# Indexing for CGT



## Unregistered (8 Apr 2005)

Hello
Indexing for CGT
Does anyone know how to go about re-indexing 38,000 Punts from Sept 1991 to today’s Euro value 2005? What are the calculations that would be used?
Thanks a million

Sammy


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## ClubMan (8 Apr 2005)

*Re: Indexing for CTG*

The information on how to do this (including the indexing multipliers) are available on [broken link removed]. Obviously you convert IR£ to € by dividing by 0.787564. Note that indexation relief is only allowed up to Decemer 31st 2003. When calculating your assessable gain don't forget to factor in stuff like allowable acquisition/improvement/disposal expenses, your annnual _CGT _allowance of €1,270, any previously incurred capital losses etc. The Revenue guide explains all of this stuff. Ishmael Whale's CGT calculator might help to estimate/sanity check your liability.


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## Unregistered (8 Apr 2005)

Thanks a million Clubman

Sammy


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## Unregistered (8 Apr 2005)

I am selling my house in a few months and I am trying to figure (roughly!!!) what expences I might expect to have.
I have looked at the revenue web site and this is the gist of what I think I need to return?
Would these figures make sense as a return for CTG?
Thanks for any comments guys

Sammy



Sale----------------------------------------------------250000

less
7 years CTG personal 
allowance at 1270py----8890
Cost of property--------50000
Sales cost--------------5000
Purchase cost?---------5000 (or part of?)
-------------------------------------------------------(68890)
Profit--------------------------------------------------181110

CTG Calculation-------------------------- Taxable Gain = 90555
**7/14 x 181110** 

**14 = years of ownership**
**7 = years as non resident**--------------CTG due      = 18110


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## Unregistered (8 Apr 2005)

If you're selling your principal residence, I don't think you're liable for any CGT....anyone correct me if I'm wrong.


Larmo


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## samspuds (8 Apr 2005)

Hi Larmo
I have owned it for 14 years but I havn't lived in it for the last seven years. I did live in it for the first seven years,so I think I am liable for 20%(18110 euro) of 7/14ths(90550euro) of the profit of sale(181110 euro).
Least thats what I think it might be??!!
Any thoughts?

Sammy


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## ClubMan (8 Apr 2005)

If you owned it for 14 years and rented it out for 7 years then I think that you are actually only assessable for _CGT _(note - _CGT _*NOT *_CTG_!) on 6/14ths of the gain. I think that the first year after you vacate it as your _PPR _is not chargeable. But I could be wrong. You should get independent, professional verification of your figures anyway just to be sure that you don't under or over estimate your tax liability.


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## Unregistered (8 Apr 2005)

Thanks for the comments guys
It all makes a lot more sense now.

Thanks
Sammy


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## ClubMan (9 Apr 2005)

Unregistered said:
			
		

> Sale----------------------------------------------------250000
> 
> less
> 7 years CTG personal
> ...



Can you explain some of your figures please? Earlier you said that the original acquisition cost was IRP38K which is Eur48,250. You say that the property was purchased 14 years ago so let's say 2000. This means that the applicable indexation multiplier is either 1.144 (1999/2000 tax year) or 1.087 (2000/2001 tax year) which means that the effective indexed cost is either Eur55,198 or Eur52,478. You list 50K above - are you simply rounding for simplicity here?

What is the sales cost of 5K? Estate agent fees, advertising etc.?

Ditto for purchase cost and what do you mean by "part of"?

The multiplication of the annual _CGT _allowance by 7 definitely wrong!!!. You only get one annual _CGT _allowance of Eur1,270 against a disposal of assets in the year in question. You cannot backdate/claim unused allowances from previous years. If your annual _CGT _allowance for a particular year was not used then you cannot carry it forward. 

Other than that the general approach to calculation of your actual and assessable gains and your tax liability looks more or less correct. As I said though, since the figures involved are not insignificant, you should make sure to get independent, professional confirmation that your calculations are correct.


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## stuart (9 Apr 2005)

You should definetly get professional advice if you were non-resident while not residing in the property

Certain absecences from a property due to work committments abroad actually count as residing in the home


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## Unregistered (9 Apr 2005)

Hiya Clubman
Yes, the 50K was just rounding for simplicity.
The 5K sales cost is estimated estate agent fees, Solicitors fees etc. but this may go to 7 or 8K, again I am rounding for simplicity here too.
Purchase costs 5K, or part of… I think I had bit of a blond moment putting this in. It shouldn’t be in this calculation.
Thanks for clarifying the CGT allowance bit; I think I misunderstood the guidelines on the IR site.
I think I will get an accountant to help me to submit this to the IR when I do have it sold, any idea what the “going rate “ for a submission like this might be?
Thanks for your advice with all this

Sammy


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## ClubMan (9 Apr 2005)

Just another point that confuses me - you mention _"IR"_ which seems to imply _UK Inland Revenue_? Is this correct or do you actually mean the Irish _Revenue Commissioners_?


