What is Capital Gains Tax?

CGT is a tax on a capital gain arising on the disposal of assets owned by you. At its simplest, deducting the price you paid for an asset when you acquired it from the sale proceeds when you dispose of it gives you the chargeable capital gain.

In calculating the amount of tax payable, deductions are allowable for incidental costs of acquisition, such as solicitor’s fees, stamp duty etc. and incidental costs of disposal such as, solicitors/auctioneers fees etc. In addition, where an asset was acquired before 2003, inflation relief may be available, effectively adjusting the cost in line with a published inflation factor.

Are any Gains exempt from CGT?

Gains on the disposal of some assets are specifically exempted from CGT. These include:

• Gains on the disposal of property owned by you (house,
  apartment, etc.) which was occupied by you or by a dependent relative as a sole or main residence. Restrictions may apply where the property was not fully occupied as a main residence throughout the period of ownership or where the sale price reflects development value.

• Gains from betting, Lotteries, sweepstakes, bonuses payable
  under the National Instalments Savings Scheme and Prize Bond
  winnings

• Gains on Government Loans and Debenture issued by certain
  Semi-state bodies

• Gains on disposal of wasting chattels (e.g., animals, private
  motor cars, etc.)

• Gains on Life Assurance policies (unless purchased from
  another person or taken out with certain foreign insurers on or
  after 20 May 1993)

• Gains made by individuals on tangible moveable property
  where the consideration does not exceed £2,540

Payment of CGT

a) If the disposal is made in the period 1 January to 30 September the tax is due on 31 October in that tax year

b) If the disposal is made in the period 1 October to 31 December the tax is due on 31 January in the following year

Capital Tax Rates

The standard rate of CGT is 20%. Exceptionally, a rate of 40%
applies on disposals of certain foreign life assurance policies and units in offshore funds.

Personal Exemption

The first €1,270 of taxable gains by an individual in a tax year are exempt. In the case of a married couple this exemption is available to each spouse but is not transferable.

Retirement Relief

A gain on the disposal of a business or farm by an individual aged 55 years or older for a consideration not exceeding €750,000 is exempt from capital gains tax. There is no limit where the disposal is to a child or a niece/nephew that works in the business. Marginal relief applies where the consideration does not greatly exceed that amount. Where the disposal is made to a child of the individual (or, in certain circumstances, to a nephew or niece), the gain is exempt irrespective of the amount of the consideration. This relief also applies to the disposal of a family business where the business consists of a group of companies having at their head a holding company.

The relief has been extended to disposals of farmland which has been leased prior to disposal. To qualify, the land must

a.have been leased for no longer than 5 years prior to disposal

b. have been owned and used by the farmer for 10 years prior to the initial letting, and

c. be disposed of to the person leasing the land.

Roll-Over Relief

With effect from 4 December, 2002, rollover relief will no longer be available on any disposal.

Indexation Relief

Where an asset was acquired before 2003 inflation relief may be available, effectively adjusting the cost in line with an inflation factor. Where a disposal is made on or after 1 January 2003, the indexation relief will only apply for the period of ownership of the asset up to 31 December 2002.