# Capital Gains Tax on Second house.



## nudger (19 Feb 2013)

First time poster, could do with a bit of help.

I bought my house in October 1992 for IR£52,000 and lived there until November 2004 as my PPR, moving back to the family home which I inherited.

The house is now for sale and I have been offered €270,000.

I can't get my head around working out the CGT, so any help would be great.

Between 2004 and now the house was not rented, family members and friends stayed from time to time but I guess I can't prove that and the other house was where I lived.

thanks
n


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## woods (19 Feb 2013)

The house being rented or not has no bearing on the CGT so no need to prove that.


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## Joe_90 (19 Feb 2013)

Sales Price less costs 269,000
Less Purchase price translated into €. x indexation 1.356 = €89,532
Gain €179,468
PPR exemption 156/245 (12 years plus last 12 months)
Gain €65,195
Annual Exemption 1270
€63924 x 33% = Approx €21k


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## nudger (19 Feb 2013)

woods said:


> The house being rented or not has no bearing on the CGT so no need to prove that.



Thanks woods, wasn't sure about that.


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## nudger (19 Feb 2013)

Joe_90 said:


> Sales Price less costs 269,000
> Less Purchase price translated into €. x indexation 1.356 = €89,532
> Gain €179,468
> PPR exemption 156/245 (12 years plus last 12 months)
> ...



Hi Joe_90

Just to get things clear, you have the sales price less costs as -€1000 of sale price, how is that?

Can I not claim EA fees, Legal fees, about €6000?

thanks.


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## Joe_90 (19 Feb 2013)

How could I possibly know that when you failed to state it in the post. €1,000 an estimate.


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## nudger (19 Feb 2013)

Thanks for coming back so quickly, and I appreciate your work on my tax estimate.

How the hell is the indexation worked out.

Cheers.


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## Joe_90 (19 Feb 2013)

http://www.revenue.ie/en/tax/cgt/leaflets/cgt1.pdf page 38

I guess it was to account for inflation but don't know the exact reason for it or why it was removed.


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## nudger (19 Feb 2013)

Had a look at that before, found it hard going.

On an older thread I seen someone post that the costs of buying the house (fees) could be taken off but others didn't think so.


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## Dermot (19 Feb 2013)

Costs involved in purchasing house will be allowed. Did you extend the house and if so have you receipts.


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## Joe_90 (19 Feb 2013)

Costs of acquisition are allowed for the base cost.  

You probably don't need to understand indexation just make sure you have the correct dates and index. factor


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## Dermot (19 Feb 2013)

If you are having difficulty understanding it all get proof of date of purchase, purchase price, Legal and stamp duty costs and any other costs associated with the purchase. Do the same with the selling costs including the estate agents bill and when you have this all put together call to some half decent accountant and get a price and this will be allowed against your tax bill as well.  It will not cost a fortune if you have all your documentation collected and it will take the worry out of it for you


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## nudger (19 Feb 2013)

Thanks for the advice lads, I have a Solicitor who is used to dealing with property but wanted to have an idea my self.

Improvements were made but no receipts.

Are the stamp duty and legal costs also indexed or just Flat rate, think it was £2800 all in.


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## Bronte (20 Feb 2013)

nudger said:


> Improvements were made but no receipts.
> 
> Are the stamp duty and legal costs also indexed or just Flat rate, think it was £2800 all in.


 
Improvements are also deductable and can be indexed. Have you a reasonable idea of how much these costs were - do a list of what you recall and keep that for future reference - revenue rules in any case state that receipts only need to be kept for 6 years so if you're reasonable about it you shouldn't have any problems (personally Ive kept every receipt since the year dot) I don't think stamp duty is allowed, that wouldn't make sense. Auctioneer and solicitor costs are allowed and can be indexed.  

Indexation was I think originally to help take account of inflation but they did away with it from a certain point in time, but it still applies in your case.  All you've to do is look at revenue.ie under CGT and there is a kind of table of example of how you calculate it and just put it into excel and you should be fine.  But ideally you should get an accountant or your solicitor to do it.


