Capital Gains Tax

Capital Gains Tax

January brings another important deadline in the tax calendar. If you made a capital gain in December 2013 you don’t have long to get your affairs in order- you must pay the Capital Gains tax (CGT) associated with your gain by the 31^st of January 2014.

But what is a capital gain? Essentially, if you sell an asset such as a house, land or perhaps shares you make a ‘capital gain’ and you are taxable on this.

To calculate your gain, deduct the price you paid for an asset when you acquired it from the sale proceeds when you disposed of it, the difference is your gain. The current rate of CGT in Ireland is 33%. It’s important to remember that in calculating the amount of tax payable, certain deductions are allowed such as solicitor’s fees etc.

Certain things are exempt from CGT entirely. For example, if you sell your own home you will not be liable for CGT. Also, if you are over 55 and you are disposing of business assets you may qualify for retirement relief meaning you won’t pay CGT.

Lastly, it’s important to remember that if you purchased an asset prior to 2004 you can get relief for inflation on the asset up until 2004.  The relevant inflation factor is available from Revenue’s indexation table

How do I pay CGT?

Once you have calculated how much CGT you owe you can pay the Revenue by bank transfer online, by credit card or by cheque.

What happens if I don’t pay?

If you expect to have a liability but don’t yet know the exact amount, you should still pay your best estimate by 31 January. If you fail to file and pay the Revenue they have the power to charge you interest.

What about foreign property?

If you normally reside in Ireland you are liable to pay CGT on worldwide gains. So if for example you have a gain on a property in Spain you must file a return in Ireland detailing the gain however you will receive a credit for any CGT already paid in Spain so that you don’t double pay the tax.

What about losses?

Current year losses in a year can be used to offset a gain and can be carried forward. So if you disposed of more than one asset in a year and made a gain on one but a loss on another you can offset the two against each other. Losses cannot be carried back to a previous year.

Date published 20 Jan 2014

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.