Capital Gains Tax Relief Update

Given the Central Statistics Office has confirmed that property prices have risen by 14 percent across the country it is expected they will soon exceed their 2007 high in the coming months.

In light of this surge in property prices it is important for any property owners/investors considering a sale to remember section 604A of the Taxes Consolidation Act 1997 which was enacted by section 64 of the Finance Act 2012 by then Minister for Finance, Michael Noonan. This section provided for relief from Capital Gains Tax for property purchased between 7th December 2011 and 31st December 2014 on a sale of any such property where that property is held for more than 7 years. The purpose behind the relief was to encourage a then stagnant property market which had a significant oversupply of property and directed that any gain for that 7 year period not be subject to Capital Gains Tax.

To qualify for the relief, land or buildings will be deemed to be acquired on or before 31st December 2014 where there is either unconditional contracts in place before that date (the property may be conveyed/transferred after this date) or if the contract was subject to any condition precedent that was satisfied before that date. It is of note that “land” is defined in section 5 of the Taxes Consolidation Act 1997 as any interest in land and the definition of “land” in the Interpretation Act 2005 includes houses and buildings so no regard needs to be made as between land or buildings for the purposes of this relief.

Positively, even where the property is held for more than 7 years the relief does not disappear but is reduced proportionally in so far as the period of 7 years relates to the period of ownership. In other words, if the property is held for 10 years, 7/10 of the gains will be exempt.

However, if the property was transferred to the claimant by a relative the claimant must have paid consideration equal to at least 75% of the market value at the time in order to qualify for the relief.

According to Revenue figures for 2018 and 2019 the overall amount of tax that was avoided was €290 million. Therefore, with the present increase in property prices it may be no harm to check if this Capital Gains Tax relief may be available to you now to avoid any unnecessary tax.

For further advice, please contact Cian Duane.