I purchased a rental property in 2012 during the capital gains tax (CGT) amnesty period. I understand this should mean that I do not have to pay capital gains tax on any increase in value over a seven-year period. I intend to keep the property after the seven-year period. Should I get the property valued at the end of the seven-year period, and will that valuation satisfy Revenue as far as the tax allowance is concerned? Is that all that will be required?
This is an interesting query. As you may know, section 604A of the Taxes Consolidation Act 1997 (TCA 97) was introduced by the Finance Act 2012. It provided for a capital gains tax relief on disposals of land and buildings acquired during a "relevant period" commencing on December 7th, 2011, and ending on December 31st, 2013 (both dates inclusive). The Finance Act 2014 extended the date by which the property could be acquired by 12 months to December 31st, 2014. The relief applies to certain properties acquired in Ireland or in any state in the the European Economic Area .
The relief originally specified that any gain arising on a disposal of qualifying property during the period ending seven years after the date of acquisition is not a chargeable gain provided certain conditions are met. However, the Finance Act 2017 amended section 604A to include relief for gains on the disposal of property after four years and up to seven years once the property was acquired in the relevant period, and the disposal is made on or after January 1st, 2018.
For the purposes of claiming this relief, a property valuation at the end of the seven-year period should not be required
Where property is held for a period greater than seven years, relief will apply to 7/n’s of the chargeable gain, where “n” is the total number of years of ownership at the time of disposal ie the portion of the gains which represents the same proportion of the gain as seven years bears to the period of ownership shall not be a chargeable gain. Therefore, for the purposes of claiming this relief, a property valuation at the end of the seven-year period should not be required.
The relief will only apply where the property is acquired for full consideration in the case of a bargain at arm’s length or for at least 75 per cent of its market value where it was acquired from a relative. A relative for this purpose means a brother, sister, uncle, aunt, niece, nephew, ancestor or lineal descendant.
Finally, it is important to note the relief will only be available if the income, profits or gains arising from the property are subject to Irish income tax/corporation tax and the relief will not apply if arrangements have been put in place to increase the relief by more than it would have been if the arrangements had not been put in place.
Susan Blake, tax manager, RSM Ireland
