Finance Bill - Capital Gains Tax

Oct 23, 2017

The Bill contained a number of new measures that were not announced on Budget Day including the extension of the definition of a CGT group to include countries with which Ireland has a double tax agreement. There were also some anti-avoidance measures introduced to section 29 TCA 1997 where non-resident persons dispose of shares, and to section 626B TCA 1997 regarding the rules to determine if shares derive their value from land and buildings for the purposes of the relief.

CGT groups

The Bill extends the definition of a company in determining the members of an Irish CGT group for the purposes of section 617 TCA 1997 (which exempts certain transfers of assets other than trading stock within a qualifying group) to include countries with which Ireland has a double tax agreement. Currently, only companies resident in Ireland, another EU member state or an EEA member state can be included in a capital gains group.  This change means that the definition of a group for Irish CGT purposes is aligned with the definition of a group for Irish corporation tax loss relief.

Farm restructuring

The Bill makes an amendment to capital gains tax relief for farm restructuring which applies to the sale, purchase or exchange of certain agricultural land between 1 January 2013 and 31 December 2019.

Individuals who have benefited from the relief are now required to provide certain information to Revenue to enable the calculation of the amount of capital gains tax that would have been paid if the relief had not applied.  This information is required so that Ireland complies with State Aid publication requirements. The information must be supplied for disposals made on or after 1 July 2016.

Leasing land for solar panels

The Bill confirms that the leasing of agricultural land for the use of solar panels will be treated as a qualifying agricultural activity for the purposes of capital acquisitions tax and CGT reliefs once the infrastructure does not exceed 50 percent of the total farmland.

2017 Voluntary Home Owners Relocation Scheme

The Bill provides that any compensation obtained under the 2017 Voluntary Homeowners Relocation Scheme is exempt from CGT.  The Voluntary Homeowners Relocation Scheme is a scheme that is targeted at a person’s main/family home that is unsustainable as a home due to its flood risk.  This amendment applies to compensation received on or after 19 October 2017. 

CGT anti – avoidance measures

Disposal of shares by non-residents

The Bill amends section 29 TCA 1997 which exempts non-resident persons from CGT on certain share sales. The change means that this exemption will only apply where the shares sold are actively and substantially traded on the stock exchange. The amendment applies to disposals made on or after 19 October 2017.

Section 626B TCA 1997

The Bill introduces a further anti-avoidance provision in section 626B TCA 1997 which gives an exemption from corporation tax on chargeable gains arising when a parent company sells shares in its subsidiary and the shares do not derive their value from Irish land.  This new provision will clamp down on cases where money or other assets are transferred to a company prior to a disposal of shares in that company in an attempt to show that shares do not derive their value from Irish land or buildings. No account will be taken of such transferred assets when establishing where the shares derive their value on disposal where the main reason for doing so is the avoidance of tax.  This amendment applies to disposals made on or after 19 October 2017.

Form CG50 applications

This section of the Bill requires a Form CG50 application to be submitted for transactions which fall within the anti-avoidance measures details above in section 22 and section 23 of the Bill.