Calculation of CGT ?

[Ennie]

Hi,
I am considering renting out my PPR which I acquired in 2005. It is a 2 Bed house, acquired new, with stamp duty relief bacause I had PPR status. I understand that I will now suffer the stamp duty clawback as im renting within the 5 year rule, along with having to eventually pay CGT when I sell the property.

Is there a partial CGT exemption? If so how it it calculated ?
i.e. Purchase Price was €255k when acquired in Sept. 2005.
Now valued at €360k in June 2007 - Gain of 105k in value while still my PPR. THe house is now(June 07) being 'converted' to Investment property..

If I decide to sell in say 2009 for OMV of say €400k, what will be the CGT payable ?

thanks.

 

[ClubMan]

I am considering renting out my PPR which I acquired in 2005. It is a 2 Bed house, acquired new, with stamp duty relief bacause I had PPR status. I understand that I will now suffer the stamp duty clawback as im renting within the 5 year rule

Correct - €255K @ 5% = €11,250 as far as I know.

along with having to eventually pay CGT when I sell the property.

Is there a partial CGT exemption? If so how it it calculated ?

Yes...

i.e. Purchase Price was €255k when acquired in Sept. 2005.
Now valued at €360k in June 2007 - Gain of 105k in value while still my PPR.

... but the timing of any capital gains is irrelevant.

If I decide to sell in say 2009 for OMV of say €400k, what will be the CGT payable ?

In this case (assuming round years for simplicity) - PPR for 2 years (x) and rented out for 2 years (y) would probably mean that (y - 1)/(x + y) = 1/4 = 25% of any capital gain would be assessable for CGT. So 25% of €400K - €255K less any allowable expenses and allowances would be subject to CGT at 20%. Say €400K - €255K - annual CGT allowance of €1,270 and arbitrarily assumed allowable expenses of €3K gives €140,730, 25% of which is €35,182 and 20% of which is about €7K.

These calculations are very rough and just illustrative. For a more detailed analysis you should get independent, professional advice.

 

[Ennie]

Thanks Clubman..my understanding was that the CGT would be €8000 - i.e. 20% of capital appreciation from date the property becomes an 'investment' up to date of sale, but the figures are pretty close either way. Thanks for the analysis.

 

[ClubMan]

i.e. 20% of capital appreciation from date the property becomes an 'investment' up to date of sale

No - definitely not! The timing of the capital gain is irrelevant. You could make no capital gain while the property is rented but still have a CGT liability. What matters is the total capital gain over the whole period of ownership and what portion of this is assessable for CGT based on the time that the property was rented out rather than your PPR.