649A Relevant disposals: rate of charge

Summary

Subject to certain exceptions, gains on disposals of development land are liable to capital gains tax at 40 per cent, where the disposal was made in the period from 3 December 1997 to 30 November 1999. The rate of tax on disposals made on or after 6 December 2012 is 33 per cent.

Details

Definitions

(3) “development plan” is defined in the Local Government (Planning and Development) Act, 1963 and refers to the plans made by the appropriate planning authority indicating the development objectives for the land concerned.

“planning authority” is defined in section 2(2) of the Local Government (Planning and Development) Act, 1963 and essentially means the appropriate County Council, Corporation or Urban District Council.

“relevant contract” refers to a contract, etc. for the sale of land which is conditional on planning permission for non-residential development being obtained for that land.

“residential development” includes any development which is ancillary to a residential development and which is necessary for the proper planning and development of the area in question. Such ancillary developments would include shops, schools, churches, estate roads, etc.

Rates of capital gains tax on disposals of development land

(1) In general, the rate of capital gains tax applying to the disposal of assets other than development land (and a number of other exceptions, e.g. certain foreign life assurance policies) is 33 per cent (section 28). Notwithstanding this, and subject to the exceptions specified in subsection (2), the rate of tax applying to gains on the disposals of development land (including unquoted shares which derive their value from land) is—

• 40 per cent, where a relevant disposal was made in the period from 3 December, 1997 to 30 November, 1999,
• 33 per cent, where a relevant disposal was made on or after 6 December 2012.

Exceptions to the higher rate

A 20 per cent rate, rather than the 40 per cent rate, applies to the following disposals made before 1 December 1999 —

(2)(b)(i) This provision has been deleted by section 44 of the Finance (No. 2) Act 2008.

• disposals of land (but not shares) —
1. (2)(b)(ii) in the period from 23 April, 1998 to 30 November, 1999 to a housing authority (section 23 of the Housing (Miscellaneous Provisions) Act, 1992) for the purposes of the Housing Acts,
2. (2)(b)(iii) in the period from 10 March, 1999 to 30 November, 1999 to the National Building Agency Limited,
3. (2)(b)(iv) in the period from 23 April, 1998 to 30 November, 1999, all of which, at the time of the disposal, has current planning permission for residential development, granted under section 26 of the Local Government (Planning and Development) Act, 1963, or
4. (2)(b)(v) in the period from 10 March, 1999 to 30 November, 1999 zoned solely or primarily for residential development under the appropriate County Development Plan.

In the case of (c) and (d) above there are two exceptions and in such cases the rate is 40 per cent. These exceptions are—

• (2)(c)(i) a disposal between connected persons, and
• (2)(c)(ii) where a “relevant contract” exists in relation to the disposal. The purpose of this exclusion is to prevent land with planning permission for residential development being sold for other purposes. A prospective purchaser might insert in the contract a requirement that planning permission for, say, a commercial development be obtained or else the sale would not go through. Such a condition suggests that the land may be intended for use other than for residential development.

Relevant Date: Finance Act 2021