Buying or selling a brokerage business

Every Broker seeking to expand their business quickly and strategically must think about acquiring a brokerage and every other broker needs to think about succession, which these days may be all the more attractive since it does not necessarily mean retiring from the business.

There are a number of reliefs available to make it attractive for Sellers to take money out of their business without being heavily taxed. Selling your business can also be a tax efficient way of transferring your family business to your children without being exposed to the full rigours of the present Capital Acquisitions tax regime.

So, what are the reliefs, how can you avail of them and what are your first steps.


Get your lawyer and tax advisor/accountant involved at an early stage to ensure the business is as attractive as possible to a Buyer and take such steps as may be needed to minimise tax on sale and avail of reliefs.

1. You may need to transfer shares to a spouse to increase available relief

2. You may need to set up a holding company.

3. You may need to increase/decrease staff levels or beef up non -compete clauses in your staff contracts. If a Seller, make sure you have no rogue employees attempting to head off into the sunset with your client list, thereby depleting your sale price or any deferred consideration. Buyers need to identify key employees they want to ensure don’t leave.

4. You may need to prepare for delays in obtaining Central Bank approval for the transfer. This applies equally to Buyers and Sellers. It is imperative to avoid delays that your application to Central Bank is as complete and informed as possible.

5. Make sure you have back up in the office so the show stays on the road while your time is taken up with the sales/buying process.


1 So, once you have your tax and legal advice in early you will know in advance your preference to buy/sell shares or assets.

2 Prepare a detailed Head of Terms. This works as a very useful road map when matters get complicated.

3 Keep your advisors involved from the beginning to manage expectations and maybe take the flack if tempers start to fray, especially if you intend to work with the Buyer/Seller going forward

4 Keep your sense of humour


There have always been pros and cons on both sides of this divide but the latest budget provisions which increased the 2% stamp duty rate to 6% on commercial transactions and commercial property transactions makes the 1% stamp duty rate applicable to the sale of shares very attractive to a potential buyer.

This represents a considerable saving for Buyers, making the acquisition of shares significantly cheaper, despite the greater risk associated with buying the shares of a private limited liability.

While the sale of shares carries the burden of increased due diligence for both sides, it is now proving a cheaper option for both sides.

There are numerous advantages eg it can be of benefit to a) acquire another regulated entity which can later be sold, b) acquire commercial property at a rate of 1% instead of 6%, a not insignificant saving if there are property assets owned by the Target Company.

In fact because of the delays in the first regulation of entities and on the consent to transfers by Central Bank I am being asked more and more if I know any clients who wish to simply sell a “regulated entity”.


A. Retirement Relief

Retirement Relief (RR) lost some of its attraction in larger transactions because of the availability of Entrepreneurial Relief (ER), but RR still has many advantages given that it provides a tax free sale of qualifying assets up to €750,000.00 or €3 million to a child.

It is however of less benefit where the consideration is more than €750,000 and there are conditions which must be complied with before RR is available

l Seller must have attained the age of 55 years

l Seller must have owned the shares for at least 10 years

l Seller must have been a working director for at least 10 years

l Seller must have worked full time for at least 5 years

It is important to note that there are opportunities for spouses to double the relief amount with proper succession planning and that a Seller does not in fact have to retire.

B. Related Reliefs

Good tax advice will ensure that a Seller has availed of all the various reliefs available. Every relief counts especially given the level of taxation once one exceeds the thresholds.

Termination Payment

Upon retirement a company director may terminate his office and in the process become eligible for a tax-free payment.

Pension Funding Allowance

It is key for a company director to ensure that he /she has funded his/ her pension to the maximum permissible thresholds.

Relief on Assets

There are also reliefs on the transfer of assets of the business.So how does the individual qualify? There are five main conditions (very similar in terms of timing etc.)


Length of Ownership

1. The individual must have owned the assets for a minimum of 10 years ending with the disposal and


2. Where the business is disposed of through shares in the Family

Company (see definition below), the individual must have been a

2.1. Working director in the relevant company for 10 years

2.2. A full-time director of the relevant company for 5 years during that 10-year period.

Since 1/1/2002 a taxpayer claiming RR in respect of the disposal of shares in a family company may also claim relief in respect of land, buildings, machinery and plant which the individual has owned for at least 10 years ending on the date of the disposal provided:

a) the assets were used by the company throughout the taxpayer’s period of ownership and

b) The assets were disposed of at the same time and to the same person as the shares in the family company.


