Revenue Note for Guidance
The occasion of the complete destruction or extinction of an asset is treated as a disposal of the asset for capital gains tax purposes, even where no capital sum is received by way of compensation or otherwise. This may give rise to a loss, or a gain if compensation is received.
If, on a claim being made by the owner, the inspector is satisfied that the value of an asset has become negligible, the inspector may allow a loss. The loss is computed as if the asset had been sold for an amount equal to the value specified by the owner in the claim.
Where a person makes such a claim in respect of a holding of shares in a company which has been dissolved and the person becomes entitled to the assets of the company by way of Ministerial waiver under section 31 of the State Property Act, 1954, the section provides that the loss arising to the person cannot be utilised for capital gains tax purposes until such time as the assets are disposed of.
An owner of a building or structure may claim a loss when its value has become negligible by treating it as separate from the land on which it is situated. In order to allow for the possibility that the land could have increased in value, the site is deemed to have been sold separately at the same time and reacquired at market value, and any gain arising on this deemed disposal is set off against the loss on the building or structure.
(1) The entire loss, destruction or extinction of an asset is treated as a disposal of the asset, even when no capital sum is received by way of compensation, and relief for the loss may be claimed. This rule is subject to section 540 which lays down detailed rules for the treatment of options.
(2) The owner of an asset may make a claim to the inspector for the allowance of a loss on an asset the value of which has become negligible even though the asset remains in existence. Where the inspector is satisfied as to the merits of the claim, a loss should be allowed. The loss is computed as if the asset had been sold and immediately reacquired by the owner for an amount equal to the value specified in the claim. That value then forms the base cost of the asset for the purposes of the computation of any gain or loss on a later disposal of the asset.
(2A)(a) Where a person, who held shares in a company which has become dissolved, acquires property of the company by way of Ministerial waiver under the State Property Act, 1954, any allowable loss accruing to the person as a result of a claim under subsection (2) in respect of those shares is allowed to be deducted from chargeable gains accruing in a year of assessment not earlier than the year of assessment in which the acquired property is disposed of.
(2A)(b) Where a company has no share capital the references in subsection (2A)(a) to “shares” includes a reference to any interest possessed by a member in that company.
(2A)(c)(i) Provision is made for apportionment of the loss on the shares where only part of the property acquired under a Ministerial waiver is disposed of.
(2A)(c)(ii) Where a person who acquired an asset under Ministerial waiver disposes of it to his/her spouse or civil partner the capital loss on the shares is not allowed at the time of that disposal.
(3) The treatment in subsections (1) and (2) is extended to buildings and structures on land by treating them as assets separate from the land on which they are situated. This is necessary to bring buildings and structures within the scope of the section because in law the asset is the land and cannot be destroyed or reduced to negligible value. The treatment of a building or structure as an asset separate from the land on which it is situated enables relief to be given under subsection (1) or (2) where necessary. To provide for the possibility that the land could have increased in value, the site is deemed to have been sold separately at the same time and reacquired at market value, and any resultant gain is set off against the loss on the building or structure.
Relevant Date: Finance Act 2021