The capital gains tax deadline of 15 December is fast approaching
15 December 2012 is the deadline for paying capital gains tax on gains arising in the period 1 January to 30 November 2012.
You may have a liability to capital gains tax if you made a gain on the disposal of an asset. An asset includes, for example, land, property, shares, foreign currency.
The tax year is divided into two periods for CGT purposes:
The initial period is from 1 January to 30 November
The later period is from 1 December to 31 December
Any capital gains tax due for the initial period should be paid to the Collector General by 15 December this year. Capital gains tax arising on disposals in the later period is due to be paid by 31 January 2013.
Does a charge to capital gains tax only arise if I ‘sell’ an asset?
No, capital gains tax also applies if you transfer ownership of an asset in some way. This can be by way of a sale, exchange or gift. Therefore, if for example you gift an investment property to your child a charge to capital gains tax may arise.
Disposal of a foreign asset may also be subject to Irish capital gains tax. If you are resident or ordinarily resident and domiciled in the State you are liable to Irish capital gains tax on worldwide gains. A credit may be available where foreign tax has also been paid on the disposal.
Are all disposals subject to CGT?
No, not all disposals give rise to a charge to capital gains tax. For example any gain arising on the disposal of your sole or main residence is exempt from capital gains tax provided you have lived in the property throughout the period of ownership. Similarly there is no liability on the transfer of an asset to a spouse/civil partner or provision of a site to a child if it is used to build a principle private residence, subject to certain conditions.
How is my liability calculated?
You will be liable to CGT on any gain you make. At its simplest the gain is calculated as the difference between the purchase price and the sale price. The current rate of capital gains tax is 30 per cent.
When calculating the chargeable gain, you can deduct acquisition, enhancement and disposal costs, e.g. solicitor fees, auctioneer fees etc, and depending on when the expenditure was incurred indexation, i.e. an adjustment for inflation, may apply.
What about losses from disposal of assets in previous years, can they be used to shelter the gain?
Yes, unused capital losses arising in the current or earlier years may be offset against the gain.
Am I entitled to a certain amount of gains each year tax free?
Each individual is entitled to an annual exemption of €1,270, i.e. if your chargeable gains in 2012 do not exceed €1,270 no CGT liability will arise.
What are the penalties for late payment?
Self assessment applies to capital gains tax therefore it is your responsibility to ensure that you calculate your liability and pay any tax due in advance of the deadline without being requested by Revenue to do so.
Interest on overdue capital gains tax is charged at a rate of 0.0219 per cent each day the tax remains unpaid, and where the return is not submitted on time the liability may also be subject to a surcharge of up to ten per cent.
The above information should be treated as a guide only. If you would like assistance with your tax affairs contact Coll & Co Chartered Accountants, Barna. Galway. They can be contacted by phone: 091 592080 or by email: firstname.lastname@example.org.
Coll & Co, specialise in Personal tax & Pensions advice. Coll&Co, Chartered Accountants is regulated by the Institute of Chartered Accountants to provide Investment Advice.
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