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May 2015

Question

I have a query regarding CGT please. Approximately seven years ago, we traded up but were unable to sell our original house within the first year and so decided to rent it out. The property valuation at the time was €350,000. We have been renting now for almost six years, but returning a genuine loss each year to revenue when mortgage allowances, repairs etc were calculated.

With property prices now on the rise we are considering trying to sell again but are completely in the dark as to how much CGT we may have to pay. We have noticed that the current market value for a similar house in the area is €300,000. Any help in this regard would be greatly appreciated.


Answer

Capital Gains Tax is a tax chargeable on the gain and as I understand it is the difference between the value when you vacated your property and the sale price when you sell. The current rate is 33 per cent. This is a tax on gain with the disposal of all assets including:

  • All forms of land and property, wherever situate, including sites, be they developed or green field and with or without planning permission, houses, apartments, and commercial property
  • Shares in either Irish resident or non-resident companies.
  • Governmental Stocks & Securities, other than Irish.
  • Antiques
  • Paintings
  • Jewellery
  • Certain capital sums derived from assets
  • All forms of incorporeal property including options and the goodwill of a business
  • Trade assets

There are various costs that are deductible against the CGT liability such as disposal costs, for example professional fees. Your particular enquiry is interesting in that you have a loss rather than a gain. In essence based upon the information provided with values, you will not be liable to CGT, you do however as I understand it need to make a return. You may require a valuation to support your claim that the value was €350,000 at the time you vacated the property and a Valuation Surveyor could carry this out on your behalf. The disposal value must be the market value and you cannot sell at a loss and be exempt from CGT if the loss is less than the market value which could be a gain. I suggest that you seek guidance from the Revenue Commissioners and there is a useful guide on their website.

John O’Sullivan is chairperson of the Society of Chartered Surveyors Ireland (MediKids) Residential Agency Surveying Professional Group