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## T McGibney (20 Feb 2013)

nudger said:


> Thanks for the advice lads, I have a Solicitor who is used to dealing with property but wanted to have an idea my self.



Unless your solicitor has a specialist tax qualification or similarly specific tax expertise, be careful about relying upon them for CGT advice. 

All solicitors are "used to dealing with property" but in my experience the majority don't have specific tax expertise, and if they get it wrong, you pay the price.


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## T McGibney (20 Feb 2013)

Bronte said:


> I don't think stamp duty is allowed, that wouldn't make sense.



Why would it not make sense? 
It is allowable as a cost of acquisition of the property.




Bronte said:


> But ideally you should get an accountant *or your solicitor* to do it.



See above


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## Bronte (20 Feb 2013)

Yes it's a cost of acquistion, you're right. I haven't looked up CGT in quite a while. I was probably thinking that it's a tax and so couldn't be tax deductable. And while it's true that solicitors are not tax experts they are trained in certain taxes and a lot of them would be able to do CGT in particular with their eyes closed.


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## nudger (20 Feb 2013)

Thanks guys,

Put in new windows and doors in 2000 cost €6000 but don't have the receipt or company name (cash job) would this count as enhancement expenditure?


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## Bronte (20 Feb 2013)

Believe it or not there used to be revenue/tax debates about whether replacing windows is repairs or enhancement (capital).

For our purposes I'd be going with enhancement.  Are you not hiring a professional to do your CGT?  If not, do it out yourself and go into revenue and find someone in there who knows CGT and ask them if you've made the correct calculation.


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## T McGibney (20 Feb 2013)

Bronte said:


> I was probably thinking that it's a tax and so couldn't be tax deductable.


The idea of a tax never being tax deductible has cropped up frequently in these pages in recent years, so much so that its now apparently being accepted as fact by some users. This is unfortunate as it is utterly untrue.


Bronte said:


> And while it's true that solicitors are not tax experts they are trained in certain taxes and a lot of them would be able to do CGT in particular with their eyes closed.


If you think that anyone can do a CGT computation with their eyes closed, then I'm afraid you have a very shallow  appreciation of CGT and how it operates in the context of a property transaction. 

Due to the amounts involved,  even a minor error or omission can have profound financial consequences for the taxpayer. For example, failure to claim €20k indexed stamp duty would cost the taxpayer almost €7k in overpaid CGT and is irrecoverable after 4 years.  And the consequences of a corresponding underpayment with subsequent penalties & interest are exponentially more serious.


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## T McGibney (20 Feb 2013)

Bronte said:


> Believe it or not there used to be revenue/tax debates about whether replacing windows is repairs or enhancement (capital).


 
There still are. It's a standard textbook topic


Bronte said:


> For our purposes I'd be going with enhancement.


Me too, based on the limited information provided, but as its a major item, the OP should establish its allowability or otherwise with a high degree of certainty before proceeding.


Bronte said:


> Are you not hiring a professional to do your CGT?  If not, do it out yourself and go into revenue and find someone in there who knows CGT and ask them if you've made the correct calculation



 Based on my most recent post above, and on the contents of another thread today in relation to Revenue mishandling/misunderstanding of a relatively straightforward tax issue, this is dangerous advice.


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## Joe_90 (20 Feb 2013)

Dermot said:


> accountant and get a price and this will be allowed against your tax bill as well.



I would not claim accountancy fees in a cgt comp. Don't know what others thoughts are.


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## Joe_90 (20 Feb 2013)

Bronte said:


> Improvements are also deductable and can be indexed. Have you a reasonable idea of how much these costs were - do a list of what you recall and keep that for future reference - revenue rules in any case state that receipts only need to be kept for 6 years so if you're reasonable about it you shouldn't have any problems



While you are correct, if you are claiming for something it is advisable to have evidence to back it up.  Revenue can audit the return and telling them, with no evidence, may be difficult.


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## T McGibney (20 Feb 2013)

Joe_90 said:


> I would not claim accountancy fees in a cgt comp. Don't know what others thoughts are.



