A number of Revenue Guidance Documents have been introduced following Finance Act 2014 being signed into law on 23rd December 2014.
1. Transfer of a Business to a Company (Section 600 Taxes Consolidation Act 1997 Relief and Assumption of Business Debt) – eBrief no. 111/14 (24th December 2014)
Section 600 TCA 1997 provides that Capital Gains Tax on the transfer of a business and all its assets to a company may be deferred providing four conditions are met:
1. The business is transferred as a going concern
2. The transfer is for bona fide commercial reasons and not for the purposes of tax avoidance
3. All the assets of the business, excluding cash, are transferred and
4. The consideration consists wholly or partly of shares in the company.
Any liabilities taken over are to be treated as cash consideration but in practice, Revenue may not enforce this rule in circumstances where:
1. The transfer is in exchange for shares only and
2. The liabilities are genuine trade creditors i.e. in cases where the business assets exceed its liabilities and the only other consideration is the assumption by the company of liability for bona fide trade creditors.
Revenue has clarified in this eBrief that bona fide trade creditors will not be treated as other consideration for the transfer. By this, they mean genuine trade creditors who provide goods and/or services to the business.
The Revenue Concession does not apply to business debts such as bank loans or tax liabilities.
Next: Part II – 2. Deduction for Income Earned in Certain Foreign States (Foreign Earnings Deduction) – eBrief no. 106/14 (24th December 2014)