How much tax will I owe

T

threadbare1

Guest
Lived in a property for 10 years. Approx 20 months ago, moved out, took out an investment mortgage to leverage capital and generate enough to purchase a new residence. Turned old house into a rental property but now want to sell it. House was around the 45k euro when I bought it with my then partner 10 years ago. 3 years later we split and I bought her share. House was valued at 85k at the time. House was valued at 270k euro when I took investment mortgage out 20 months ago and is now in my name plus my new partner (and wife!). House valued at c350k euro now. Interest only mortage about 215k euro. How much profit will I have been deemed to have made if the house sells for 350k and consequently how much CGT will I owe if I sell? Im reckoning roughly 2 years since the move by the time any sale goes through. Might make it easier for calculations. I cant seem to follow the relevant articles on revenue.ie on selling residential property due to my previous situations, but Im sure its something simple Im missing. thanks in advance..
 
You will probably need professional advice to calculate your liability as the ownership history of the property is relatively complicated since you first purchased it. Happily the bulk of your capital gain should be tax-exempt given that you lived there for a long period but you are likely to have some level of CGT liability notwithstanding this.
 
Calculation will be as follows

Capital gain= (350k-indexation amount of 45k)

Portion exempt from CGT= (8.33+1 yr)/10yrs = 93.30% . Apparently you can add the 1 year on as this is the time you are given to sell your PPR.

Deductions can also be taken account of by way of costs of acquisition and disposal such as auctioneer fees, legal fees, stamp duty, valuer. So the gain itself can be reduced much further.
 
The Punter said:
Calculation will be as follows

Capital gain= (350k-indexation amount of 45k)....
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This rule of thumb will hardly apply here in its usual simplicity given the fact that the OP acquired and disposed of half-shares in the property at various stages?
 
You will need to speak to a tax consultant to calculate your profit/gain on purchase of house. Given payment made to former partner.

But in a straighforward transaction of this nature if house was bought for say 40k and sold for example at 150k. Less purchase costs to estate agent, solicitor etc - profit could be something like 100k.

You lived there for 10 years - these are exempt.
Plus final 12 months of ownership - also exempt.
Rented for 2 years - therefore apx one year CGT applicable.

So roughly 90% of gain could be exempt.

Just a very, very rough guide, open to all sorts of corrections!
 
But in a straighforward transaction of this nature if house was bought for say 40k and sold for example at 150k. Less purchase costs to estate agent, solicitor etc - profit could be something like 100k.

You lived there for 10 years - these are exempt.
Plus final 12 months of ownership - also exempt.
Rented for 2 years - therefore apx one year CGT applicable.

So roughly 90% of gain could be exempt.
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Yeah, got all that from the revenue site but as ubiquitous says, because of the first split from original partner and then wifey coming on 2 years ago to take half share, really dont know where I stand in relation to the basic calculations of CGT above. As far as I was concerned I had to "rebuy" the property each time which would leave me just the last 2 years of profit but I dont know if the revenue would see it that way. I'll try the revenue tmrw and see what they say.
 
threadbare1 said:
Yeah, got all that from the revenue site but as ubiquitous says, because of the first split from original partner and then wifey coming on 2 years ago to take half share, really dont know where I stand in relation to the basic calculations of CGT above. As far as I was concerned I had to "rebuy" the property each time which would leave me just the last 2 years of profit but I dont know if the revenue would see it that way. I'll try the revenue tmrw and see what they say.
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If you were rebuying then you would have had to sell so incurring a CGT liability at that time so we can safely say you didn't rebuy it. You have owned it since day 1 but I would be interested to see how they treat the second transfer, is ownership actually in joint names or is it just the mortgage that is in joint names?
 
If you were rebuying then you would have had to sell so incurring a CGT liability at that time so we can safely say you didn't rebuy it. You have owned it since day 1 but I would be interested to see how they treat the second transfer, is ownership actually in joint names or is it just the mortgage that is in joint names?
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Well, thats where it gets complicated, I only had a half share for the first 3 years so even estimating the first bit isn't straightforward. I'll post later with revenues response.
Im not sure if the property is in joint names, cant remember if the bank stipulated it must be before they give us the joint mortgage, I'll chase them before ringing the revenue.
 
