Capital taxes

Oct 10, 2017

With no enhancements to entrepreneurs’ relief and no increases in any of the tax free thresholds for capital acquisitions tax, capital taxes were relatively untouched in the Budget announcements apart from some small tweaks.

Capital gains tax (CGT)

There were no improvements announced to entrepreneurs’ relief on Budget Day. Chartered Accountants Ireland continues to advocate that this relief, as it currently stands, is not operating to its optimal effect in a number of respects.  

The seven year CGT relief is to be amended to allow the owners of qualifying land or buildings to sell those assets between the fourth and seventh anniversaries of their acquisition and still enjoy relief from CGT on chargeable gains.

This relief was originally introduced by Finance Act 2012 and brought a capital gains tax exemption on disposals of land or buildings acquired in the period commencing on 7 December 2011 and ending on 31 December 2013. The second Finance Act of 2013 extended the period within which the land or buildings may be acquired for the purposes of this relief to 31 December 2014.

The intention of the relief was to help stimulate activity in the property market. This reduction of the ownership period to allow relief for disposals after four years of ownership and not seven should go some way to further stimulating property transactions in Ireland, especially when coupled with some of the other measures announced.

Capital acquisitions tax (CAT)

Agricultural land placed under solar infrastructure will continue to be classified as agricultural land (formerly it would no-longer have been deemed agricultural land), but with a condition restricting the amount of the farmland that can be used for solar infrastructure to 50 percent of the total farm acreage. This will apply for the purposes of both CAT agricultural relief and CGT retirement relief

Chartered Accountants Ireland is disappointed that an opportunity was not taken to align the rate of CAT with international rates applied to similar taxes. Also, the restrictions to the dwelling house exemption introduced in Finance Act 2016 remain too harsh.

In addition, the unchanged CAT thresholds are disappointing, the current thresholds are not sufficient to exempt children inheriting the family home when we consider that the average value of an Irish family home is often above €300,000. The UK, for comparison purposes, currently provides a couple with an inheritance tax nil rate band combined of £650,000 in total. From 6 April 2020, the combined total increases to £1 million when the phasing in of the new residence nil rate band is completed. 

Stamp duty reliefs

To facilitate the intergenerational shift in farm ownership and management, consanguinity stamp duty relief for inter-family farm transfers is extended for a further three years. This relief applies to transfers of farm land by specific individuals. As this is an extension of a relief, according to the Budget 2018 documents, the net amount coming in should be revenue neutral.