Fees re tax advice at planning stage (ie pre-sale) should generally be allowable. There is an argument that fees for preparation of return and computation post-sale are not allowable. This uncertainty means that a decision in each case on whether to deduct has to be made with regard to the facts of the case and the preferences of the taxpayer.


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## Dermot (20 Feb 2013)

I have no connection with accountants other than to employ one for my returns but I agree with T McGibney's earlier advice about employing an Accountant rather than a solicitor unless they have a dual qualification. I suggested to OP in an earlier post to get an Accountant


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## nudger (20 Feb 2013)

Thanks lads for all the advice, in my ignorance I had presumed that my solicitor either knew how to do all this or would employ on my behalf, for a fee, someone who did, still think he will.

The solicitor is part of a partnership that are also Estate Agents, have used them a few times before and have been happy with their service, never for a sale/CGT job before.

Always like to have my own figures before receiving them from others.

Just to recap,

On purchase of the house, are the stamp duty/legal fees available for relief. think the Legal fees are but no mention of stamp duty on revenue.ie 

If both are, are both indexed?

Think I'll forget the €6000 spent on windows and doors as no receipt.

With a bit of feed back from you guys I might put up a few numbers to see what you think.

From what I can see Joe_90 was on the money or very close.


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## Bronte (21 Feb 2013)

*1. Deductible expenditure*
The amount of a chargeable gain or an allowable loss is determined by deducting any allowable expenditure from the
consideration received for the disposal. The allowable expenditure may include:
(a) the cost of acquisition of the asset and any incidental cost of acquisition such as agent’s commission and costs
of transfer or conveyance,
(b) expenditure incurred for the purpose of enhancing the value of the asset which is reflected in the state of the
asset at the time of disposal; expenditure to establish, preserve or defend legal title,
and
(c) the incidental costs of making the disposal, such as legal and selling costs.​
The amounts under (a) or (b) above may be adjusted to take account of inflation
________________________

*9. Enhancement Expenditure*
This is the cost of additions to the asset, after the date of acquisition, which adds to the value of the asset and is
reflected in the state of the asset at the date of sale. Examples would be landscaping, addition of a garage,
conservatory. It does not include routine maintenance such as painting.
*10. Multiplier*​ 
w 
​​The multiplier to be applied here must be by reference to the year in which the Enhancement Expenditure at 9
was incurred​

__________________​ 

*7. Cost of Acquisition​​*

w Incidental costs of acquisition such as legal fees and stamp duty are allowable as part of the cost.

http://www.revenue.ie/en/tax/cgt/leaflets/index.html  under leaflets 2012 version​


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## Bronte (21 Feb 2013)

Yes the legal fees are allowed and indexed and stamp duty. I wouldn't be worried about not including the windows because you've no receipt. You can prove they are there can't you?  Put them under enhancement and index it (for the year you purchased them)


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## mandelbrot (21 Feb 2013)

Bronte said:


> Yes the legal fees are allowed and indexed. I too cannot find stamp duty. I wouldn't be worried about not includiing the windows because you've no receipt. You can prove they are there can't you?


 
Stamp duty is allowed where it's a cost of acquisition, which it generally is.

http://www.revenue.ie/en/tax/cgt/leaflets/cgt2.html - see Note 3 to the Computation Sheet - "Incidental costs of acquisition such as legal fees and stamp duty are allowable as part of the cost."


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## Bronte (21 Feb 2013)

mandelbrot said:


> Stamp duty is allowed where it's a cost of acquisition, which it generally is.


 
Yes I managed to find it in the other document I copied from.  But that one you've linked to has a much nicer computation sheet that the OP could work with more easily then the ones at the back of the document I linked.


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## nudger (14 Mar 2013)

Joe_90 said:


> Sales Price less costs 269,000
> Less Purchase price translated into €. x indexation 1.356 = €89,532
> Gain €179,468
> PPR exemption 156/245 (12 years plus last 12 months)
> ...



Hi Joe_90
When you are calculating the PPR exemption do you only count full years and add the last year or do you count month as well?

Also the Annual Exemption, is that double for a married couple?

thanks.


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