CAP­I­TAL GAINS TAX EX­EMP­TION TO END

Bray People - - NEWS -

THE present 7 year Cap­i­tal Gains Tax ex­emp­tion is not be­ing ex­tended past the last day of the year.

Un­der the leg­is­la­tion, if the owner bought the prop­erty in the pe­riod from De­cem­ber 7 2011 to De­cem­ber 31 2014 and uses it or rents it for seven years and then sells it, then the gain will be ex­empt from Cap­i­tal Gains Tax.

It is not too late to take ad­van­tage of this tax break – as long as you have signed an un­con­di­tional Con­tract to buy the as­set be­fore De­cem­ber 31 2014 then you will be in time. The sale does not have to be closed by year end, typ­i­cally clo­sure one month after sign­ing of the con­tract will be suf­fi­cient to qual­ify as a pre–De­cem­ber 31 pur­chaser.

How­ever, if you buy prop­erty and you make the clos­ing of sale sub­ject to get­ting Plan­ning Per­mis­sion then the ef­fec­tive sale date is not that on sign­ing the con­tract but rather the date that plan­ning is granted.

There is no pro­hi­bi­tion on buy­ing prop­erty from a rel­a­tive or from a con­nected company ex­cept that you must pay a price at least equal to 75 per cent of the mar­ket value of the prop­erty.

If you have large Cap­i­tal losses for­ward as a re­sult of the prop­erty crash then it is un­likely that the seven-year tax hol­i­day will be at­trac­tive as Cap­i­tal Gains Tax losses can be car­ried for­ward to go against fu­ture gains.

Not all losses can be off­set. Sup­pose you have a large po­ten­tial loss on a prop­erty and in or­der to crys­tallise it, you trans­fer it to your child. This cre­ates a con­nected loss but un­for- tu­nately con­nected losses can only be off­set against con­nected gains made on trans­fers to the same per­son. There­fore, don’t trans­fer prop­erty to rel­a­tives, think­ing that you have crys­tallised losses for off­set against cur­rent or fu­ture un­con­nected gains.

Where there is a Cap­i­tal Gain aris­ing on a trans­fer to a rel­a­tive and also a Gift Tax li­a­bil­ity, as the rel­a­tive did not pay any­thing for the as­set, then you can off­set the Cap­i­tal Gains Tax against the Gift Tax so that only one tranche of Tax has to be paid. The cur­rent rates of Cap­i­tal Gains Tax and Gift Tax are 33 per cent – in the good old days be­fore the Crash they were both 20 per cent.

When has Cap­i­tal Gains Tax to be paid? If you sell some­thing be­tween Jan­uary 1 and Novem­ber 30 it is due on De­cem­ber 15. If you sell in De­cem­ber it is due on Jan­uary 31. Thus, the best time to sell some­thing is in Jan­uary as you have the use of the tax money for eleven months and the worst months for sell­ing are Novem­ber and De­cem­ber.

Given the very low de­posit in­ter­est rates from the banks, if you have sur­plus funds then you may be cor­rect to put them into prop­erty. How­ever, if you have to bor­row some or all of the funds then you will most likely not make it by year end. The banks have in­tro­duced Forms and Pro­ce­dures which are dif­fi­cult to deal with and take up time.

If they had a quar­ter of th­ese mea­sures in force prior to the Crash then they would not have to be res­cued by the Ir­ish tax­pay­ers.

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