Capital Gains Tax

Individuals resident or ordinarily resident in Ireland are liable to capital gains tax on disposals.

Individuals resident or ordinarily resident but not domiciled in Ireland are liable on gains arising on the disposal of assets situated in Ireland and the United Kingdom and on all foreign gains to the extent that those gains are remitted to Ireland .

Individuals neither resident nor ordinarily resident are liable on gains made on the disposal of certain specified assets, viz:

  • Land and buildings in Ireland .
  • Minerals in Ireland including related rights, and exploration or exploitation rights in a designated area of the continental shelf.
  • Unquoted shares deriving their value, or the greater part of their value, from such assets as mentioned above.
  • Assets of a business carried on in Ireland through a branch or agency.

An anti avoidance section imposes CGT on individuals who dispose of shareholdings after 4 December 2002 during a period of temporary non-residence, a temporary period of non-residence is described as absences of less than 5 years.

Rates

The standard rate of Capital Gains Tax arising on disposals is 30% (Prior to 7 December 2011 the rate was 25%).

Inflation Relief

In arriving at the chargeable gain on the disposal of an asset held for over twelve months, the allowable cost is to be adjusted for inflation based on the Consumer Price Index (Indexation).

Indexation relief will only be available in respect of ownership of assets up to 31 December 2002. Expenditure incurred in 2003 and subsequent years of assessment will not qualify for indexation relief.

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Year Year Factor for disposal for year ended 5 April/31December:
expenditure
incurred
93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 2001 2002 2003
                       
1974/75 5.656 5.754 5.899 6.017 6.112 6.215 6.313 6.582 6.930 7.180 7.528
1975/76 4.568 4.647 4.764 4.860 4.936 5.020 5.099 5.316 5.597 5.799 6.080
1976/77 3.935 4.003 4.104 4.187 4.253 4.325 4.393 4.580 4.822 4.996 5.238
1977/78 3.373 3.432 3.518 3.589 3.646 3.707 3.766 3.926 4.133 4.283 4.490
1978/79 3.117 3.171 3.250 3.316 3.368 3.425 3.479 3.627 3.819 3.956 4.148
1979/80 2.812 2.861 2.933 2.992 3.039 3.090 3.139 3.272 3.445 3.570 3.742
1980/81 2.434 2.477 2.539 2.590 2.631 2.675 2.718 2.833 2.983 3.091 3.240
1981/82 2.012 2.047 2.099 2.141 2.174 2.211 2.246 2.342 2.465 2.554 2.678
1982/83 1.693 1.722 1.765 1.801 1.829 1.860 1.890 1.970 2.074 2.149 2.253
1983/84 1.505 1.531 1.570 1.601 1.627 1.654 1.680 1.752 1.844 1.911 2.003
1984/85 1.366 1.390 1.425 1.454 1.477 1.502 1.525 1.590 1.674 1.735 1.819
1985/86 1.287 1.309 1.342 1.369 1.390 1.414 1.436 1.497 1.577 1.633 1.713
1986/87 1.230 1.252 1.283 1.309 1.330 1.352 1.373 1.432 1.507 1.562 1.637
1987/88 1.190 1.210 1.241 1.266 1.285 1.307 1.328 1.384 1.457 1.510 1.583
1988/89 1.167 1.187 1.217 1.242 1.261 1.282 1.303 1.358 1.430 1.481 1.553
1989/90 1.130 1.149 1.178 1.202 1.221 1.241 1.261 1.314 1.384 1.434 1.503
1990/91 1.084 1.102 1.130 1.153 1.171 1.191 1.210 1.261 1.328 1.376 1.442
1991/92 1.056 1.075 1.102 1.124 1.142 1.161 1.179 1.229 1.294 1.341 1.406
1992/93 1.019 1.037 1.063 1.084 1.101 1.120 1.138 1.186 1.249 1.294 1.356
1993/94 - 1.018 1.043 1.064 1.081 1.099 1.117 1.164 1.226 1.270 1.331
1994/95 - - 1.026 1.046 1.063 1.081 1.098 1.144 1.205 1.248 1.309
1995/96 - - - 1.021 1.037 1.054 1.071 1.116 1.175 1.218 1.277
1996/97 - - - - 1.016 1.033 1.050 1.094 1.152 1.194 1.251
1997/98 - - - - - 1.017 1.033 1.077 1.134 1.175 1.232
1998/99 - - - - - - 1.016 1.059 1.115 1.156 1.212
1999/00 - - - - - - - 1.043 1.098 1.138 1.193
2000/01 - - - - - - - - 1.053 1.091 1.144
2001                   1.037 1.087
2002                     1.049
2003                     1.000

Retirement Relief

A retirement relief is available for an individual aged 55 years or more on disposal of business assets owned and used for 10 or more years ending on the disposal date, it also applies to shares in a family trading company which have been held for at least 10 years. Periods of ownership of a deceased spouse may also be included in the calculation. This relief is limited to proceeds of €750,000 where the disposal is not to a child of the individual.

