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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 33%.

Retirement Relief

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 decommissioning of fishing vessels.

Where a disposal is made after 1 January 2014 by an individual who has reached the age of 66, the relief is restricted to €500,000. Also, in the case of the disposal of assets to a child or certain other individuals, the relief for an individual aged 66 or over is restricted to qualifying assets with a market value of up to €3m with no relief for the excess. The €3m cap is an aggregate lifetime limit.

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 which encourages early gifting of the family business.

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

Currently no CGT will apply to gains on purchases made
between 7 December 2011 and 31 December 2014 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.
Finance Act 2017 reduces the required holding period from
seven to four years for disposals made on or after 1 January
2018. The aim is to reduce any impact the required seven-year
holding period may have on the supply of development land,
with the intention of increasing supply so more houses can be
built.

Entrepreneur Relief

CGT relief for individuals who reinvest the proceeds of an
asset disposed of on or after 1 January 2010 on which CGT
has been paid into a new business is available in certain
limited circumstances.
The relief takes the form of a tax credit equal to the lower of
the capital gains tax paid or 50% of the CGT due on the
disposal of the new business asset.
The reinvestment must take place between 1 January 2014
and 31 December 2018.

Revised Entrepreneur Rate

A reduced rate of CGT of 10% from 1 January 2017 (20% in 2016) will apply in respect of a chargeable gain or chargeable gains in the case of a disposal or disposals of chargeable business assets made by an individual on or after 1 January 2016 up to a lifetime limit of €1m. The chargeable business assets must have been owned by that individual for a minimum period of three years prior to the disposal of those assets.

The relief will not apply to disposals of chargeable business assets by companies or to disposals of development land or a business consisting of dealing in or developing land, a business consisting of the letting of land or buildings or
holding investments.

Where the business is carried on by a private company, individuals seeking to qualify for the relief must own not less
than 5% of the shares in the company or at least 5% of the shares in a holding company which owns 100% of the
company. The shareholder must have been a full-time working director of the company for a minimum period of three years prior to the disposal of the chargeable business assets

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

CGT is a self-assessment tax and the return filing date is the
same as for income tax. However, the payment dates differ
as there are two payment dates:

Period of Disposal Date of Payment
1 January – 30 November 2016 15 December 2019
1 December – 31 December 2016 31 January 2020

Debt forgiveness rules

From 1 January 2014 any debt write off will not be allowed as a deduction in computing a chargeable gain if an asset is disposed of. If debt is written off after the asset is disposed of then the amount of debt write off is deemed to be a chargeable gain in the year that the debt is written off.

Clearance Certificate

Where the proceeds of a sale of certain assets such as land
and buildings are more than €500,000 (€1 million for
residential property), a tax clearance certificate (CG50A) is
required. In the absence of this, the purchaser is obliged to
deduct tax at 15% of the sale proceeds and pay the tax
withheld to 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
purchaser’s CGT where the consideration for the disposal is
in non-monetary format.
An agent may apply for a CG50A on behalf of a client

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