CGT -application of Mutiplier Index in year of purchase and year of disposal

M

modestus

Registered User
Messages
60
Am I right in saying that if you are selling investment property to calculate CGT that you apply the 1991/92 multiplier to the purchase price as house was purchased in January 1992 less costs of acquistion and you then apply the 2002 multiplier to the selling price after deduction of allowable disposal costs and any capital costs incured less the purchase price after indexation above less your €1270 allowance for 2005?
I also believe that you are "allowed"the first year of renting as your PPR for CGT purposes in calculating the CGT payable and your last year of renting as a PPR for calculation of CGT
Any comments -have I missed anything ?
 
modestus said:
Am I right in saying that if you are selling investment property to calculate CGT that you apply the 1991/92 multiplier to the purchase price as house was purchased in January 1992 less costs of acquistion and you then apply the 2002 multiplier to the selling price after deduction of allowable disposal costs and any capital costs incured less the purchase price after indexation above less your €1270 allowance for 2005?
Click to expand...
Your application of indexation multipliers is incorrect. You apply the relevant multiplier (based on the year of acquisition and disposal) to the acquisition price to get an effective acquisition price indexed for inflation. You don't apply multipliers to anything else. You subtract the indexed acquisition price from the disposal price and then deduct allowable expenses and annual CGT allowance to give the amount subject to CGT.

I also believe that you are "allowed"the first year of renting as your PPR for CGT purposes in calculating the CGT payable and your last year of renting as a PPR for calculation of CGT
Click to expand...
I think that the first 12 months of renting are not counted for CGT purposes. I don't understand your second point.

If in doubt get independent, professional advice to avoid costly mistakes and under or over payment of tax.
 
Thanks Clubman -what about the fact that the investment property was purchased in 1992 and was a PPR until 1997 when I got married -can I assume Revenue will treat it as PPR until 1998?
Therefore I also have to compute the proportionate period from 1998 up to 2005 when it was not a PPR -so therefore is 1998 not the year to apply the 1998 multiplier to the original 1992 purchase price
I calculate it as PPR for 6 years and non PPR for 7 years less one year =6 years which you are alllowed
So in a nutshell its 6/12 of the difference between cost of aquisition and related costs and sale price less allowable sale costs less€1270 allowance
 
modestus said:
Thanks Clubman -what about the fact that the investment property was purchased in 1992 and was a PPR until 1997 when I got married -can I assume Revenue will treat it as PPR until 1998?
Therefore I also have to compute the proportionate period from 1998 up to 2005 when it was not a PPR -so therefore is 1998 not the year to apply the 1998 multiplier to the original 1992 purchase price
Click to expand...
No. You use the "acquired in 1992/sold in 2005" multiplier regardless. You don't take the value at the time it was switched from PPR to rental as the effective acquisition cost or anything like that.

I calculate it as PPR for 6 years and non PPR for 7 years less one year =6 years which you are alllowed
So in a nutshell its 6/12 of the difference between cost of aquisition and related costs and sale price less allowable sale costs less€1270 allowance
Click to expand...
No - if the property was owned for 13 years, was a PPR for 6 and was rented for 7 then (7-1)/13 = 6/13 = c. 46% of any resale gain is chargeable for CGT. (The actual figure may be slightly different if months rather than rounded years are taken into account). This 46% is applied to the figure calculated above (i.e. sale price minus indexed acquisition price minus allowable (indexed if necessary) costs minus annual CGT allowance) and 20% of the result is the CGT bill.

Note also that if the property was rented within five years of purchase as an owner occupier then a will most likely apply (that's the case nowadays and I think that this may have applied back in the 90s too) and, if due not already discharged, would be well overdue and possible subject to interest and penalties.

As I said before if in doubt get independent, professional advice.
 
The first year of renting does not qualify as PPR but the last year of ownership does. The amount of the gain that is taxable is therefore 7/13.
 
