Finance Bill 2025: Capital Taxes, Charities and Sporting Bodies

The Finance Bill contains a number of important tax changes in the area of Capital taxes. It also introduces new measures for those involved in the Charitable and Sporting sectors. Our Tax team considers some of the key changes.

Capital gains tax - entrepreneur relief

Entrepreneur Relief applies to certain shareholders on the sale of shares in a trading company, or on the disposal of a qualifying business by reducing the Capital Gains Tax (CGT) rate from 33% to 10%. The lifetime limit on the gain which qualifies for this relief is being increased from €1 million to €1.5 million from 1 January 2026. This measure gives a potential additional CGT saving of up to €115,000 for qualifying shareholders and so enhances the attractiveness of the relief to entrepreneurs from 1 January. It may also incentivise some vendors to defer share sales until after 31 December 2025.

The Bill also sets out the position for individuals who realised a qualifying gain prior to 31 December 2025 and will make another disposal after that date. These provide that an individual who realised a chargeable gain in excess of €1 million on a disposal on or before 31 December 2025 and benefitted from entrepreneur relief on €1 million of the chargeable gain based on the limit at that time, should be entitled to benefit from a further €500,000 on disposal after 31 December 2025.

Capital acquisitions tax – business relief

Business relief is a relief from Capital Acquisitions Tax (CAT) arising on a gift or inheritance that reduces the taxable value of relevant business property by 90% where certain conditions are satisfied.

In determining the value of a gift or inheritance that qualifies for business relief, the current CAT legislation requires that the value of certain assets, known as “excepted assets”, not used wholly or mainly for the purposes of the business concerned for a two-year period prior to the date of the gift or inheritance, are excluded from the relief. The Bill proposes to amend this provision so that an asset will not be an excepted asset if, at the date of the gift or inheritance, it was required to be used for a specific purpose of the business concerned within the following 6-year period. If the asset in question is not used for that purpose within six years, the asset will be presumed to be an excepted asset unless the contrary is shown.

This amendment is welcome as it clarifies the position regarding certain assets, such as cash, which may be required for future investment. There has been some uncertainty on the correct treatment of cash held by a business for the purpose of a business relief claim. This issue has also been the subject of appeals to the Tax Appeal Commissioners by taxpayers.

Another amendment to the business relief legislation proposed in the Bill relates to the replacement rule. This rule provides that where property on which business relief has been claimed is disposed of, the relief will be withdrawn to the extent that the full proceeds from the disposal are not used, within a year after the disposal, to acquire other qualifying property. The Bill includes an anti-avoidance provision that, where the property is disposed of for less than full consideration, the “full proceeds” for this purpose will be deemed to be equal to its market value immediately before the disposal.

Capital acquisitions tax – policy of assurance

Under current CAT legislation, where a policy of assurance has been the subject of a gift or inheritance, a charge to CAT will not arise until the policy:

• Matures
• Is surrendered to the insurer for consideration, or
• The insurer otherwise makes a payment under the policy

The Bill proposes to amend this legislation to provide that where a person, having received a gift or inheritance of a policy of assurance, disposes of their interest in the policy before any of the events set out above occur, a charge to CAT will arise at the time of the disposal.

Income tax exemptions for charitable and sporting bodies

Under the proposed changes, income arising after 1 January 2026 will only be exempt from tax where the Revenue Commissioners have granted formal approval of the exemption before that income arises.

The Bill also introduces several administrative changes to the tax relief available on donations to approved sports bodies and national governing bodies.

Key changes include:

• An individual’s decision about whether to claim the relief themselves or give it to the approved sports body is irrevocable, either from the date a taxpayer claims the relief or files a tax return, or at the latest by 1 December in the year after the donation was made.
• Donors must now provide both an “approved project number” and a “unique receipt number” when submitting a claim to Revenue. These will be issued by the sporting body and are designed to improve verification and audit trails.
• Donations will no longer affect the calculation of tax-relieved pension contributions, ensuring that philanthropic giving does not reduce an individual’s allowable pension relief.
• For USC purposes, donations to national governing bodies will now be treated the same as donations to other approved sports bodies, i.e. these donations will not be deductible when calculating USC liability.

It is expected that further clarification will be required on the practical implications of these provisions.

Other Finance Bill 2025 insights

The content of this article is provided for information purposes only and does not constitute legal or other advice.