Sale of sand

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ssap16

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I have had contrary advice from 2 different tax advisors. My brother in law who I help out has asked me to enquire about a tax situation. He is granting a licence to a company whereby they extract sand from a 7 acre field over a 5 year period leaving the field back suitable for cattle grazing. For this he is receiving €600,000. One tax 'expert' states that it will all be taxed at 20% CGT whilst the second 'expert' states that it will be a combination partly 20% CGT but mostly 42% income tax. Both are known as being good advisors. Obviously something is amiss. Any help lads. If you say ask an expert give me names. Would ringing the revenue be the way to go.
 
Get each expert's advice in writing. Ask each expert to justify their own opinion in the light of the contrary view. From your own viewpoint, review critically the information you have given to each respective advisor in order to ensure that they are fully conversant with all the facts of the case. Regardless of popular prejudice, these matters can sometimes be quite complex and both advisors may well be correct based on the information given to them.
 
This comes under the old chestnut "What is a trade"

Go with the CGT route obviously,but the contract has to be drafted in a particular way to support this.
The CGT guy should know what is required here, there should be caselaw to support the CGT interpretation ask him about similar Irish cases,there are defintely similar UK cases
 
Surely this must be a common enough event and there must be precedents for it's treatment.
 
For the CGT treatment you want it to be regarded as a capital sum received from the exploitation of an asset

However if you were getting annual payments revenue could argue it was subject to income tax
 
Provided it is clear that the money being received is for the right to exploit the land (to remove the sand) and not for the sale of sand, the CGT treatment should apply.
 
hard to judge without all the facts and reviewing the documents, but if its a once off lump sum you've good arguments for cgt treatment. it is a grey area so i wouldnt be too harsh on your 2 "experts".

although its not a deciding factor you might ask the quarry company how they will treat the payment from a corporation tax point of view - ie, as a capital payment for the acquisition of the asset, or as a trading expense.

why not insist on an indemnity from the quarry company (ie, if income tax applies they will be liable to an additional payment to bring you back to the position you'd have been in had cgt applied) - that will incentivise them to draft everything as if cgt applies!
 
nmh001 said:
why not insist on an indemnity from the quarry company (ie, if income tax applies they will be liable to an additional payment to bring you back to the position you'd have been in had cgt applied) - that will incentivise them to draft everything as if cgt applies!
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This sounds like wishful thinking. The OPs tax affairs are none of the quarry's business.
 
its a matter of negotiation. you'd be surprised how common it is for companies in these situations to indemnify people for unforseen tax hits. i've seen it frequently with property developers buying land where there's a risk the seller might be liable to income tax rather than cgt
 
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