property involved.

Owners should review the following points before relying on the relief:

• Whether the business property meets the relevant definition.
• Whether the business activity qualifies and is not excluded.
• Whether the shares or interest meet the applicable ownership conditions.
• Whether the required ownership and retention periods can be satisfied.
• Whether assets held by the company are genuinely part of the qualifying business activity.

Investment assets and property held outside the qualifying business may receive different treatment. For this reason, owners should not assume that transferring a company automatically makes every asset within it eligible for relief.

What Other Tax Considerations Apply to Business Succession in Ireland?

CAT is only one part of a transfer. The owner and beneficiary should also review the following matters.

Capital Gains Tax and Retirement Relief

A lifetime transfer of business assets or shares may have CGT implications for the person making the disposal. Retirement Relief may be available for qualifying disposals, subject to conditions that can include age, ownership periods, the nature of the assets and the relationship between the parties.

The CAT position for the recipient and the CGT position for the owner are separate calculations. A transfer that appears affordable from the recipient’s perspective may still have tax consequences for the person transferring the business. Both sides should be assessed before documents are signed.

Agricultural Relief where relevant

Agricultural relief may be relevant where the transferred property qualifies as agricultural property and the applicable conditions are met. It is not a general relief for ordinary trading businesses. Where the enterprise combines farming with other activities, the nature and ownership of the assets need to be examined.

Lifetime gifts versus inheritance through a will

Transferring ownership during the owner’s lifetime can allow a successor to learn the business while the existing owner remains involved. It may also allow the owner to plan the timing of the transfer. However, a lifetime gift can have CAT and CGT consequences, and the owner gives up some or all control over the transferred interest.

Passing the business through a will may allow the owner to retain control during their lifetime, but the eventual transfer still needs to be assessed for CAT, relief eligibility and continuity. Neither approach is automatically better; the right option depends on the business, family circumstances and tax position.

Legal ownership, shares and company records

A transfer may require updated share registers, company records, shareholder agreements or other legal documents. The business should also review voting rights, director appointments, decision-making powers and any restrictions on transferring shares.

A successor who receives shares does not necessarily acquire the skills or authority needed to run the company. Ownership transfer and management succession should be planned together.

How Should Irish Business Owners Prepare for Succession After Budget 2027?

A clear plan can help an owner prepare the company, the successor, and the finances before ownership changes. Business succession planning should start well before retirement or a proposed transfer, particularly where the business depends on the current owner for customer relationships, technical knowledge or daily decisions. The following steps provide a practical starting point.

1. Review ownership and business value. Identify who owns the shares or assets, check any restrictions on transfers, and obtain a current valuation.
2. Choose the intended successor. Consider whether a family member, co-owner or employee has the experience and interest to take responsibility.
3. Compare transfer options. Assess a lifetime gift, sale or inheritance through a will, taking account of control, funding and tax implications.
4. Check thresholds and reliefs. Confirm the beneficiary’s CAT group, previous taxable benefits and eligibility for business relief or other relevant reliefs.
5. Prepare the company for the handover. Document key processes, clarify management responsibilities and plan how customers, suppliers and staff will be informed.
6. Review the plan when circumstances change. Revisit the arrangements after changes to ownership, family circumstances, business value or tax rules.

This process is relevant to family business succession planning, particularly when several relatives may expect to inherit or take part in the company. Open discussions can help clarify who will own the business, who will manage it and how other family members will be treated.

Owners searching for successful business plan secrets & strategies should focus on practical preparation rather than a single tax-saving measure. A written handover plan, reliable financial records, clear decision-making arrangements and early professional advice can make the transfer easier to manage.

What Mistakes Should Business Owners Avoid?

Several common errors can increase the cost or difficulty of transferring a business.

• Assuming the full threshold is available: Previous gifts and inheritances in the same CAT group may have used part of the allowance.
• Treating Business Relief as automatic: The property and transfer must meet the relevant conditions.
• Leaving valuation until the last minute: An unsupported valuation can complicate the tax calculation and the transfer itself.
• Considering CAT in isolation: CGT, legal costs, company obligations and funding requirements may also affect the decision.
• Delaying the management handover: A successor needs time to understand the company’s finances, employees, customers and responsibilities.
• Failing to review the arrangements: A plan made years ago may no longer reflect the business’s value, ownership or family circumstances.

A tax adviser can assess the applicable rules, while a solicitor can advise on wills, share transfers and other legal documents. Business owners should confirm the relevant requirements before completing a transfer rather than relying on general examples.

Conclusion

Budget 2027’s higher CAT thresholds may reduce the tax burden for some beneficiaries receiving business assets or shares. However, the final position depends on the relationship between the parties, previous gifts and inheritances, the business valuation and eligibility for relevant reliefs. The CAT threshold is only one part of a successful transfer.

Owners should review the tax position alongside management responsibilities, legal documents and the successor’s readiness to take over. Finsoul Ireland supports businesses in reviewing the financial and practical considerations involved in preparing for a change of ownership. Before transferring business shares or assets, check the applicable revenue rules and obtain professional advice on the proposed transaction.

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FAQs 

What are the new CAT thresholds after Budget 2027?

For gifts and inheritances taken on or after 7 October 2026, the thresholds are €420,000 for Group A, €44,000 for Group B and €22,000 for Group C. The beneficiary’s relationship to the disponer determines the relevant group.

What is the CAT rate in Ireland?

The standard CAT rate is 33%. It applies to the taxable amount above the available threshold after relevant reliefs and rules have been considered.

Can Business Relief eliminate CAT on a family business?

Not necessarily. Business Relief can reduce the taxable value of qualifying business property by 90%, but eligibility conditions apply. CAT may remain payable depending on the value transferred, the threshold available and the recipient’s circumstances.

Do previous gifts affect the new thresholds?

Yes. Previous taxable gifts and inheritances received in the same CAT group since 5 December 1991 must be included when calculating the threshold available. The new figures do not create a separate allowance for every transfer.

Is it better to gift a business during your lifetime or leave it in a will?

There is no single answer. A lifetime transfer may allow the successor to learn the business while the owner remains involved, but it can trigger tax and reduce the owner’s control. An inheritance may allow the owner to retain control during their lifetime, but the eventual transfer still requires tax and legal planning.