COVID-19: The Pandemic that may cause succession plans to change
Here we look at the impact of the unprecedented spread of the Coronavirus for private clients, and how now could be a good time to turn the disruption into a succession plan.
Every newspaper we open at the moment relays information about the downturn in the stock market as a result of the spread of the Coronavirus. Businesses are closing, staff are being laid off and unfortunately, the impact of the virus on the economy is already very apparent worldwide, and definitely here in Ireland.
Over recent years, most clients we meet will tell us of regrets they have in terms of recessionary times, and not making decisions during the recession that could have saved a substantial amount of tax down the road when the economy finally bounced back. These regrets are particularly in relation to succession planning.
We will always recommend that our clients have Wills in place, and retain enough assets to ensure they are financially comfortable for their future. Given the current climate, clients may wish to explore the option of transferring certain assets to the next generation. This will involve getting assets such as properties or shares valued and it is likely that the market value of such assets, particularly shares, has decreased substantially as a result of the Coronavirus. From a taxation perspective, a lower market value is likely to create a capital loss for capital gains tax purposes, and a substantially lower capital acquisitions tax liability for the person benefiting from the asset than may arise if assets are left by Will and pass on death.
Importantly, a primary issue for the spread of COVID-19 in the business world is all-round uncertainty. The recession brought a similar uncertainty and what came from the recession was an overall increase in tax rates, including capital gains tax and capital acquisitions tax. Capital acquisitions tax group thresholds (which allow an individual to receive certain amounts tax free depending on their relationship) were dramatically reduced as the Revenue Commissioners and the Irish government desperately needed funding. While the CGT and CAT rate is currently relatively high at 33%, this could increase and cause huge funding issues for individuals of the next generation.
At Mazars we have the practical experience and expertise to support our private clients in navigating turbulent and uncertain times. Whether it’s succession planning or compliance if gifts have already passed to beneficiaries, we are well positioned to deal with your queries.
If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client tax team below:
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01 449 6480
Senior Tax Manager
01 449 6418
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