The Finance Act 2012 introduced a new incentive relief from CGT for disposals of certain properties. The exemption from CGT applies to properties bought after the Budget date on 7th Dec 2011,and before 31 December 2013. (Later extended to 31 December 2014).
The property must be held for at least seven years.
Where such property is held for a period of equal or greater than seven years’ duration, the gains attributed to that seven-year period will be relieved from CGT.
The rational for the relief was to stimulate transactions in the then almost moribund property market by encouraging investors (and their capital) into the market. (See Oireachtas debates.)
Now five years later the landscape has changed, particularly.
A “housing crisis” has appeared and one can read almost daily denunciations from politicians, media, and other parties of the supposed part played in this by the latest villains of our society, the “Land Hoarders”.
It appears serious consideration is being given to measures such as a coercive “Vacant Site Tax” to force investors to sell up if they cannot develop property themselves.
My issue with this is that as currently proposed such penalties would impact precisely those who were incentivised in the 2012 to 2014 period to invest in property. Who would have based their financial planning on the reasonable expectation that a seven year relief would actually be honoured for seven years and would not be effectively withdrawn and negated less than three years after it's latest date of commencement.
In many cases where there is land-hoarding it is precisely because the government has made land hoarding a condition of incentives still in operation.
I would make an alternative proposal that will mobilise property and recognise that the mandatory seven year “Freeze” may no longer be suitable in the changed current circumstances.
That is that qualifying property currently held for less than seven years should have CGT relief available from it's date of purchase until it's next sale date up to a max of seven years. Following first sale it is no longer qualifying property and would be subject to CGT in the normal manner.
This achieves a number of objectives.
Property is mobilised and brought back into circulation, leading to more effective resource allocation and economic activity all round.
The total accrued value of CGT over seven years where some property is disposed early will be greater than if all property were held for full term. On aggregate Govt wins, developers/investors lose.
Economic actors will not lose (any remaining) trust in medium term Government planning and incentives.
I accept that it was an inevitable result of the seven year ban on disposal that some property is in the hands of those who are not financed, qualified, or disposed to lease/rent or develop it.
However this could have been predicted at the introduction of the relief. It can now be easily rectified.
The property must be held for at least seven years.
Where such property is held for a period of equal or greater than seven years’ duration, the gains attributed to that seven-year period will be relieved from CGT.
The rational for the relief was to stimulate transactions in the then almost moribund property market by encouraging investors (and their capital) into the market. (See Oireachtas debates.)
Now five years later the landscape has changed, particularly.
A “housing crisis” has appeared and one can read almost daily denunciations from politicians, media, and other parties of the supposed part played in this by the latest villains of our society, the “Land Hoarders”.
It appears serious consideration is being given to measures such as a coercive “Vacant Site Tax” to force investors to sell up if they cannot develop property themselves.
My issue with this is that as currently proposed such penalties would impact precisely those who were incentivised in the 2012 to 2014 period to invest in property. Who would have based their financial planning on the reasonable expectation that a seven year relief would actually be honoured for seven years and would not be effectively withdrawn and negated less than three years after it's latest date of commencement.
In many cases where there is land-hoarding it is precisely because the government has made land hoarding a condition of incentives still in operation.
I would make an alternative proposal that will mobilise property and recognise that the mandatory seven year “Freeze” may no longer be suitable in the changed current circumstances.
That is that qualifying property currently held for less than seven years should have CGT relief available from it's date of purchase until it's next sale date up to a max of seven years. Following first sale it is no longer qualifying property and would be subject to CGT in the normal manner.
This achieves a number of objectives.
Property is mobilised and brought back into circulation, leading to more effective resource allocation and economic activity all round.
The total accrued value of CGT over seven years where some property is disposed early will be greater than if all property were held for full term. On aggregate Govt wins, developers/investors lose.
Economic actors will not lose (any remaining) trust in medium term Government planning and incentives.
I accept that it was an inevitable result of the seven year ban on disposal that some property is in the hands of those who are not financed, qualified, or disposed to lease/rent or develop it.
However this could have been predicted at the introduction of the relief. It can now be easily rectified.