Help needed on yet another CGT Question!

[Misty23]

I'm looking for advice regarding the sale of an apartment & whether of not i will have to pay CGT

I owned & lived in an apartment in Dublin city for over 10 years. I then bought a house & started paying the mortgage in Sept 2005 but i did not move into the house until Feb 2006. I rented the apt from March 21st 2006.

I now want to sell the apartment & herein lies my problem. The government gives you 12 months to sell your PPR & NOT pay CGT. But when does the clock start ticking on that 12 months?? I have only lived in my new house for 10 months but started paying the mortgage 15 months ago! So how will this be viewed by the government?
I DO NOT obviously want to fork out 60k in CGT!!!

So given the above scenario can anyone advise me if i will be caught for it or not?

 

[Satanta]

The government gives you 12 months to sell your PPR & NOT pay CGT. But when does the clock start ticking on that 12 months?? I have only lived in my new house for 10 months but started paying the mortgage 15 months ago! So how will this be viewed by the government?

You may only have one PPR at any time.

Did you claim TRS on the mortgage payment 15 months ago?

Usually, the clock starts on closing of the deal. If you had the home for those 3 months without it being a PPR, it'll leave you liable to CGT on the home should you ever go to sell it later. Where did the 3 month difference come from? Waiting for the house to be furnished???

To be honest, it's not that big a deal on the sale (if it wasn't your PPR for those 3 months) given the length of time the apartment was your PPR..... (but do figure out where you stand, it either is or it isn't your PPR, you don't get to pick which is/isn't and as I said, complications on the situation regarding the house could arrise in the future)

Re the sale....
If you have owned the Apart for ten years (120 months - including the time it wasn't your PPR), left it as a PPR 15 months ago (it having been your PPR for the rest of the time) and then claim your 12 month exemption.... you will be due to pay 20% CGT on the profit (- deductables [solicitor fees etc.]) * 3 (15-12 [non PPR period - exemption])/120 (total period of ownership).
So, whatever your profit is, you're only paying CGT on 1/40th of it, and only paying 20% (.2) on that, so 1/200th of the taxable gain is your CGT bill.

So, if you made 200k profit (say 203000 gain - 3000 selling fees) you'd pay a CGT of 200000/200 = 1000
if you made 400k, you'd owe 2000

in order to owe 60k you'd need to have made a gain of 12'000'000!

 

[Misty23]

I have only just submitted a TRS form for my new home. I had to finalise the deal with the developer as it came about faster than i had hoped and they were hounding me on it! I didn't move in as i had a 2 month trip planned for Australia (which i went on ) & came back in Feb 2006. So it took me a while to get everything sorted.

The apt cost 56,000 euro & i spent 70,000 on it over the years. I hope to sell for 400,000 making 274,000. My impression of the CGT was that, allowing for whatever indexation & time of ownership etc i have to pay 20% on the profit which i figure out to be around 250,000 @ 20% - 50,000 CGT.. Do your figures refer to the gov allowing the 12mth exemption?

 

[Newby]

My impression of the CGT was that, allowing for whatever indexation & time of ownership etc i have to pay 20% on the profit which i figure out to be around 250,000 @ 20% - 50,000 CGT.. Do your figures refer to the gov allowing the 12mth exemption?

I think you're impression is wrong. Satanta's calculations above are the way to calculate the gain. You should seek professional advice in advance of making the sale / paying your tax.

 

[Satanta]

I have only just submitted a TRS form for my new home.

Well, at least now if the home wasn't/isn't considered a PPR for this period you won't have any additional complications on the TRS side of things.

I didn't move in as i had a 2 month trip planned for Australia

Technically, I'm not sure if either property was considered a PPR for this period. If you returned to live in the apartment after this trip, it's possible that Revenue may accept the apartment was your PPR for this time, but I'd confirm this with a Tax expert. Try searching through the Revenue CGT forms for information relating to this sort of event. You're far from the only person who has done this so the details should be clearly stated for the situation, I just don't know what they are.

Possibly someone here on AAM may be able to clarify the situation relating to the months spent travelling.

The apt cost 56,000 euro & i spent 70,000 on it over the years. I hope to sell for 400,000 making 274,000. My impression of the CGT was that, allowing for whatever indexation & time of ownership etc i have to pay 20% on the profit which i figure out to be around 250,000 @ 20% - 50,000 CGT.. Do your figures refer to the gov allowing the 12mth exemption?

My figures do take into account the 12 month exemption.....

15 - 12 = 3
where 15 is the non PPR time, 12 is the exemption so 3 is the liable non PPR time.

But they also take into account your time as a PPR, where the real savings on the expected CGT bill are coming from.
You pay 20% on the profit, but only on the profit related to the non PPR time.
You had it as a PPR for 10 years, and not as a PPR for 3 months (well, 15 - exemption) so hence you're only paying a small fraction of the total gain.
It's calculated as if every euro of profit (say 250k in your case) was gained by an equal amount on every day of ownership. So your only going to pay for the profit gained from 3 months of the total 120 months. So 3/120 or 1/40 of the total gain.

If any part of the calculation isn't clear, please query it. It's all information available from Revenue, but a lot of users here on AAM understand it and are happy to explain it in specific terms to your situation.



Do check that the money spent on the apartment, 70k, is an allowable deduction. I'd presume it is, but again I've no specific knowledge of this so wouldn't advise either way on that. Again, the Revenue docs should clear this up.

 

[Newby]

Technically, I'm not sure if either property was considered a PPR for this period. If you returned to live in the apartment after this trip, it's possible that Revenue may accept the apartment was your PPR for this time, but I'd confirm this with a Tax expert. Try searching through the Revenue CGT forms for information relating to this sort of event. You're far from the only person who has done this so the details should be clearly stated for the situation, I just don't know what they are.

Possibly someone here on AAM may be able to clarify the situation relating to the months spent travelling.

This is a grey area. Get an independant professional opinion. I think (for what its worth) that if the house was your only residence and you would have been living there as your PPR had you not been away on your 2 months off then it would qualify as a PPR for that period.

If this was not the case then everytime a PPR owner goes away for a weekend or takes a week off for a holiday then such time wouldn't be regarded as your PPR.

 

[Misty23]

Thanks so much for all your help Satanta. It's very much appreciated.