Revenue Note for Guidance

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Revenue Note for Guidance

607 Government and certain other securities

Summary

This section provides for the exemption from capital gains tax of Government and certain other public securities. In addition, future contracts which are based on such securities are also exempt provided that the delivery of the security is an unconditional requirement of the contract.

Profits and losses on all futures contracts are calculated by reference to the market value of the underlying gilt.

Details

List of exempt securities

(1) The following are not chargeable assets —

  • securities (including savings certificates) issued under the authority of the Minister for Finance,
  • stock issued by a local authority or a harbour authority mentioned in the First Schedule to the Harbours Act, 1946,
  • land bonds issued under the Land Purchase Acts,
  • debentures, debenture stock, certificates of charge or other forms of security issued by the ESB, Bord Gáis, the company established pursuant to section 5 of the Gas Regulation Act 2013, Irish Water, RTE, CIE, Bord na Mona or Dublin Airport Authority,
  • securities issued by the Housing Finance Agency under section 10 of the Housing Finance Agency Act, 1981,
  • securities issued by a body designated under section 4(1) of the Securitisation (Proceeds of Certain Mortgages) Act, 1995,
  • securities issued by the National Development Finance Agency under section 6 of the National Development Finance Agency Act 2002,
  • securities issued in the State, with the approval of the Minister for Finance, by the European Community, the European Coal and Steel Community, the International Bank for Reconstruction and Development, the European Atomic Energy Community or the European Investment Bank,
  • securities issued by An Post and guaranteed by the Minister for Finance.

A gain on the disposal of any of the above assets is not a chargeable gain and, consequently, a loss on such a disposal is not an allowable loss.

Future Contracts

(2)(a) All future contracts which —

  • are unconditional contracts for the acquisition or disposal of securities which are exempt under the section,
  • require delivery of the security, and
  • meet the requirements of paragraph (c),

are not chargeable assets.

(2)(b) In the case of a futures contract dealt in or quoted on a stock exchange or futures exchange, the requirement that the security be delivered will be met if the person by whom the contract is made closes out the contract by entering into a reciprocal and opposite contract on the exchange and settles through the exchange on a net payment or receipt basis.

(2)(c) Where a profit or loss on a futures contract is calculated, directly or indirectly, by reference to the acquisition cost or disposal proceeds of an instrument to which subparagraph (i) of subsection (2)(a) applies —

  • (i) that acquisition cost will be the market value of the instrument at the date of acquisition, and
  • (ii) those disposal proceeds will be the market value of the instrument at the date of disposal.

For example, a person contracts to sell a given amount of a specified security on a specified day. Before the specified day he enters into a second contract to buy the same amount of the specified security on the same specified day. Instead of the person completing both deals separately, the exchange will net off the contracts and make a payment to the person if he has made a net profit on both transactions. In the event of a net loss, he will make a payment through the exchange.

Relevant Date: Finance Act 2020