Capital Gains Tax

[Soddy]

Hi there. I'm looking for some advice on capital gains tax. I was working for a company about 4 years ago, and they gave us shares. I sold the shares but after talking to someone recently, apparently I should have paid capital gains tax (I had no idea what i was doing as I was about 23 and had no idea about shares), and that there are huge penalties. The amount at the time was about 3,000EUR.

Do anyone have any idea what kinds of penalties I face or what I should do?

 

[ClubMan]

they gave us shares. I sold the shares but after talking to someone recently, apparently I should have paid capital gains tax

You were probably liable for income tax on the value of the shares obtained less anything (e.g. discounted price or nothing if they were free) that you paid for them. If you then sold them later for a gain above the value on that date then this amount would have been assessable for CGT. If you sold them immediately on acquiring them then it sounds like you have an outstanding income tax liability. Can you post more details - e.g. what sort of share scheme (Employer Share Option Plan/ESOP, Employer Share Purchase Plan/ESPP, Revenue approved or not), when you acquired the shares, how much you paid and what the market value was at the time, when you sold them and for how much etc.?

 

[Soddy]

I got them in March 2003 and I sold them roughly about 10 months after I got them. The company gave them to me at 17 and I sold them for maybe 35-40. The details are a little hazy because it was so long ago. I don't know if it was part of some company scheme because I was fairly clueless at the time.

Could you give me some adive on the best course of action if possible? I'd like to apply for rent relief but I'm worried that all of this will come out and I'll have to pay huge fines.

 

[ClubMan]

I got them in March 2003 and I sold them roughly about 10 months after I got them. The company gave them to me at 17

What was the market value when you acquired them? If 17 (€?) was a discounted acquisition price then you were liable for income tax on the difference between the market price and this discounted price. This probably should have been paid within 30 days via RTSO1 (although I'm not sure if this was the form in force at the time?)

[broken link removed]

and I sold them for maybe 35-40.

You were most likely assessable for CGT on this less the market value at the time of acquisition (less the usual expenses and allowances etc.).

Could you give me some adive on the best course of action if possible?

First thing to do is to clarify the precise details of the transactions and get a better feel for the possible outstanding tax liabilities. If you cannot figure it out yourself then you may need professional assistance.

I'd like to apply for rent relief but I'm worried that all of this will come out and I'll have to pay huge fines.

You need to sort out any outstanding tax liabilities but I don't think that this should necessarily adversely impact your rented accommodation tax credit (?) application. And while some penalties or interest may apply on the outstanding tax liabilities I'm not sure that they will necessarily be onerous especially if you come clean ASAP.

 

[Iceman732]

You can a list of all companies who have the different types of approved share option scheme's of Revenue.ie, I don't have the link but you can google it and it'll bring something up for you.

I tend to agree with Clubman. The likelihood is that these shares were issued as part of an unapproved share option scheme. You are liable to Income tax on the difference between the grant price and the market value of the shares on the day you exercised your right.

For CGT purposes, assuming you paid you income tax, the market value on the day you purchased them is your base cost. So if you made a profit from the CGT based cost then you have a CGT liable (or return at the very least) to complete.

I would recommend you get professional advice, bringing all your documents with you and it'll be sorted out easily enough.

In relation to penalties, well you could be charged interest on late filing of the RTS form Clubman mentioned above. You are obliged to file this form within 20 days of selling the shares. Interest is something like 15% APR.

Then if you made a capital profit you exceeding €1,000 (I think it was that amount back then!!) you are liable to a 10% surcharge limited to circa €63,000 and interest of again roughly 15% APR.

Your penalties will more than likely not be huge as Revenue will more than likely take the fact that you honestly didn't know about your liability at the time.

 

[Soddy]

When you say, there won't be huge costs - are you talking 100's or 1,000's?

Thanks for all the good advice. It's put my mind at ease.