Charlie McConalogue (Donegal North East, Fianna Fail)
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142. To ask the Minister for Finance the changes in budget 2014 in relation to capital gains tax for business people; and if he will make a statement on the matter. [53904/13]

Michael Noonan (Limerick City, Fine Gael)
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I announced in Budget 2014 that I would introduce a new CGT incentive to encourage entrepreneurs to invest and re-invest in assets used in new productive trading activities. The measure will apply where an individual, who has paid capital gains tax on the disposal of assets, makes investments in a new business in the period 1 January 2014 to 31 December 2018 and subsequently disposes of this investment no earlier than three years after the date of investment. The CGT payable on the disposal of this new investment will be reduced by the lower of:

(i) the CGT paid by the individual on a previous disposal of assets in the period from 1 January 2010 and

(ii) 50% of the CGT due on the disposal of the new investment. Commencement of this measure is subject to receipt of EU State Aid approval.

The CGT entrepreneurial relief is provided for in Section 45 of Finance (No 2) Bill 2013 and will apply to active entrepreneurs who invest in new businesses, engaged in relevant trading activities (as defined), carried on by them personally or through qualifying companies controlled by them in which they are full-time working directors. The relief is intended to apply to productive enterprises that will generate employment and will not therefore apply to passive investors or to investments in passive activities.

The benefit of the entrepreneur relief will arise on the ultimate disposal by qualifying entrepreneurs of the chargeable business assets in which they invest. These chargeable business assets must be held for a minimum of three years and the other applicable conditions must be satisfied to qualify for relief. Accordingly the benefit of the relief will crystallise from 2017 onwards on disposals of chargeable business assets that qualify for the relief.

I also announced in the Budget, the extension of capital gains tax farm retirement relief to farmers who:

(i) have farmed their lands for a period of not less than 10 years,

(ii) on ceasing to farm the lands, immediately let them for up to 15 years – with each such letting being for a minimum period of 5 years,

(iii) then sell the land.

The purpose of the measure is to encourage older farmers who have no children to whom to transfer their farm to lease out their farmland over the long term to younger farmers. The relief will apply in respect of disposals made on or after 1 January 2014, where the above conditions are satisfied.

For a farmer aged 55 or over but under 66 years, full capital gains tax relief will be available on any gain made in respect of disposals for a consideration of up to €750,000. For a farmer aged 66 years of over full capital gains tax relief will be available on any gain made in respect of disposals for a consideration of up to €500,000. Marginal relief will apply to disposals slightly in excess of these amounts.

I also extended the property purchase incentive relief from CGT (in respect of the first 7 years of ownership) by one year to include properties bought up to the end of 2014. Where property purchased in this period is held for seven years any gain on a subsequent disposal that accrued in that period will not attract a capital gains tax liability. Where property is held for longer than this period a proportion of any gain will be exempt.