DarraghDuane said:
The first year of renting does not qualify as PPR but the last year of ownership does.
Click to expand...
Not being a tax expert I am certainly open to correction on any or all of this but is that actually the case? I always thought that the 12 months after vacation of the property as a PPR and renting was counted as "PPR time" for the purposes of CGT (but not stamp duty clawback etc.).
 
I'm always open to correction as well, but the only "deemed" PPR periods are:

- the last year of ownership
- any periods of absence not exceeding 4 years in total where the owner's job required them to work elsewhere in Ireland and during which they had no other principal private residence, as long as they lived in the house before and after the absence
- any period of absence where the person worked outside of the State and during which they had no other principal private residence, as long as they lived in the house before and after the absence.
 
Thanks for that Darragh Duane -I take this clawback of stamp duty if let within 5 years of purchase only applies to new properties purchased by first time buyers where no stamp duty was payable originally -I bought a second hand property and paid Stamp Duty at the time
I assume for an allowable expense the stamp duty originally paid is an allowable expense?
I assume as it was a long time ago that all I have to do is ascertain the Stamp Duty rate as a percentage of the purchase price in 1992 and then work it out ?
Incidentally how does one go about recalling the amount of Indemnity Bond paid to the Bank at the time and the Banks Surveyors fees as it all happened years ago -I wonder would the AIB Mortgage file at the time reveal this info and do the rvenue really xpect receipts to be produced after 13 years?
Any help appreciated
 
modestus said:
I take this clawback of stamp duty if let within 5 years of purchase only applies to new properties purchased by first time buyers where no stamp duty was payable originally -I bought a second hand property and paid Stamp Duty at the time
Click to expand...
If an investor would have paid more on the same purchase then you are still liable for the difference under the clawback. If an investor would have paid the same as a non first time buyer then there is no liability. I have no idea what the relevant rates were back in 1992 though. Best to check with Revenue directly.

I assume for an allowable expense the stamp duty originally paid is an allowable expense?
Click to expand...
As far as I know it is.

I assume as it was a long time ago that all I have to do is ascertain the Stamp Duty rate as a percentage of the purchase price in 1992 and then work it out ?
Click to expand...
Yes.

Incidentally how does one go about recalling the amount of Indemnity Bond paid to the Bank at the time and the Banks Surveyors fees as it all happened years ago -I wonder would the AIB Mortgage file at the time reveal this info and do the rvenue really xpect receipts to be produced after 13 years?
Click to expand...
Not sure if you did not retain any related documentation yourself. Is the indemnity bond an allowable expense?
 
With reference to the last comment that "if an investor had paid more"etc I really do not understand this nuance as I bought it as an ordinary punter as my PPR which I was for slightly over 5 years -purchased January 1992 and got married and moved into the wifes place in May 1997 -rented it out in May 1997 -how can there be a stamp duty clawback when I paid the stamp duty on the purchase in 1992-I am a bit bewildered -what is there to clawback?
 
modestus said:
-how can there be a stamp duty clawback when I paid the stamp duty on the purchase in 1992-I am a bit bewildered -what is there to clawback?
Click to expand...
My comments were based on the possibility that you were liable for the SD clawback (explained here on ). I did not say that you are liable for this because I have not been able to establish from the details posted so far that the property was or was not rented out within the five years (60 months) of purchase. If you are liable for the clawback then if an investor would have paid more in SD than you did at the time then you are liable for the difference.
modestus said:
Also how would I know if an investor would have paid more -who establishes this ?
Click to expand...
Revenue - check with them as to the applicable rates of owner occupier and investor SD were in 1992 if the clawback is an issue for you.
 
I had a read of the Oasis site you mentioned and this whole SD clawback is irrelevant as I was not a first time buyer or investor when I purchased the property
 
modestus said:
I had a read of the Oasis site you mentioned and this whole SD clawback is irrelevant as I was not a first time buyer or investor when I purchased the property
Click to expand...
That is not the point - if you bought as an owner occupier (first or non first time buyer) and subsequently rented the property out within five years of purchase then the stamp duty clawback is relevant.
 
You must log in or register to reply here.
Back
Top