“Family Company”

Family Company (FC) is important as it facilitates the structuring of transactions to permit availability or otherwise of RR. So, a FC is where the individual must hold at least 25% of the voting rights or it is a FC provided the person’s family hold at least 75% of the voting rights with the individual holding not less than 10% of these rights. Family includes: spouse, civil partner, direct relatives and in-laws. A family company must be a trading, or a holding company of a trading group.


The definition of Qualifying Company is also quite important; it is a

(a) A trading company and the individual’s family company or

(b) A member of a trading group of which the holding company is the individual’s family company


Chargeable business assets include:

1. Shares in a family trading, (or farming) or holding company of a trading group

2. Land, machinery or plant owned by the individual and used by his/ her ‘family company

3. Land used for the purposes of farming

4. The Asset must be used for purposes of trade/business/office/ employment. This definition by the way whilst it includes goodwill, it does not include debtors, stock, cash or investments


Now is a good time to highlight that RR can be claimed twice! – in connection with disposals to persons other than a child, and also to third parties. In addition, both husband and wife, if they each meet the criteria with early planning in particular, can each avail of the limits, at present €750,000 each. This is why early planning is so critical.

Given that there are so many family brokerages it is important to remember the benefit of inter family transfers

Disposal to persons other than a child (Section 598 TCA 1997)

l Full Capital Gains Tax Retirement Relief is only available where the proceeds relating to the disposal of ‘qualifying assets’ does not exceed €750,000

l With effect from 1 January 2014, individuals aged 66 years and over are subject to ceiling limit of €500,000

l It is also essential to remember that these €750,000 or €500,000 ceilings are lifetime limits and important to keep in mind the fact that non-qualifying assets such as investments are not included in this limit (these are subject to CGT as normal).

Disposal to a child (Section 599 TCA ‘97)

There was NO limit on the consideration/proceeds relating to the disposal of ‘qualifying assets’ if the individual was over 55 and under 66 years – however, with effect from 1 January 2014, individuals aged 66 years and over are subject to ceiling limit of €3 million in order for full CGT retirement relief to apply. Any value in excess of €3 million will be subject to Capital Gains Tax. What is included in the definition of a “child”?

1. Child of a parent and child of a deceased child (i.e. grandchildren in certain circumstances)

2. Niece/nephew who has worked in the business or company on a full-time basis for 5 years prior to date of disposal of qualifying assets to that niece/nephew

3. A foster child (subject to specific conditions being met)


I mentioned above that I believe ER may render RR redundant and we may even see it being phased out, to simplify the tax code. ER allows an entrepreneur to dispose of qualifying investments (mainly shares in trading companies) at a rate of 10%; up to gains of €1.0 Million.

This is a reasonable relief for many broker businesses; but €1.0 Million has long since lost its glitter and many believe that it is not enough to stimulate entrepreneurial activity which was its intention or to stimulate sales. This is especially so considering that the threshold for similar legislation in the UK is £10.0 Million. However, as we know the recent budget failed to address this in any way.

This relief does however (TCA 1997 s 597AA) reduce the effective rate of CGT on disposals of chargeable business assets to 10% (effective 1 January 2017). For any disposals made in 2016 the rate is still 20%. The 10% rate shall apply to the net chargeable gain arising on the disposal by the individuals of assets, comprising the whole or a discrete part of a trade or business.

The lower rate of 10% (or 20% for disposals in 2016) shall be subject to a lifetime limit of €1.0 million although I see no reason why a spouse could not have a similar gain in the case of early tax planning. Thus, based on current CGT rates, the maximum tax benefit per entrepreneur is €230,000. The relief is available to the individual owners of a trade or business (owners/founders of private unquoted companies and sole traders) in respect of the disposal of all or a part of a trade or business which they have owned for at least three years. To avail of the relief there is a 5% shareholding requirement.

RR -v- ER

This is an important review and comparison

If RR is claimed then any further transactions may bring an individual over the previous limits, and mean that marginal relief applies to transactions; where the tax is 50% of the difference between the proceeds and the €750K threshold.

So, for example where the proceeds are (say) €1.2 million the threshold is exceeded and the tax would be €225K!

In such a scenario you would be better claiming ER rather than RR; and the tax would be €120K. Clear advice is key.

I also cannot finish this article without mentioning Holding Companies.

