Brian Keegan: Season of goodwill doesn’t extend to tax liabilities
If you have sold any property or shares in the past 11 months for a significant amount, consider if there might be tax owing on December 15.
November is the bumper month for Exchequer tax receipts.
Given the results that were published last week, you could be forgiven for thinking that the pandemic was having no effect on the economy.
Receipts tend to be high in November because of critical income tax and corporation tax deadlines, but December has its own peculiar payment deadline which can be a trap for the unwary.
Capital gains tax is not a major component of the Irish tax take; at approximately €1 billion per annum, it only amounts to about 1.5% of the Irish tax yield.
Nevertheless, most capital gains tax for the year has to be paid by December 15 next, an unusual deadline that catches many people out.
First of all, and by definition, capital gains tax is only paid on non-routine transactions, like an investment property or land or share sales; taxable gains are made on the sale of assets like these.
We can all handle routine events well; it is the exceptions that tend to cause problems.
Secondly, money does not have to change hands for a capital gains tax liability to arise.
A gift of an asset between connected persons is treated as if the money had changed hands.
If, for instance, a parent gifts a property to a child, there can be gift tax implications for the recipient, but the parent is also treated as if they had sold the property at market value.
Capital gains tax at 33% will be charged at the difference between what the parent paid for the property originally, and its value at the date of the transfer.
Often there can be quite an interval between the conclusion of a contract and the payment being made. The seller might be willing to wait, but Revenue won’t wait.
As if to complicate matters further, the December 15 deadline is all about the payment of capital gains tax on any sales or transfers which occurred between 1 January 1 and November 30 last.
The payment, therefore, covers 11 months of possible activity. That offers plenty of breathing space if a sale or transfer took place in the early months of the year, but if a deal was concluded in late November, there are only a few weeks available to account for the capital gains tax which might be due.
Any capital gains tax arising in this month of December must be paid by 31 January 31, 2022.
It is only the money that is being asked for in the next few days, not a return of the details behind the transactions.
Broadly, the amount which is taxable is the difference between what was paid for the asset the first day, and what it is sold for.
Small gains — a total of €1,270 per annum — are disregarded when making the calculations.
Some moveable items — furniture and the like — don’t attract tax either as long as the gain is less than €2,540, and some capital losses can be offset against gains.
A gain from selling your home won’t normally attract capital gains tax either.
But if you have sold any property or shares in the past 11 months for a significant amount, consider if there might be tax owing on December 15.
The season of goodwill doesn’t extend to tax liabilities.
- Brian Keegan is director of public policy at Chartered Accountants Ireland