A disposal of a business to a child including a foster child supported by the donor for five years prior to the child turning eighteen years of age is not liable to capital gains tax regardless of the consideration provided the child retains the asset for 6 years. For the purposes of this exemption a child includes a nephew or niece who has worked in the business substantially on a full time basis for the period of five years ending with the disposal. Also, the definition of child may certain circumstances include a grandchild.

Assets that are held outside a family company and used by that company also qualify for retirement relief provided that certain conditions are met.

Relief will only apply where the disposal of qualifying assets is for bona fide commercial reasons and not as part of a tax avoidance scheme.

Special relief also applies to compensation payments for the de commissioning of fishing vessels.

Where a disposal is made after 1 January 2014 by an individual has reached the age of 66 the relief is restricted €500,000, and in the case of the disposal of assets to a child the relief for an individual aged 66 or over (post 1 January 2004) is restricted to qualifying assets with a market value of up to €3m with no relief for the excess.

 

Tips:

  • An individual is not in fact required to retire in order to avail of this relief.
  • A husband and wife each have a €750,000 individual limit, therefore a split of the business on commencement to trade ought to be considered
  • A company buyback of shares may be used in conjunction with retirement relief to ensure that no tax exposure arises if the amount received for the shares is €750,000 or less. In the case of a buyout of a retiring couple who both qualify for retirement relief, the amount may be increased to €1,500,000 where all conditions have been met.
  • A company buyback of shares is a useful way of using company funds as opposed to personal funds to buy out a dissenting or retiring shareholder. It also avoids taking new shareholders in to the company to fund a buyout. In addition the remaining shareholders maintain the same proportional percentage shares.
  • Plan to avail of the relief prior to the restrictions that are introduced from 1 January 2014.

Exemptions and Relief

The following are a number of exemptions available to individuals:

  • Annual gains of up to €1,270 for each individual. For married couples the exemption is €1,270 each, which is non-transferable.
  • Sale of tangible moveable property not exceeding €2,540 e.g. antiques
  • Sale of tangible moveable property, which is a wasting asset and does not qualify for a capital allowances claim
  • Sale of principal private residence (except where sale proceeds reflect development value).
  • Sale of dwelling house occupied rent-free by a dependent relative.
  • Gains or profits on sales of Government Securities or Savings Certificates.
  • Transfer of assets between spouses living together.
  • Gains on the sale of Irish Government securities, where the security has been held for at least two years.
  • Disposals of individual works of art which are valued at not less than €31,740 when loaned to an approved gallery or museum for public display for a minimum period of ten years from 2/2/2006 (for loans made prior to 2 February 2006 the loan period is six years).
  • Transfer of a site from a parent to a child including a foster child supported by the donor for five years prior to the child turning eighteen years of age, provided it is for the construction of the child’s principle private residence. The maximum marketable value of the site is €500,000 . The relief is limited to one site per child (this is limited to 1 acre exclusive of the area where the house is to be built). The threshold applies where both parents make a simultaneous disposal of a site to a child.
  • Gains arising from personal injury compensation payments to permanently incapacitated individuals, where the exempt income and gains are greater than 50% of an individual’s total income and gains.
  • Disposal of certain shares (see corporation tax section).

 

Property Relief

No Capital Gains Tax will apply to gains on the ultimate disposal of purchases made between midnight on 6 December 2011 and the end of 2013, where the property is held for at least seven years. This includes all EU and EEA located properties. Gains on properties held for longer than seven years will be time apportioned.

Turf-Cutting Compensation Scheme

No chargeable gain will be deemed to arise on compensation payments, whether in money or money’s worth made under the “Cessation of Turf Cutting Compensation Scheme”.

 

Payment and Compliance

Capital Gains tax is a self-assessment tax. In summary, the following are the due payment and compliance dates:

Payment Dates for Capital Gains Tax

The payment dates for Capital Gains Tax have been revised, the payment date previously 31 October following the year of assessment in which the gain arose has been revised to bring forward the payment date and provide for two payment dates as follows;

Period of Disposal Date of Payment
1 January 2012- 30 November 2012 15 December 2012
1 December 2012 – 31 December 2012 31 January 2013
   

Clearance Certificate

Where the proceeds of a sale of certain assets such as land and buildings are more than €500,000 a tax clearance certificate is required. In the absence of the certificate, the purchaser is obliged to deduct tax at 15% of the sale proceeds and pay the tax withheld to the Revenue within 30 days of making the deduction. This provision applies irrespective of the method of payment.

A credit will be available for the tax withheld against the purchasers CGT where the consideration for the disposal is in non-monetary format.

An agent may apply for a tax clearance certificate on behalf of a client.

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Noone Casey Registered Auditors and Accountants

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Republic of Ireland. | T: +353-1-6766476 | F: +353-1-6766783 | E: info@noonecasey.ie twitter: @noonecasey