What is our CGT liability in this situation?

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Prudent1

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We bought our first house for IR£41000 in October 1993.We bought our second house in March 2005 and remortgaged our first house for €160000.We sold our 1st house for €230000 in June this year,mortgage paid off on this was €153000,Solicitors and Auctioneers fees came to just over €7000.I cannot find out from the Revenue website what we should pay Capital Gains Tax on, it would either be the€230000 minus IR£41000 converted to Euro multiplied by the Indexer of 1.38 and less Fees of just over €7000 or else the €230000 minus the mortgage payment of €153000 and less the fees.Big difference between the two.Any help would be appreciated.
 
Re: What is out CGT liability in this situation?

The mortgage is irrelevant to the CGT calculations. What happened to the first property after it ceased to be your home in 2005? Was it rented out or what? Basically if you vacated it as your PPR in March 2005 then you are probably liable for CGT in relation to the period March 2006 to the date of disposal. The first 12 months after vacating your PPR is exempt from CGT. For example - if you owned a property for 10 years, lived in it as your PPR for 8 and then rented it for the remaining 2 then (2-1)/10 = 1/10th or 10% of any capital gain is assessable for CGT. This means that after you subtract the original purchase price (indexed for inflation up to c. 2003) and any allowable expenses from the disposal price then 10% of this will be assessable for CGT. You should get professional advice on calculating your precise liabilities and making a correct return/payment.
 
Re: What is out CGT liability in this situation?

Thanks Clubman,yes the house was rented from March 2005 to March 2007, rent declared and taxed on this.Much appreciated.
 
Re: What is out CGT liability in this situation?

ClubMan said:
The first 12 months after vacating your PPR is exempt from CGT. For example - if you owned a property for 10 years, lived in it as your PPR for 8 and then rented it for the remaining 2 then (2-1)/10 = 1/10th or 10% of any capital gain is assessable for CGT.
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Clubman is there an official document/website that gives the formula you give above?? Thanks
 
Re: What is out CGT liability in this situation?

10% of any capital gain is assessable for CGT.

This seems very harsh, what if the capital gain was in the first 8 years when the propert was PPR, and for the two years when the property was rented the property decreased in value? I am not familiar with CGT, but I would have thought the CGT would only apply to gains for the two years the propert was rented!! Am I wrong, can anyone clarify??
 
Re: What is out CGT liability in this situation?

kev53 said:
Clubman is there an official document/website that gives the formula you give above?? Thanks
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The Revenue website CGT summary guides cover this stuff. The actual divil is in the detail of the legislation (Tax Consolidation Acts). My calculations above are only illustrative, deal in round years for simplicity and could always be wrong. Anybody who needs to determine their actual liabilities should get professional advice.
 
Re: What is out CGT liability in this situation?

kev53 said:
10% of any capital gain is assessable for CGT.

This seems very harsh, what if the capital gain was in the first 8 years when the propert was PPR, and for the two years when the property was rented the property decreased in value? I am not familiar with CGT, but I would have thought the CGT would only apply to gains for the two years the propert was rented!! Am I wrong, can anyone clarify??
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Harsh or not that's how it works. The timing of gains is irrelevant. The amount of time that a property is rented out versus a PPR determines the proportion of any total gain assessable for CGT. If all paper capital gains are made while it was a PPR and none further while it was rented this is irrelevant and some portion of the total gain may be assessable for CGT by virtue of it being rented out. If CGT is a problem then there is an easy way to avoid it altogether - sell the PPR within 12 months of vacating it and take the full gain free of any tax.
 
sell the PPR within 12 months of vacating it and take the full gain free of any tax.

Thanks clubman, and one can rent the property for the year also while it is goin through the motions for being sold??
 
Yes - the first 12 months are exempt from CGT even if rented out. But bear in mind if you rent it out within 5 years of purchase then a clawback of stamp duty is triggered.
 
ClubMan said:
Yes - the first 12 months are exempt from CGT even if rented out. But bear in mind if you rent it out within 5 years of purchase then a clawback of stamp duty is triggered.
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But only if stamp duty was payed in the first instance, e.g. firsttiem buyer or if original price below 127k (i think)??
 
No - if the clawback is triggered then what is owed is the amount of SD that an investor would have paid on the purchase of the property minus whatever SD the owner actually paid (which could be zero).
 
ClubMan said:
No - if the clawback is triggered then what is owed is the amount of SD that an investor would have paid on the purchase of the property minus whatever SD the owner actually paid (which could be zero).
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OOOOoo it gets complicated! Investors dont pay stamp on properties less that 127k, hence if purchased property as PPR for less that 127k, then no clawback??
 
Yes - but how many properties realistically cost €127K or less in the last 5 years?
 
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