E. Holding Company Regime (HCR)

Over the last number of years, the Irish government has introduced a number of measures designed to increase the attractiveness of Ireland as a location for the establishment of holding companies of multinational groups.

There are now a wide number of benefits in locating a holding company in Ireland and the benefits can be increased by establishing trading operations falling within the 12.5% tax regime in Ireland in tandem with having an Irish holding company. The principal benefits of the holding company regime are as follows:

1. Generous exemptions from withholding tax on dividend and interest payments made by an Irish holding company. Although Ireland imposes a dividend withholding tax and a withholding on interest payments (both at a rate of 20%), Irish Tax law provides for wide exemptions from these obligations, in particular with respect to dividend payments.

2. Exemption from the charge to Irish capital gains tax in respect of the disposal of qualifying shareholdings in subsidiaries. You often hear of prominent investors such as Buffet, speak about the impact of fees or friction costs on returns, the holding company regime is a very effective method of rolling over gains on investments into new entrepreneurial endeavours. Usually used where cash is not immediately required and extracting cash will result in high tax costs.

3. Limited thin capitalisation legislation and no controlled foreign corporation rules for foreign income.

4. Beneficial regime for the taxation of foreign dividends. By way of background, foreign dividends paid out of the trading profits of

(i) subsidiaries resident in the EU

(ii) subsidiaries resident in a tax treaty country or in a country which has ratified the Convention on Mutual Administrative Assistance in Tax Matters, or

(iii) subsidiaries – regardless of their location, where that subsidiary is itself, or is related to, a company quoted on a recognised stock exchange in either Europe or in a jurisdiction that has entered into a double tax treaty with Ireland

Can be taxed at 12.5%, with other foreign dividends being taxed at 25%. In both cases, it is generally possible to claim a foreign tax credit in respect of withholding taxes and underlying corporation tax paid by the relevant subsidiary, so that generally no further charge to Irish tax should arise on receipt.


So, despite the somewhat heavy going on the legislation front above, it does show that there is scope with proper planning to have a very cost effective exit from your business.

Early planning with good accountants and lawyers who are both thinking for you and ahead of you, in the event that you decide to sell/merge your business can save you from an otherwise heavy tax bill.

Remember you may be looking at selling to unknown Buyers/ family members/ or key employees. It could be an MBO or a MBI, you might be retiring or you might be spearheading a new merged entity. The information is key to both sides to ensure knowledge of the bargain, for a Seller to get the most tax free and for a Buyer to know what a Seller might be taking home. This will all help when working out the price you are prepared to pay.

Either way early planning is key so saving/ making money and protecting the business you have worked so hard to build up or building upon what you have.

Early planning with good accountants and lawyers who are both thinking for you and ahead of you, in the event that you decide to sell/merge your business can save you from an otherwise heavy tax bill.

Brokers Ireland and Royal London Annual Lunch 2017

The annual Brokers Ireland and Royal London lunch took place late last year. It was hosted by broker representative body Brokers Ireland’s senior management and board members and attended by senior management from leading protection specialist Royal London.

The lunch meeting provided the backdrop for discussions about the events of the year gone by, including Royal London’s recent successes which have been in no small part thanks to the support received from Brokers Ireland and its members. Both parties are looking forward to continuing their strong working relationship into 2018.

Pictured are members of Royal London’s senior management team in Ireland alongside Brokers Ireland senior management and board members

Jim Hegarty, former President

of IBA appointed Captain of

Grange Golf Club for 2018

Grange Golf Club in Rathfarnham is one of the leading parkland courses in Dublin and home club to former Ryder Cup player and captain Paul McGinley who can be seen on the course occasionally when his busy schedule permits. Jim extends a very warm welcome to all companies interested in holding their 2018 outings in Grange Golf Club.

New Ireland’s iFunds Range Introduces New Leading Global Fund Manager

New Ireland is delighted to announce the introduction of a new multi-asset fund to the iFunds range. In partnership with our investment advisors Fundhouse, we have selected the M&G Dynamic Allocation Fund to add to iFunds 3, iFunds 4 and iFunds 5. We are delighted to be working with this new fund manager, M&G Investments, which further strengthens the iFunds investment message of selecting and working with the world’s leading fund managers.


Our recent iFunds webinar explains the rationale for the introduction and the strong recommendation the fund received from Fundhouse. To hear the playback of this webinar, go to www.

For more information about the iFunds range, talk to your New Ireland Broker Consultant.