Stifster said:
If you were rebuying then you would have had to sell so incurring a CGT liability at that time so we can safely say you didn't rebuy it. You have owned it since day 1 but I would be interested to see how they treat the second transfer, is ownership actually in joint names or is it just the mortgage that is in joint names?
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Don't think there would have been any CGT on first transaction as he was buying out the ex partner i.e. was family home and remained so.
 
Ok, rang revenue, guy said to split the portion of the first 3 years and use that figure as the initial price for workign out profit. As the value at the time was 85k only 42.5 of it was mine. So 42.5 to now.
So profit made = (350k-42.5k), this doesnt make sense to me as did I not have a share in the house before that? I would have thought my initial share of 45k/2= 22.5k would count for half of the calculations.

My reckoning
profit made =
Sale price/2 minus half initial price of house (175-22.5) = 152.5
Plus
Sale price/2 minus cost to buy first partners share (175-42.5) = 132.5
Profit = 152.5 + 132.5 = 285k

Revenues reckoning
Profit = 350 - (85/2) = 308.5k

The third split with wife coming on the books would only affect tax allowance and not the calculations of what the actual profit is.

Revenue also said to check the CGT multiplier index on their [broken link removed] (thats a small pdf download) to work out what I owe. Can some give a laymans explanation of that note and how it applys to me? thanks again..
 
My reckoning
profit made =
Sale price/2 minus half initial price of house (175-22.5) = 152.5
Plus
Sale price/2 minus cost to buy first partners share (175-42.5) = 132.5
Profit = 152.5 + 132.5 = 285k
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I could be completely wrong here so you need to get expert tax advise here. I came to the same conclusion using a slightly different method

Revenue also said to check the CGT multiplier index on their [broken link removed] (thats a small pdf download) to work out what I owe. Can some give a laymans explanation of that note and how it applys to me? thanks again..
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The tax year used to run from April to April each year.
Depends on the date you purchased the property.

Assuming you bought the property after 6th April and the transfer from your partner went through after 6th April, I recon you can apply the multiplier rates of 1.277 and 1.232 to the purchase figures.
 
Assuming you bought the property after 6th April and the transfer from your partner went through after 6th April, I recon you can apply the multiplier rates of 1.277 and 1.232 to the purchase figures.
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What is this multiplier figure for though? So if you say purcahse figure, if we work off the 85k purchase price, why am I multiplying it by the 1.277 or 1.232. Thanks again...
I will engage the services of a tax expert to finalise the figures but just trying to understand the process myself.
 
Doesn't the multiplier allow for inflation? So when you multiply purchase price of 85k by say 1.277 - it becomes around €108k. It's the 108k you deduct from sale - reducing paper profit and therefore the tax you owe.

Just a quick calculation.

Don't go near CGT without a tax consultant/AITI.
 
The multiplier is to allow for inflation. The reason I gave the 2 figures is that you purchased half the property in 1995 so therefore you apply 1.277 to 22.5 giving 28.73 and 1.232 to the other half you purchased in 1998 giving a revised figure of 52.36
These new amounts 28.73 and 52.36 are now your revised purchase figures
You can also add legal cost (half in your case) before applying the multiplier.
You can also add enhancements cost building works etc and apply a multiplier if applicable before arriving at your purchase costs.


Revenue also said to check the CGT multiplier index on their [broken link removed] (thats a small pdf download) to work out what I owe. Can some give a laymans explanation of that note and how it applys to me? thanks again..
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I thought you were aware of the details/implications of the multiplier and just wanted an explanation on the Note at the end of the page

NOTE :

In the “Year Expenditure Incurred” column, for all years to 2000/2001 inclusive, a year means a 12 month period commencing on 6 April and ending on the following 5 April. The “Short year” 2001 covers the period 6/4/2001 to 31/12/2001. With effect from 1/1/2002 the Income Tax year is the calendar year, i.e. 2002 refers to the year ended 31 December 2002.
Indexation is not available on expenditure incurred within 12 months prior to the date of disposal. Indexation relief will onlyapply for the period of ownership of the asset up to 31 December 2002 for any disposals made on or after 1 January 2003.​

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thank you so much for the detailed responses. Im a lot clearer now.
 
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