Strange Claim by Irish Revenue for CGT on EU foreign Property

[Redmond]

Hi All

Abou 5 years ago I bought a property in France, refurbished it, used it as PPR and sold it. The French Noraire did his calculation, accepted the restorations costs, inspected the building and deemed that no Capital Gain was made. Right enough.

Recently, my accountant made Irish revenue aware of the sale and some figures indicating no CGT due. However, Revenue took the position that it would not accept the refurbishment expenses that were accepted by the French. So some 'profit' was deemed to have been made and now a bill arrived for 25% of that. Typically under bilaterals, French charge would be 16% and irish 10% of supposed gain. Three things have happened , Revenue will not accept French authority over determination of the 'Gain', nor accept the refurbishment expenses, nor a limit of 10% on any claim.
Its pretty gaulling giving that a substantial loss was actually made on the whole affair coming to about about 100K Euro.

Has anyone, any ideas on how to handle Revenue, apart from hiring Arnold Swartznegger to sort it out? Revenue refer to 'allowable enhancements' as their recognition of refrubishment costs, I suppose based on general Irish property practice...........

• As it was a PPR for 2 years of 3, can I claim deduction.
• Is it correct to disallow genuine repair expensses?
• Is revenue not bliged to recognise judgement by a fellow EU state?

Has anyone any idea how to tackle Revenue on this.

Many thanks if anybody could help.

REdmond

 

[Nige]

In determining your gain, if any, for Irish tax purposes, the Irish Revenue apply the Irish tax rules which may differ in what is an allowable deduction from the French rules. They are not in any way obliged to follow the judgement of another EU state on this matter.

Under Irish rules, deductions can be claimed for the "enhancement" expenditure that is reflected in the value on the date of sale, so run of the mill repairs (rather than improvements) are not deductible.

However, if you were living in this property as your PPR, you should get a deduction for this. Bear in mind that the last 12 months of ownership are deemed to be part of the PPR term even if you were living elsewhere so, if the year you weren't living there was the last year, the entire gain should be exempt.

 

[Redmond]

Hello Nige,
You were good enough to give some good hints before on my previous property. You seem to be a bit of a whizz. Maybe you are in fact a specialised accountant and would be interested in a consultancy?!!!

About my foreign, the refurbushment was for serious structural and sewer work as opposed to routine stuff. The Notary recognised all this on the day of sale and this was inspected and documents in the sale document. Revenue have decided to ignore this and sales and purchase costs which I find bizarre and then apply penalties and interest to top it all up. My irish accountant is bewildered and it appears like a sloppy bogus attempt to extract money from me.

What should one do in a situation like this. My books and tax affairs are in order as a small business-sole trader working internationally yet Revenue seems to be behaving like crooks. I cannot understand it.

How should one deal with them......any ideas. I work on the far side of the planet a lot of the time and although I get back to eueope and Ireland now and again, the claim by revenue is a severe nuisance as I cannot carry around the vast paper files that are in a foreign language.

Does a Tax ombudsman exist or would a complaint increase the targeting I wonder???

 

[Nige]

You need to appeal the Revenue's assessment. This can only be done, normally, within 30 days of receipt of the assessment. Get your accountant to submit a letter of appeal and then wait for the Revenue to do their bit (they have to issue a form AH1 to send it to the Appeal Commissioners). Often, once an appeal has been filed, they are amenable to a bit of horsetrading.