Minority discounting for share transfers

In an interesting decision (198TACD2024), the Tax Appeals Commission has ruled in favour of a taxpayer quashing an assessment to capital gains tax (CGT) in the amount €2,220,625. The case revolved around the gift of shares in a company and the application of a minority discount in the valuation of the shareholdings.

Case Background

The appellant had gifted a 100% shareholding between a number of beneficiaries and applied a 30% minority discount to the shareholding value in calculating CGT. The gifts were completed at the same time but documented separately under a number of deeds. Revenue issued an amended assessment, arguing that no minority discount was applicable, resulting in a higher CGT liability.

Evidence and Submissions

Revenue argued that, on the basis of prudent lotting, the appellant should be treated for tax purposes as disposing of a 100% shareholding to one purchaser (i.e. that no minority discount should apply). The appellant argued that each shareholding that was gifted should be valued separately with a 30% minority discount applying.

Commissioner’s Analysis

The Commissioner examined the relevant legal principles and case law, concluding in favour of the appellant that each disposal (i.e. each gift) must be considered separately for CGT purposes. The principle of “prudent lotting” was deemed not applicable to CGT and had no legislative basis, which was the crucial point in the Commissioner’s determination.

This case highlights the complexities of CGT assessments and the critical role of accurate shareholding valuations in determining tax liabilities.