Paul Kehoe
Question:159. Deputy Paul Kehoe asked the Minister for Finance the reason capital gains tax is applicable (details supplied); and if he will make a statement on the matter. [41097/23]
View answerTuesday, 26 September 2023
Questions (159)
Written answers
In general, capital gains tax (CGT) is chargeable on a gain arising on the disposal of an asset at the rate of 33 per cent. The first €1,270 of chargeable gains of an individual in any year are exempt from CGT. The transfer of an asset by a person to his or her child constitutes a disposal of that asset for CGT purposes. Where an asset is transferred other than by way of a bargain at arm’s length, e.g., between connected persons or as a gift, it is deemed to be disposed of and acquired at its market value on that date.
From the details supplied, it appears that a mother intends to transfer assets, being land and a house, to her son. Based on these facts, it appears that the transfer will constitute a disposal for the purposes of CGT and, subject to relief being available, a CGT liability may arise in respect of any gain which accrues to the mother on the disposal. No details have been provided as to the consideration, if any, which will pass from son to mother on the disposal of these assets; however, as set out above, the disposal by the mother of the assets and the acquisition of same by the son will be deemed to take place at market value on the date of disposal. If this market value exceeds the cost which the mother incurred, or is deemed to have incurred, when she acquired the assets, a chargeable gain, in respect of which CGT may be due, arises.
Depending on the circumstances, certain CGT reliefs may apply to the disposal of these assets. Section 604 of the Taxes Consolidation Act 1997 provides relief from CGT on the disposal of an individual’s principal private residence; and section 599 provides relief from CGT on the disposal by an individual, who has attained 55 years of age, of certain qualifying business or agricultural assets where the disposal is to a child of the individual.
As it is unclear whether consideration will pass on the disposal of assets from mother to son, it should also be noted that a charge to capital acquisitions tax (CAT) may arise if the transfer occurs by way of gift. Where CGT and CAT are chargeable on the same event, the CGT paid can be credited against the CAT liability arising provided the asset in question is not disposed of by the beneficiary within 2 years of the acquisition. This ensures that the transfer is not subject to double taxation.
There is insufficient information provided to consider whether any of the aforementioned CGT reliefs may be available in these circumstances; the scope and nature of any potential relief may only be confirmed in light of the facts and circumstances at the date of the disposal. Further guidance on the operation of CGT and associated reliefs is available on Revenue’s website at: www.revenue.ie/en/gains-gifts-and-inheritance/cgt-reliefs/index.aspx.