Excepted assets – CAT Business Property Relief

The Finance Bill has updated the definition of excepted assets for the purpose of claiming Business Property Relief. The update is a welcome change as legislation and Revenue practice has been contradictory to date.

What is Business Property Relief?

Business Property Relief (BPR) is a relief from Capital Acquisitions Tax (CAT) if certain conditions are satisfied. The relief is available if you receive a gift or inheritance of business property including shares in a company. BPR reduces the taxable value of the business property on which CAT is calculated by 90%. However, excepted assets are not included in the 90% reduction.

Excepted assets

In Section 100 CATCA 2003, the definition of excepted assets are assets not used for business purposes during the two-year period prior to a gift / inheritance. The definition does not deal adequately with cash.

Under the current definition, where a company holds significant cash assets, the issue of the cash or part of the cash being treated as an excepted asset has to be considered. The issue is whether the cash is used wholly or mainly for the purposes of the business.

The general understanding of Revenue practice is that:

• Cash held for liquidity / cash flow purposes will not be an excepted asset.
• Where a company has been accumulating cash from trading profits for a specific business purpose, such as the purchase of a new premises, it should not be regarded as an excepted asset.

However, there have been 2 recent Tax Appeal Commission (‘TAC’) cases where the treatment of cash as an excepted asset has been looked at. In both cases, Revenue’s position was that proposed future use of cash should not be taken into account when considering if there are excepted assets within a company. While the taxpayer was successful in both TAC cases, the matter remained uncertain with no change in Revenue’s position in their guidance notes and thus the possibility of further TAC cases.

The Finance Bill has expanded the definition of excepted assets for the purpose of claiming BPR. With effect from 1 January 2026, the definition will be updated to exclude assets that are held by the business / company to be used for a specific purpose within the six years following the date of the gift / inheritance from being considered excepted assets.

If the assets are not used for that specified purpose during the 6-year period, the asset is presumed to be an excepted asset, and an effective clawback will apply.

The Finance Bill effectively broadens the relief, especially for businesses holding cash reserves or assets earmarked for future business use, which were previously at risk of being excepted assets. The update is a welcome change as the ambiguity surrounding a future use of cash for business purposes for BPR seems to have been resolved. However, it remains to be seen what position Revenue will take in their guidance notes regarding this change. It is hoped that, once updated, the guidance notes will confirm that the above clarity has in fact been provided.