Passing a family business to children on the other side of the border: UK inheritance tax meets Irish CAT

If you live in Northern Ireland and leave or gift your business to a child living in the Republic, 2 separate taxes can apply to the same transfer:

• UK inheritance tax is charged on the person giving. As a UK resident, your worldwide estate is in scope.
• Irish capital acquisitions tax (CAT) is charged on the person receiving. Your child is in scope because they are resident in Ireland.

Each country has its own business relief with its own conditions:

A transfer can be tax-free in one country and taxable in the other. A UK–Ireland double taxation convention gives credit for tax paid on the same property, but it only helps where tax has actually been paid on both sides. The way to avoid a surprise bill is to plan the transfer against both sets of rules before it happens, not after.

The rest of this guide explains how each tax works, where they clash, and what you can do to keep more of the business in the family.

Why both taxes can apply to the same transfer

The UK and Ireland tax inheritances from opposite ends.

UK inheritance tax looks at the person giving the asset. If you are UK resident on a long-term basis, your worldwide estate is within the charge.

Irish CAT looks mainly at the person receiving it. A gift or inheritance is generally within the scope of CAT if the person making it or the person receiving it is resident or ordinarily resident in Ireland, or if the asset is Irish property. There are additional rules for people who are not Irish domiciled.

So the common border scenario looks like this. A parent lives in Armagh and owns a trading company registered in Northern Ireland. One child runs a branch of the business from Dundalk and lives there. When the parent passes shares to that child, the UK looks at the parent’s estate and Ireland looks at the child’s inheritance. Both have a claim.

How UK inheritance tax treats family business shares

UK inheritance tax is charged at 40% on estates above the £325,000 nil-rate band. Shares in an unquoted trading company usually qualify for business property relief if you have owned them for at least 2 years. Since 6 April 2026, 100% relief applies to the first £2.5 million of combined business and agricultural property, with 50% relief on qualifying value above that.

Any unused part of that £2.5 million allowance can transfer to a surviving spouse or civil partner, much like the nil-rate band. The government’s policy paper on the changes also confirms that inheritance tax on qualifying business and agricultural property can be paid in equal annual instalments over 10 years, interest-free.

Relief isn’t automatic. The company must be a trading company rather than one whose business is wholly or mainly holding investments. Large cash balances or rental property held inside a trading company can reduce the relief. We often see business owners assume the whole value of their company qualifies, only to find that surplus cash or an investment property sitting in the balance sheet doesn’t.

If the business is a farm, the agricultural property rules apply as well. Our guide to cross-border farming tax rules covers those in more detail.

How Irish CAT treats the same shares

Irish CAT is charged at 33% on the value of gifts and inheritances above the beneficiary’s lifetime tax-free threshold. For a child receiving from a parent, the Group A threshold rises from €400,000 to €420,000 for gifts and inheritances taken on or after 7 October 2026, under Finance (No. 2) Bill 2026.

The threshold is a lifetime allowance. It covers everything the child has received from either parent since 5 December 1991, not just this one transfer.

Business relief can reduce the taxable value of qualifying business property by 90%. Importantly, the business doesn’t have to be carried on in Ireland, so shares in a Northern Ireland trading company can qualify. The main conditions are:

• The property must be relevant business property, such as a business or shares in a trading company
• The disponer must generally have owned it for 5 years before a gift, or 2 years before an inheritance on death
• For unquoted shares, the child must usually end up with more than 25% of the votes, or family control, or at least 10% plus 5 years working full-time in the company
• The child must keep the business, and it must keep trading, for 6 years or the relief can be clawed back

Revenue’s guidance on how business relief is calculated explains how liabilities and non-business assets are deducted before the 90% reduction applies.

Where the 2 systems clash

The reliefs don’t line up neatly. This is where most cross-border succession plans come unstuck.

The practical consequences catch families out:

• The 5-year rule. A share structure that qualifies for UK relief after 2 years may not qualify for Irish relief on a lifetime gift until year 5.
• The 25% test. Splitting shares between 5 children equally gives each child 20%. That can fail the Irish test unless another condition is met, such as family control.
• Lifetime gifts. Ireland taxes the gift immediately. The UK generally doesn’t, unless you die within 7 years. That creates a timing mismatch for any credit between the 2 countries.
• Reliefs don’t offset each other. Full UK relief doesn’t help with Irish CAT, and vice versa.

The double taxation convention, and what it does not do

The UK and Ireland have a convention on estates, inheritances and gifts dating from 1977. It allows a credit for tax paid in one country against tax due in the other on the same property. Revenue’s page on double taxation relief with the UK explains how the credit works on the Irish side.

There’s a catch that families often miss. A credit only offsets tax that has actually been paid. If UK business property relief wipes out the UK bill, there is no UK tax to credit against the Irish CAT, so the Irish liability stands in full. The same works in reverse. The convention stops you paying twice, but it won’t stop you paying once.

