CGT Allowable Expense in House sale.

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charlie007

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I'm preparing a property for sale.

The full painting will cost up to €4k.

Would this be deemed 'enhancement expenditure' and therefore an allowable expense against CGT?
 
No at all answering your question, but I would question why in this market you would paint a house before sale? I doubt you would be adding 4k of value to the eventual sale price - in fact I would view a freshly painted house almost with suspicion...is the new paint hiding damp patches etc.
 
misemoi said:
No at all answering your question, but I would question why in this market you would paint a house before sale? I doubt you would be adding 4k of value to the eventual sale price - in fact I would view a freshly painted house almost with suspicion...is the new paint hiding damp patches etc.
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Interesting perspective.

But I'm reliably informed that I'll recoup more than the painting outlay.

And no, I'm hiding nothing!
 
That is indeed what I've been told.

However below from Revenue seems to suggest a claim is plausible?

10.1 Allowable expenditure Allowable expenditure is divided into the following categories a) Cost of acquisition, i.e., the consideration which was given wholly and exclusively for the acquisition of the asset, plus the incidental costs of acquiring the asset; or, if the disposer created the asset (e.g., copyright or the goodwill of a business), the expenditure he or she incurred in creating it.(b) Additional expenditure, i.e., expenditure incurred to add to the value of the asset, in so far as the expenditure is reflected in the state or nature of the asset at time of disposal; and expenditure to establish or maintain legal title to the asset, or an interest in or right over it.(c) Incidental costs of disposal (restricted as in para 10.5).
 
Check the various Revenue manuals and guidance documents but, as far as I can see, painting and decorating might be an expense allowable against rental income but not against capital gains. They provide specific worked examples that state this to be the case but unfortunately I can't link directly to them. If in doubt get professional advice.

Edit: here's an example:
Thus, outlay such as expenditure incurred in decorating a house is not allowable because, if the house were used for the purposes of a trade, the expenditure would be allowable in computing the
profits of the trade.
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ClubMan said:
Check the various Revenue manuals and guidance documents but, as far as I can see, painting and decorating might be an expense allowable against rental income but not against capital gains. They provide specific worked examples that state this to be the case but unfortunately I can't link directly to them. If in doubt get professional advice.

Edit: here's an example:
Click to expand...

Thanks for that and I shall peruse carefully!
 
I'm in a similar boat - i.e. trying to figure out what exactly can be classed as "enhancement expenditure"

All I can find on the Revenue site is a bit vague:

"What are ‘allowable expenses’?​

These are costs that you can deduct from the sale price to work out your chargeable gain. They can be:
  • any money spent by you which adds value to the asset (known as ‘enhancement expenditure’)
  • costs (for example, fees paid by you to a solicitor or auctioneer) when you acquired and disposed of the asset."
How granualar can these be? I have a LOT of small - medium expenses that went into the property like insulation sheets, topsoil for landscaping, various plumbing items (radiators, fittings etc.), alarm system - all DIY'd over the years (and receipted) but they all add up substantially.

Can anyone point to a more detailed "Revenue" reference for such? ( I searched but came up w very little!)
 
Screenshot_2024-11-25-22-27-40-634_com.google.android.apps.docs-edit.jpg

Nope, painting costs are deductible against rental income BUT not CGT sales
 
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Pauley said:
I'm in a similar boat - i.e. trying to figure out what exactly can be classed as "enhancement expenditure"

All I can find on the Revenue site is a bit vague:

"What are ‘allowable expenses’?​

These are costs that you can deduct from the sale price to work out your chargeable gain. They can be:
  • any money spent by you which adds value to the asset (known as ‘enhancement expenditure’)
  • costs (for example, fees paid by you to a solicitor or auctioneer) when you acquired and disposed of the asset."
How granualar can these be? I have a LOT of small - medium expenses that went into the property like insulation sheets, topsoil for landscaping, various plumbing items (radiators, fittings etc.), alarm system - all DIY'd over the years (and receipted) but they all add up substantially.

