We are a retired couple with four grown-up children. We transferred the farm to our eldest son. We jointly own a considerable number of Kerry Group plc shares. We are interested in dividing them between the other three members of our family. Our query is that we want to know if it is possible to gift these shares while we are alive, without incurring taxes for either them or us?

While the focus is on the Glanbia shares spin-out, Kerry farmers are well used to getting plc shares. Having visited a number of Kerry farmers, I know that when they say considerable they generally mean it. I am going to assume 7,000 shares. At the current share price of €67.80, these are worth €474,600. A substantial sum of money and if divided between the three children it comes to €158,200 each.

It sounds like a simple query, but when you start working out the implications and details it is anything but. The reason is a positive one – Kerry shares have done very well.

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I will look at the tax implications for your children first. The gift falls under group A, which means you are both allowed a gift up to €225,000 tax-free, without a capital acquisitions tax (gift tax) liability. Assuming they have not received other gifts under the same category accumulated since 5 December 1991, then their tax bills will be zero. If they already had inherited or been gifted over that amount, then they would have to pay gift tax at a hefty 33%.

It is a different matter for you both. There are a number of questions that need to be answered. The main one is: did you buy the actual Kerry plc shares or as Kerry Co-op members did you get them as part of the share spin-outs over the years?

If you bought them, then you take the share price you bought them at, add in transaction costs and deduct from the current value of the share. For example, if you bought these at €30/share, the cost was €30 x 7,000 - €210,000 plus costs, say €2,000 or €212,000 (see table). This is taken away from the €474,600 value, to give a capital gain of €262,600. You both have a personal exemption of €1,270, so the taxable gain is €260,060. This is taxed at 33%, so you will have a bill of €85,820. A large sum of money.

If you received the shares as part of the Kerry shares spin-out, the base cost will be a lot less. I have done another example of having a base cost of €5/share and you can see what it does to the amount of capital gains tax that you will have to pay. To get an exact figure for the base cost you will need to look at each specific spin-out to see what the base cost is. In many cases, it could be even lower than €5/share. One thing that will actually increase the base cost is indexation. This is a factor that is applied to the cost if the shares were acquired before 2002, which some I presume were.

As you can see it gets very complicated and you will need to go to Kerry Co-op and your accountant to get the exact figure.

You main question is, could you avoid tax? The fact is that your children will pay no tax and you will be left with a large capital gains tax bill seems unfair. If you had other shares or property showing a capital loss you could crystallise the losses and offset them against the gains to reduce the capital gains tax bill.

One option is to sell the shares or enough of them to cover the capital gains tax bill and gift the money instead. This would mean you the children would get less money, but you would not be out of pocket and your children’s thresholds would not be used up as much.

Kerry lesson for Glanbia

Working out the base costs of shares gets more complicated as time passes. If the shares do well, it can leave a substantial tax bill when sold or gifted. One option for farmers is to gift the co-op shares rather than the plc shares. The co-op shares have a nominal value of €1. They were traded at the last market at €2.88, which could be used to establish a market value. Glanbia Co-op shares look set to go up to €5, so doing this now would reduce the gift amount. It is a good way of transferring assets without incurring large capital gains and gift tax bills.