C) CGT Flashcards
(37 cards)
CGT - Basics: Due Dates, Rates, Calc, Indexation
A
15 Dec for disposals to 30 Nov
31 Jan for disposals in Dec
33% - Standard,
10% Reduced (Entr. Relief)
Calc: Proceeds - Cost
Index: Consumer Price Index
- Losses are monetary only, not by index
- Gains that become losses - No Gain or Loss
- Assets before 1974, use 7.528
- Index ends in 2003
CGT - S 534
A
Part Disposals - Disposing anything less that the entire asset, either physical or interest stake.
Original Cost x (Proceeds/Proceeds + MV of retained portion)
CGT - Partnership Disposal
A
- Charged on partners separately
- Partnership dealings in assets treated as dealings by partners, not the firm.
CGT - Short- Lease Interest
A
Less than 50 years
Considered a “Wasting Asset”, therefore the allowable base cost is calculated using lease depreciation tables. S/P where S is years of lease Remaining and P is Total years of lease.
CGT - Long Leasehold Interests
A
Long-hold leases (more than 50 years) is treated as a sale!
Any premium paid upfront is deducted from disposal proceeds.
A Long-lease becomes a Short-lease once 50 years or less in remaining!
CGT - CG50 Tax Clearance Certificate
A
Required on the disposal of houses or flats with proceeds in excess of €1M (and other specified assets in excess of €500k) in order to AVOID 15% withholding tax.
Must be resident of state and no CGT must be due (or already paid)
CGT - Spouses and Civil Partners
A
- The assessable spouse is taxed on gains of the other spouse who lives with them (unless assessed separately)
- Don’t forget annual exemption of €1,270 each
- Only ONE PPR (unless dependent living rent-free in a house)
- Losses are transferrable
CGT - Territory
B
Irish Source Gains & Remittances:
NOT Domiciled/ YES Resident/ MAYBE Ordinarily Resident
Only Disposal of Irish Asset:
MAYBE Domiciled/ NO Resident/ NO Ordinary Resident
Depends where asset is physically located or the register of shares is kept.
-Gain on “Specified Asset” are always taxed here, regardless of Residency
CGT - Specified Assets
B
a) Land and Buildings in the State (also leases)
b) Mineral Rights and Exploration Rights
c) Assets in the State used for trade by Non-Resident/Non-Ordinary Residents
d) Unquoted Shares based on at least 50% of a company invested in a) or b) above
CGT - Transfer of Assets Abroad
B
Irish Assets transferred abroad before individual becomes resident in Ireland are fully taxable when individual becomes resident.
CGT - Territory - Anti-Avoidance
B
Leaving the State to avoid gains on shares (Not Irish Specified)
- Payment due on return (within 5 years)
- Instead, wait 6 years
CGT - Specified Assets
B
ALWAYS taxable here independent of residency.
NOT IRISH specified assets that are disposed (artwork perhaps), then leave country for 4 years and return to avoid Irish CGT.
CGT - Remittance of Capital Gains
B
For non=domiciled individual selling Non-Irish assets taxes only on proceeds remitted to Ireland.
ASSUME Gain is the first to be remitted, then balance of proceeds
ASSUME Gain is taxable in “Year remitted”, not the actual disposal
ADVICE: Before you return to Ireland, dispose of foreign assets and lodge in Irish account while still Non-dom and non-res…this will avoid Irish CGT
No loss relief available to assets situated outside of Ireland for individuals assed by remittance basis.
Transfer to spouse and remittance still chargeable.
CGT - Losses (6 rules)
C
- Gains less losses to find CGT
- Capital losses are carried forward indefinitely and deducted from gains.
- Losses with connected person only offset gains of connected person
- Only allow to carry back losses in Year of Death
- Losses on assets OUTSIDE Ireland for Non-domiciled person, no relief available
- You may not increase a loss through indexation. Only use base price.
CGT - Debt Write-offs (BOOK)
D
FA2013 - Base cost of asset reduced by Borrowings that were written off.
Calc: Reduce base cost of asset by lesser of:
a) the debt written off
b) the loss that would arise otherwise
Example: Bought for 100k, sold for 80k, write-off of 50k.
Loss on Disposal: 80k - 100k = (20k loss) NOT 50k - 100k = (50k loss)
Ensures proper economic losses. Will never result in a gain.
Calculation depends on if write-off occurs before, during or after period of disposal
Before or During: Use Proceeds - (Base cost - write-off)
After: Prepare as usual (Proceeds - Base) in year of disposal, then the write-off amount will be considered a chargeable gain in the next period.
CGT - Development Land - Notes
E
- Enhancement Expenditure isn’t Indexed
- All costs in value of the Development is deductible, but ONLY Current Use Value is Indexed. Purchase expenses are apportioned.
Losses: 1. From Non-Development land not offset against gain on Development land
2. From Development Land may be offset against gains of both.
Special: Disposal of Development Land <€19,050, restrictions to indexing and loss relief do not apply. Only for individuals
CGT - Development land - Definition
E
Market Value of land (at disposal Date) is greater that Value in Use
CGT - Advantages/Disadvantages of being Sole Trader
F
Sole Trader becomes Limited Company - Cessation of Individual (determine last of income tax)
Advantages:
1. Current year losses offset against other income (S318 and Schedule E)
2. Business Assets remain in ownership of individual
3. Only one annual tax return
Disadvantages:
1. Profits liable to Marginal Rate Taxes (incl PRSI and USC)
2. Cannot raise capital through EIIS or SURE
3. Restriction on tax deductibility of pension investment.
CGT - Advantages/Disadvantages of being Incorporated
F
Advantages:
1. Corporation Tax is 12.5% for trade income
2. Limited Liability
3. No limit on tax deductability of Pension investment (Not treated as BIK for EE or Dir.
4. Ability to raise capital through EIIS and SURE
Disadvantages:
1. Close company implications
2. More filing requirements
3. Withdrawing cash by Dirs/Shldrs has tax implications
CGT - Incorporation (Cessation rules)
F
Income tax cessation rules apply when a business is transferred from sole trader to Company
CGT - Extracting Cash from Company
F
- “Sell” the sole tradership to the “Company”. New Company “Owes ST” for the assets. A “Loan” is created that the company pays back from it’s profits. Repayment is tax free.
CGT - Tax consequences of Sole trader to Ltd. - “Incorporation Relief”
F
- The transfer of assets(goodwill, buildings, machinery) is a DISPOSAL and CGT is due.
2, That CGT may be deffered IF value of assets is taken as shares in new company (S600)
3.Any value taken as cash (or cash eq, ie Liabilities taken over or a loan to director), that portion is taxed NOW.
CGT - Calculation for Incorporation Relief
F
(Value of shares taken / Total Consideration) x Gain on assets = Deferred Tax
CGT- Conditions for Incorporation Relief (S600)
F
- Must be a transfer from person to Company
- Business must be a going concern
- ALL Business assets (except cash) including land and buildings
- Must be at least partly for shares in the company. The part that is not shares causes a restriction in the deferral.
- Transfer must be Bona Fide commercial reason and not to avoid tax.
Side-effects: Liabilities of the trade are taken over by company are treated as CASH CONSIDERATION. Reduces benefit of relief.
Downside of incorporation: Chargeable gain on sale of shares. Corporation tax on sale of property by company.
