8 October 2023
By Elaine Murphy
John Beausang and Yvonne Rayner, Cork City’s Citizens Information Managers recently give a brief outline about Capital Gains tax.
You dispose of an asset when you:
- Sell it
- Give it as a gift
- Exchange it
- Get compensation or insurance for it
“If you make a profit or gain when you dispose of an asset, you pay Capital Gains Tax (CGT) on the chargeable gain. The chargeable gain is usually the difference between the price you paid for the asset and the price you got when you disposed of it. You can deduct allowable expenses such as the cost of acquiring and disposing of the asset.”
John and Yvonne clarify “When you dispose of an asset, you must file a tax return for CGT by 31 October of the following year. Although you may file your return the following year, you must pay the Capital Gains Tax in the same year as you dispose of the asset, unless the disposal is in December.”
Capital gains that are exempt
“There are some capital gains that are exempt, for example transfers of assets between spouses and civil partners are exempt from Capital Gains Tax. Transfers of assets between spouses and civil partners who are separated are also exempt from Capital Gains Tax if they are made under a Separation Agreement or a court order.
“The transfer of a site from parent to child is exempt if it is to build the child’s principal private residence.” John and Yvonne warn “The land must be less than one acre and have a value of €500,000 or less.”
There is no Capital Gains Tax on assets that are passed on death. The assets are treated as if the person who died got the assets at the same value they have on the date of death. If a personal representative disposes of the assets, they are responsible for any gains between the date of the person’s death and the date of disposal.
Principal Private Residence Relief
“You may be exempt from CGT If you dispose of a property you own that you lived in as your only or main residence. This includes land around the house of up to 1 acre.
This relief may also apply if you dispose of a property that you provided for free to a widowed parent or incapacitated relative to use as their sole residence.
There are some restrictions to Principal Private Residence Relief, including that you can only claim the relief for:
- The part of the house that you used as your home
- The time you lived in the property, with some exceptions including for the last 12 months of ownership and absences for work or health reasons
- The value of the property as you currently use it, rather than for development potential
Other exemptions from Capital Gains Tax include gains from:
- Betting, lotteries, sweepstakes and prize bonds
- Bonuses payable under the National Instalments Savings Schemes
- Government stocks
- Certain life assurance policies
- Moveable property, if the gain is €2,540 or less
- Private motor cars.
Rate and payment of Capital Gains Tax
The standard rate of Capital Gains Tax is 33% of the chargeable gain you make.
A rate of 40% can apply to the disposal of certain foreign life assurance policies and units in offshore funds and for certain windfall gains the windfall gains rate of tax is 80%.
You can deduct allowable expenses from the chargeable gain, including:
- Money you spent that adds value to the asset
- Costs to acquire and dispose of the asset (for example solicitor fees).
You may also be able to deduct an allowable loss you made in the same tax year.
The first €1,270 of taxable gains in a tax year are exempt from CGT. If you are married or in a civil partnership, this exemption is available to each spouse or civil partner but it is not transferable.”
The telephone lines at Citizens Information Cork City are monitored from 10am to 4.30pm, Monday to Friday. In addition, the Cork City Centre CIC in Cornmarket Street is open to the public Mondays, Tuesdays, Thursdays and Fridays, from 9.45am to 1pm and Wednesdays from 2pm to 4.30pm. The Blackpool CIC is open to the public each morning from 10am to 4pm, Tuesday and Thursday. Full details for all Citizens Information Centres and their opening times are available on our website.