CGT on house for years living abroad

P

pascal

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I bought a house in June 1998 for 100,000 Euro. I left the country to get work experience abroad (worked for different companies) from Nov 2000 to Oct 2004. My house abroad was my primary residence during these years.
I returned to Ireland in Oct 2004 and having been living in the house since.
I did not rent out my house during that period as I used it for any holidays I returned to Ireland.

I want to sell the house in February 2007 for 500,000 Euro.

From what I understand my Capitals Gains Tax will be based on 2001 to 2003 as they were years I did not live in the house.
98,99,00,04,05,06,07 will be years I have lived in the house.
Total: 7 years in dwelling, 3 years not in dwelling

30% of 400000 (Difference in selling and buying price) = 120000.
This is what I am liable to tax.
Capital Gains Tax: 20% of 120000 = 24,000 minus the selling costs

Can anyone confirm my assumptions are correct?
As the period abroad was less than 4 years, do I have to pay any CGT?
 
As you left the country to get work experience abroad, this period of absence cannot be deemed to be a period of occupation for CGT purposes. If you had been required by your employer to work abroad then this period would be deemed to be a period of occupation, provided you did not use your property for commercial purposes, eg rented the property. You will have to time apportion the time you were residing in the house which qualifies for the PPR relief. You should note where full exemption is not available then partial relief will apply to reduce the liability of the chargeable gain arising.


As you purchased your property in 1998, you will be entitled to some indexation relief. The multiplier rate in your instance will be 1.212. You can index the cost of the property, (including all associated costs in purchasing the property, eg legal fees) by this amount.
 
I'm not too sure that you have to pay CGT at all. The property was not rented in your absence so to all intents and purposes it was a family home for the duration. I think the spirit of the law is to stop people gaining from rent etc. during periods of absence and yet still availing of the tax relief. The letter of the law, however, might differ from my opinion. I'd consult a tax advisor before doing anything. Tenacious, do you have a link?
 
Yes it is true that Self-Assessment rules apply to CGT, and the onus is on the individual to declare capital gain on disposals and pay the correct amount of tax. Self-Assessment is subject to Revenue audit. There may be severe interest, surcharges and penalties to pay if the individual did nothing and were subject to a Revenue audit.

Here's Revenue's leaflet on CGT
http://www.revenue.ie/leaflets/cgt1.pdf
 
Thank you for the response. I suppose to Liteweight´s point on if I have to pay at all. In the last link, where CGT does not apply is
i) any period throughout which the individual was employed outside the State and (ii) a period of up to four years during which the individual was required by the conditions of his/her employment to reside elsewhere.


My condition was not a condition of my employment. I left my company to pursue international work experience and study again. My residence was outside the state for 4 years. The logical conclusion I can see is I owe partial CGT for the 3 tax years not residing in Ireland. I will seek advice from a tax advisor before doing anything.

Thanks for your responses again.
 
I think you said in your first post that you were abroad less than four years. Your calculations are more or less correct (ball park figure). You also have an allowance of circa 1270.

When you leave your PPR you are entitled to 12 months grace before capital gains tax applies. For example if you had come back to live in the property before the year was up, you would have no liability at all. Likewise, if you had sold it in that time period there would have been no liability.

Perhaps a tax advisor will tell you if you can still avail of the year's grace, i.e liability for two years rather than three? Search the forums as there are a lot of posts on CGT that may be of interest.
 
Based on your figures above, and presuming you sell your property for €500,000 in February 2007 you CGT computation will look somewhat like this. Adjust as necessary.


Sales Proceeds..............................................................................500,000
Less Cost of Sale (eg legal fees, auctioneers' fees, advertising, etc.)............-....
..................................................................................................500,000

Cost of Purchase:
(Include legal fees, valuer fees etc.)
100,000 indexed at 1.212 .............................................................(121,200)
Stamp Duty.......................................................................................-....

Total Gain....................................................................................378,800

Portion of Gain not Exempt:

378,800 *47 (Months of Absence) = 169,558
.............105 (Months of Ownership)

Therefore Portion of Gain Exempt

378,800 - 169,558 = ...................................................................(209,242)

Enhancement Expenditure (index as necessary) .......................................-....

Chargeable Gain............................................................................169,558

Less Annual Exemption ...................................................................(1,270)

................................................................................................168,288

CGT Payable @ 20%......................................................................33,658
 
Thanks Tenacious. More than I was hoping for.
I thought I could be more general and calculate in years and not months.
 
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I think you may be entitled to 2 * €1270 = €2540 of annual exemption if you are married and property is in joint name..
 
I have a similar query to Pascal's with the added complexity being that I did rent out my place for some of the time that I worked overseas.
Basically, my situation was along these lines:

I bought an apartment to be my PPR in May 1995 for Euro100k

I took up a job offer overseas in July 1995 and subsequently stayed overseas for about 10 years (returned in August 2005).

For the first 18 months I held the apartment for my own use on return visits to Ireland. Thereafter I let it out for various periods (with some gaps).

At the same time as my return to Ireland (August 2005) the tenants left the apartment and I did not replace them, intending to use the property as my PPR again. However as I have a family, it became obvious after a month or so that the apartment was too small for us so instead we rented a house keeping the apartment vacant for a period before letting it out for 6 months after which we sold it.

I would be interested in anyone's opinions for which portion of my ownership of the apartment I can claim exemptions.

Thanks.
 
I calculate your period as PPR as 2 months plus the period of ownership from 2005 to date of sale.

Then calc your liabliity using the formula above. Don't forget about the Multiplier legal cost on buying plus multiplier and selling expenses etc

I also think you have a Stamp duty clawback liability and a profit on rental income tax liability plus interest and penalties for each of the years the property was let.

Stamp Duty
You will need to see how much stamp duty you paid when you purchased the property. You then need to see what the investors stamp duty rate was and pay the difference plus interest and penalties. These can be very substantial.

Profit on Rental Income (Maybe you have made the necessary tax returns, if so ignore the following)
See [broken link removed] for how revenue calc the profit on rental income now.

You have to do a return for each year. The rules changed over the years so you need to be aware of the rules that applied for each year. I don't think they have changed much over the last few years. There was a period of about 3 years when interest was not allowed as a deductibe expenses and capital expenses were written off over 5 years etc. Again interest and penalties can be very substantial.

I would suggest you see an accountant or tax advisor/consultant that deals with tax on rental income regularly and is aware of the changes that occurred from year to year. They may be able to write off some expenses legally that you may not be aware of. Could pay for the fee involved.
Your former tenants could (altough I doubt it) be liable for tax due on rental income. They should have deducted tax at 20% and remitted this tax to revenue.
See
What if Rents are payable to a non-resident landlord?
How are non-resident landlords taxed?
from the link above
 
Thanks for the detailed reply asdfg. Very helpful.
I did declare the rental income during my years overseas so I should have no remaining liability there.
I had not thought about the Stamp Duty being different for renters, so will look into that.
Finally, I am going to contact a tax adviser tomorrow to arrange an appointment to go through this in detail. Cheers.
 
has the indexation factor been discontinued since Dec 2002?
Click to expand...

the cut off date is Dec 2003

For any property bought and sold in 2003 or since 2003

For any property bought before 2003 indexation is available up to Dec 2003 e.g. if you bought a proprety in 2002 and sold in 2003 indexation of 1.049 or 4.9% is allowed

See Multiplier here and scroll down to Appendix 1 on page 37
 
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