4 Tips for filing your CGT Return
Filing you Capital Gains Tax Return:
Individuals that have made a gain from the disposal of an asset or disposed of an asset where no tax is due because of the availability of reliefs or losses must file a Capital Gains Tax (CGT) return and may also be liable to pay CGT on the income. This means that regardless of the amount gained from the disposal or whether the income is taxable, all profits made from the sale, gift or exchange of an asset must be declared to the Revenue Commissioners.
Filing a CGT return, however, can be a complicated process, particularly for first timers. With over 20 years of experience helping people across Ireland file their CGT returns, our experts have an in-depth understanding of the Irish tax system.
Here, they have collected a few things you should know as a first time CGT payer in order to help you file and pay correctly.
1) “DISPOSE” DOESN’T ALWAYS MEAN “SELL”
While the term “disposal” (in the context of Capital Gains Tax) is often equated with the sale of an asset, the Revenue Commissioners actually use the term to refer to a wide range of methods. Any transfer of ownership of an asset is considered disposal, including the giving of a gift, the exchange of one asset for another, or receiving compensation or insurance for an asset.
It is important to note that CGT is levied on the gain made from disposing of the asset. This means that if you paid €X for a piece of land and disposed of (sold) it for €Y, you are only liable to pay tax on the difference (Y-X).
While many of our clients come to us for assistance about the disposal of property or shares, these are not the only assets subject to Capital Gains Tax. An asset is any item of value, tangible or intangible, that can be converted into cash. This includes things like foreign currency, land, insurance policies, company shares, jewellery, patents and copyrights.
There are, however, a number of CGT-exempt assets identified by the Revenue Commissioners. You are not liable to pay CGT on gains from things such as lottery wins, government stocks, animals, certain bonuses and moveable property under €2,540.
If you are unsure whether your asset disposal gains are liable to Capital Gains Tax, get in touch with us to discuss your circumstances and receive a quote.
2) YOU CAN CLAIM RELIEFS/EXEMPTIONS
It is important to be aware of all the various CGT exemptions and reliefs available to you, particularly if it’s your first time filing a CGT return.
While there are many different CGT reliefs available to taxpayers, eligibility for many of them is dependent upon individual circumstances. The exception to this is the Personal Exemption which exempts the first €1,270 of income gained from CGT for each person, each tax year.
Eligibility for certain reliefs depend on when the asset was bought or owned. The Indexation Relief, for example, can be claimed if the asset was owned before 2003. This relief takes into account inflation rates by assigning an “indexation factor” for each preceding year. Costs incurred up to 31 December 2002 are multiplied by the relevant indexation factor and the total can then be claimed against your CGT.
There is also a relief for gains made on property acquired between 7 December 2011 and 31 December 2014 and subsequently sold on or after 1 January 2018. Full relief can be claimed if you owned the property in question for more than four and up to seven years – partial relief can be claimed if you owned the property for more than seven years.
Other reliefs are dependent upon the type of asset and the circumstances surrounding both ownership and disposal. For instance, the Principal Private Residence (PPR) Relief can be claimed against gains made from the disposal of a property that you lived in as your main residence. If you also used the property as a place of business, partial relief may be given, proportionate to the amount of the property used.
Similarly, you may be exempt from CGT on gains made from the transfer of a site from parent to child, given that the house built on that site is the child’s only or primary residence. In this instance, the property must be one acre or less and be worth no more than €500,000.
Additional CGT reliefs include:
– Farm Restructuring Relief – if you dispose of farmland for restructuring purposes.
– Revised Entrepreneur Relief – if you (a qualifying business) dispose of qualifying business assets.
– Retirement Relief – if you are 55 years or older and dispose of business or farming assets.
3) THE PAYMENT AND RETURN DEADLINES ARE DIFFERENT
The CGT payment deadline varies depending on when the disposal was made. CGT on disposals between 1 January and 30 November must be paid by 15 December of the same year; tax on disposals made between 1 December and 31 December must be paid by 31 January of the following year. Payment of CGT can be made using the Revenue Online Service.
The CGT return deadline is 31 October of the year following disposal. This means that if you sold shares in November 2019, you must declare it on your CGT return by 31 October 2020.
Don’t forget! Before you can file and pay, you must first register for CGT by sending a request to your regional registration office.
4) LIVING OR EARNING ABROAD DOESN’T MEAN YOU’RE EXEMPT
Living and/or earning in another country does not exempt you from filing a return and paying your Capital Gains Tax.
If you are not an Irish resident but you dispose of an asset in Ireland, you must file a CGT return and pay any relevant tax. This includes gains on the sale of property in Ireland, any share sale proceeds that are remitted to Ireland and any assets used for the purpose of trade carried out in Ireland. Non-resident individuals must complete the TR1(FT) form to register for CGT and can then file and pay where relevant.
If you are resident in Ireland making gains on the disposal of certain foreign assets, you must file a CGT return and may be liable to pay tax on the gain. CGT applies to the disposal of assets such as foreign life insurance policies, offshore funds and foreign currency; however, you may be able to claim a relief if you have paid foreign Capital Gains Tax on an asset such as a foreign property.
If you are unsure whether you fall into either of these categories, we recommend consulting a tax expert before filing, particularly if it is your first time filing a CGT return. Our experts can help you identify the relevant income and uncover all the credits for which you are eligible. Fill out our short form now to receive a quote and find out how our team can help you with your CGT return this year.