Confused over impact of higher CGT rate

C

Carramore

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I'm confused over the impact of the higher CGT rate and how it affects my CGT liability.

Keeping the numbers simple for the sake of the illustration, I made a gain of €2,000 on shares sold earlier in the year, when the CGT rate was 20%. I then made a loss of €1,000 on shares sold later in the year, after the CGT rate had increased to 22%.

Do I calculate my CGT liability for the year as:

20% of 2,000 = €400, minus
22% of 1,000 = - €220

Therefore, net liability is €400 - €220 = €180.

Alternatively, I calculate my net gain for the year of €1,000. The net gain was realised when the tax rate was 20%, therefore my net liability for the year is 20% of €1,000 = €200.

Which liability is correct, €180 or €200?
 
My understanding is that CGT is not increased until 1/1/2009. Don't forget to deduct the 1270 from your net gains for the year before calc the tax * 20% for 2008 (22% in 2009)

You have net gains of 1,000 for the year so your liability is Zero for 2008
 
The rate changed to 22% from the middle of October 2008.

I used the figures shown in the example for illustratiion purposes. In reality, the tax on the net gain (no matter how it's calculated) is more than the tax-free amount, so the problem is very real.
 
It appears to me (and I'm not an expert) that E180 would be the amount owing.
By the way have you noticed the change in payment dates in budget 2009
 
Thanks Blacksheep. It would be great if your interpretation is correct. It would save me quite a bit. It would seem perverse however if a measure introduced in order to raise tax receipts would have the opposite effect in 2008. I'm sure that there were plenty of people like me who had lots of opportunities to realise substantial losses in the last couple of months of 2008, whatever about them having made gains earlier in the year so that they had a net positive tax liability for the year.

I hadn't known about the change in payment dates. I have just checked the details. The change is trivial and you wonder why they made it. Instead of asking you to pay the tax on gains from January to September at the end of October, they are now asking you to pay the tax on gains for January to November on 15 December. In both cases, the balance of the tax is due on 31 January. I cannot understand why they made such a minor change to the calculation and payment dates.
 
Aren't the losses offset against the gains *before* you calculate the tax? Am going through the same process at the moment and have losses prior to October and a smaller gain after the new rate was introduced....
 
I haven't yet got to the stage of filling in my return but I think you're right. In effect, that means that I only get relief at 20% on the losses incurred since mid October. That seems logical (although I would have preferred the other interpretation). In your case, I presume you have a zero liability no matter how you do the figures.
 
Well yes, I have a zero liability (lucky me;-)

I see what you mean though (now) - you want to deduct at 22% and charge the gain at 20%. Just makes it all the more bizarre that the govnt changed the CGT rate mid-year...

From the Citizen's Information blurb, it does appear on the face of it that they are dealt with separately - but there's no actual info on what you do in relation to offsetting losses in the same period. If I was you, I'd call Revenue to ask and, if you aren't getting a clear answer, I'd take your interpretation and write them a letter explaining what you are doing. I can't see that they'd penalise you for taking that view, even if it turns out that they don't agree.

The only reason I mentioned that you need to offset losses before applying the CGT exemption limit was really because of the other post about applying the exemption - I thought it could be read that you could take your exemption before dealing with any losses, which is deffo not the case.
 
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