Can anyone point to a more detailed "Revenue" reference for such? ( I searched but came up w very little!)
Click to expand...
Screenshot_2024-11-25-22-37-31-019_com.google.android.apps.docs-edit.jpg
these are NOT deductible for a sale of a property for CGT purposes but rather allowable as a deduction against rental income BUT NOT capital gains tax ,
 
"Enhancement costs refer to money spent to increase the value of an asset, like a building.

These costs are important when calculating taxes on any profit you make from selling the asset.

Here's how it works:

Adding Value to the Asset:

Enhancement costs are expenses that make the asset more valuable.

For example, if you add a new room to your house or renovate the kitchen, these improvements increase the property's value.


Legal and Ownership Costs:


These costs can also include money spent to secure or maintain legal rights over the asset. For instance, if you pay legal fees to resolve a dispute over property boundaries, this could be considered an enhancement cost.


How Enhancement Costs Affect Taxable Gains:


When you sell an asset, like a building, you might make a profit, known as a "taxable gain."
Enhancement costs can be subtracted from this gain, reducing the amount of tax you owe. Here's how:
Example: Imagine you bought a house for 200,000 and sold it years later for
300,000. Your taxable gain is 100,000.

If you spent 20,000 on adding a new room (an enhancement cost), you can subtract this from your taxable gain.

So, your taxable gain becomes 80,000 instead of 100,000.


Indexing Enhancement Costs


Over time, money loses value due to inflation. To account for this, enhancement costs can be adjusted to reflect today's value rather than what you originally paid.

Example: If you spent
10,000 on renovations ten years ago, that amount might be worth more today due to inflation. You can adjust (or "index") this cost to reflect its current value when calculating your taxable gain.


What Doesn't Count as Enhancement Costs?


Not all expenses qualify as enhancement costs.

Regular maintenance and repairs do not count because they don't add significant value; they just keep the property in good condition.


Example: Fixing a leaky roof or repainting walls is regular maintenance and cannot be deducted from your taxable gain as enhancement costs."
 
Tx for that. I didn't realise there was an inflation/index adjustment allowable on older expenditures.

Where did this info come from? Revenue's site? If so would you have a link pls?
 
The only indexation I can find with relation to CGT iss the one regarding having owned an asset before 2003

Indexation Relief

This page is an explanation of indexation relief for Capital Gains Tax (CGT)
www.revenue.ie www.revenue.ie

I don't see anything about what is mentioned above (Indexing Enhancement Costs) - which, as written above, makes no mention of pre 2003.

If someone can point to a Revenue source for that I'd be obliged...
 
Pauley said:
Tx for that. I didn't realise there was an inflation/index adjustment allowable on older expenditures.

Where did this info come from? Revenue's site? If so would you have a link pls?
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Screenshot_2024-11-26-18-45-31-845_com.google.android.apps.docs-edit.jpg


The full table is above

No(not revenue), it's QFA loans documents for 2024

No public link available for the above.

This stuff should be easily accessible

For all the love Revenue can get at times (being efficient) and their resources. I personally think the HMRC(UK) from experience are far better

The quality of the information with examples , the search functions for material , the FAQ is far better

Revenue could improve further by the reviewing the HMRC stuff I think

Anyway , it's the QFA material I have.
 
I've perused your posts with great interest.
Very informative, however:) I still don't see an answer to my original question.
I see the example of €5k spent on repainting, but this was 3 years before the property was sold.
What if it was done in the month before the house was put up for sale with the obvious intention of adding value to the property?
 
charlie007 said:
I've perused your posts with great interest.
Very informative, however:) I still don't see an answer to my original question.
I see the example of €5k spent on repainting, but this was 3 years before the property was sold.
What if it was done in the month before the house was put up for sale with the obvious intention of adding value to the property?
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Unfortunately, no is the short answer



Only capital expenditure goes against CGT deductions



Revenue expenditure (eg repair and maintenance and upkeep ) goes against income tax



Painting / Repainting isn't consider capital expenditure
 
cally1990 said:
Unfortunately, no is the short answer



Only capital expenditure goes against CGT deductions



Revenue expenditure (eg repair and maintenance and upkeep ) goes against income tax



Painting / Repainting isn't consider capital expenditure
Click to expand...
Confirming what I've already been told above:(

Thanks for that.
 
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