A worked example

Take a parent living in Northern Ireland who leaves 100% of a trading company to a daughter living in Co. Louth on death. Assume:

• The shares are worth £3 million, using an illustrative exchange rate of £1 to €1.15
• The parent’s nil-rate band has been used against other assets
• The daughter has received nothing from either parent before

The difference between those 2 columns is entirely about whether the daughter meets the Irish business relief conditions. If she sells the shares within 6 years, or the company is found to hold too many investment assets, the second column is where she ends up. That’s why the conditions matter more than the headline rates.

These figures are simplified. Real cases depend on actual values, exchange rates, previous gifts, how the credit is calculated and the exact form of the transfer.

Lifetime gifts and the capital gains tax trap

Many families prefer to pass shares on during the parent’s lifetime. That can work well for UK inheritance tax, because a gift to an individual is usually exempt if the parent survives 7 years. But it brings capital gains tax into play.

A gift of shares is treated as a disposal at market value for UK capital gains tax. Between UK residents, gift holdover relief can usually defer that gain on business assets. It is generally not available where the person receiving the gift is not UK resident. So a gift to a child living in the Republic can trigger a UK capital gains tax bill on the parent straight away, with no cash coming in to pay it.

On the Irish side, a lifetime gift is taxed for CAT when it is made, subject to business relief and the Group A threshold. By contrast, on death there is generally no UK capital gains tax, and the child usually takes the shares at their market value at that date.

Which route is better depends on the values involved, the parent’s age and health, and how soon the child is likely to sell. There is no default answer.

Practical steps before you transfer anything

In our experience working with family businesses on both sides of the border, the families who avoid problems are the ones who plan the handover with both tax systems in view from the start.

• Confirm where everyone lives. Check where each family member is tax resident now and is likely to be over the next 6 years.
• Clean up the company first. Check whether it is clearly trading, and whether surplus cash or investment property should be separated out.
• Model the shareholdings. Make sure each child meets the Irish shareholding test after the transfer.
• Check the ownership periods. Confirm the 2-year UK and 5-year Irish periods have been met for the specific shares.
• Decide who pays. Agree whether the transfer happens by lifetime gift or on death, and how any tax will be funded.
• Draft the wills together. Make sure your will and the company’s articles work together, including on who bears any tax.

Separating investment assets from the trading business is often the single most valuable step, but it needs care to avoid creating tax charges of its own. Our company restructuring team can help you model a reorganisation before anything moves.

A robust valuation also matters, because both HMRC and Revenue will want to see how the share value was reached. Our guide to how a private company is valued explains the main approaches. Where siblings disagree about value or fairness, an independent business valuation from our forensic team can help settle the numbers. Reliable audited accounts make any valuation easier to defend.

Getting the next generation ready

Tax is only part of a successful handover. The Irish 6-year retention rule means your child is committing to run the business, not just to own it.

A clear family charter can set out roles, decision-making and what happens if someone wants to leave. Strengthening reporting through practical SME business support helps the next generation take over with reliable numbers. A review by our internal audit services team can confirm that controls don’t depend on one person’s knowledge.

If the business also claims R&D or capital allowances relief, make sure the records will survive the handover. Our specialist tax team can help keep those claims documented.

Frequently asked questions

Do I pay inheritance tax in both the UK and Ireland?

You can be charged in both. UK inheritance tax applies to the estate of a UK resident, and Irish CAT applies to a beneficiary resident in Ireland. The UK–Ireland convention gives credit for tax paid in one country against tax due in the other on the same property, but only to the extent that tax has actually been paid.

Can Irish business relief apply to shares in a Northern Ireland company?

Yes. Irish CAT business relief isn’t limited to businesses carried on in Ireland. Shares in an NI trading company can qualify if the conditions are met, including the minimum ownership period, the shareholding test for the beneficiary, and the 6-year retention requirement after the gift or inheritance.

What is the Group A threshold for CAT?

Group A is the lifetime tax-free threshold for gifts and inheritances from a parent to a child. It rises from €400,000 to €420,000 for gifts and inheritances taken on or after 7 October 2026. Amounts received from either parent since 5 December 1991 count towards it.

Who pays the tax when a parent in Northern Ireland leaves a business to a child in Ireland?

UK inheritance tax is paid out of the estate by the executors, unless the will says otherwise. Irish CAT is the child’s own liability, so the child files the return and pays any tax due. Without planning, a child can inherit shares but have no cash to pay the Irish bill.

Plan the handover with both sides of the border in view

Cross-border succession is manageable, but only if the plan works under both tax systems at the same time. Getting the structure, timing and shareholdings right before a transfer can make a substantial difference to what reaches the next generation.

SCC’s dual-qualified team advises families across Northern Ireland and the Republic on succession, inheritance tax and CAT, working alongside your solicitor and our partners at Success Wealth Management. Speak to our cross-border accounting and tax specialists to review your family business succession plan.