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## ubiquitous (9 Apr 2005)

Unregistered said:
			
		

> Purchase costs 5K, or part of… I think I had bit of a blond moment putting this in. It shouldn’t be in this calculation.



Why? Purchase costs are allowable and indexable. 

You definitely need professional advice as, without a clear understanding of all the issues, you run a grave risk of (1) overpaying your CGT; or (2) underpaying, and ending up with interest, penalties and other sanctions in the event of a Revenue audit or investigation.


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## Unregistered (9 Apr 2005)

Hi Clubman and Ubiquitous
Yep..IR (Irish Revenue Commissioners)
I will get an accountant to check over everything before I go about submitting the returns for this.
It is rented out until mid Sept and I will stick it on the market then.
I know my figures are slightly broad brushed but the advice you guys have given me with this has certainly helped me to have a clearer picture and understanding of it all.
Next thing I need to sort is paying the tax due on the rental income..
I guess the fines and interest for the late return on 7 years of income from it will be huge.
Oh well... there you go. Being a bit thick about all this has its price I suppose.
Thanks for all the replies guys; ye have been a huge help.

Sammy


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## ClubMan (9 Apr 2005)

For what it's worth the Property Investment FAQ explains how the taxation aspects of renting are supposed to work. Best to sort out any outstanding liabilities now rather than not at all even if it means interest and penalties.


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## samspuds (11 Apr 2005)

Definitely will do. 

Do you think that one income tax submission for the seven years or seven individual income tax submissions would be more appropriate?

Sammy


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## ubiquitous (11 Apr 2005)

You will definitely need professional advice on how to approach the whole issue of a submission. As things stand you are in a very vulnerable position with the Revenue and it is possible that you could end with a serious criminal conviction. (Ray Burke was actually jailed for offences of this nature).  

If you approach the process of declaring your liabilities and settling with the Revenue in the proper fashion, then you should have a good chance to sort the whole matter out without serious (ie non-financial) consequences. On the other hand, if things go wrong and/or you end up in a situation where the Revenue for whatever reason take a dim view of you, or your bona fides, then you could be plunged into an extremely serious situation. 

If I were in your shoes, I certainly would not be discussing this issue on a live public forum such as this. The Revenue have extensive powers in chasing and investigating suspected instances of tax evasion and you never know who would be reading this.


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## samspuds (11 Apr 2005)

Thanks for the advice ubiquitous

I will address all of these with an accountant and get things straightened up.

Below is a quote from the revenue website guidelines on rental income for non-residential landlords, I suppose I should have made sure that each tenant complied with this so as not to have this mess which I currently have.



Thanks  



Sammy

*What if Rents are payable to a non-resident landlord?*

If a landlord resides outside the country and rent is paid directly to him/her or to his/her bank account either in the State or abroad, tax must be deducted by the tenant at the standard rate of tax (currently 20%) from the gross rents payable.* Failure to deduct tax leaves the tenant liable for the tax that should have been deducted*


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## ubiquitous (11 Apr 2005)

This is irrelevant to you as you have not declared the income you received over the 7 years. 

Quite apart from any obligation on your tenant (the practical effect of which is debatable in any event as you never even registered for tax in the first instance), you have a separate obligation to declare rental income on each annual tax return, and pay whatever liability arises. In the circumstances any attempt to pin the blame on your tenant could well backfire on you. The last thing you need is for the Revenue to flex their muscles and make an example of you.


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## samspuds (11 Apr 2005)

I agree completely, I will post an update when this has been sorted with the IRC, and let ye know what kind of a wrist slapping I got!!

Thanks for all the advice and comments lads.

Sammy


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## samspuds (13 Apr 2005)

Hello Clubman

I have looked at the conversions for indexing CGT, I'm confused by your explanation. (easily done!!)

Should the applicable indexation multiplier be 1.406. The property was purchased 14 years ago, 1991. Would this make the recalc Eur 48,250 x 1.406 = EUR 68739.50.
Thanks
Sammy



			
				ClubMan said:
			
		

> the original acquisition cost was IRP38K which is Eur48,250. You say that the property was purchased 14 years ago so let's say 2000. This means that the applicable indexation multiplier is either 1.144 (1999/2000 tax year) or 1.087 (2000/2001 tax year) which means that the effective indexed cost is either Eur55,198 or Eur52,478.
> QUOTE]


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## ClubMan (21 Apr 2005)

Yes - I think I selected the wrong multipliers from the [broken link removed] because I was using 2001 instead of 1991 as the year of purchase. Apologies for any confusion caused!


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## samspuds (21 Apr 2005)

Thanks for clarifying this Clubman

Kind Regards

Sammy


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