Revenue Note for Guidance

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Revenue Note for Guidance

552 Acquisition, enhancement and disposal costs


This section sets out the basic rules for determining the expenditure to be allowed in computing chargeable gains. Allowable expenditure includes cost of acquisition of an asset, enhancement expenditure incurred during the period of ownership of the asset and costs incurred in disposing of the asset. It provides, in relation to the cost of assets acquired with borrowings where the borrower is released from payment of all or part of the debt, that the cost of acquisition is to be restricted by the amount of any debt released where a loss arises on the disposal of the asset.


(1) The type of expenditure which is allowable as a deduction from the consideration in computing a chargeable gain on the disposal of an asset is as follows —

  • the cost of acquisition of the asset or its value given wholly and exclusively by the taxpayer or on his/her behalf, together with any incidental costs of the acquisition. Where the asset was created by the person making the disposal the expenditure incurred in creating it is allowable;
  • expenditure which adds to the value of the asset and which is reflected in the state or nature of the asset at the time of disposal, and expenditure to establish, preserve or defend legal title;
  • costs incidental to the disposal.

To come within the second-mentioned type of expenditure, the expenditure must not prove futile or have wasted away before disposal. Thus, expenditure on an abortive planning application, or on an unsuccessful attempt to dig a well, would not be reflected in the state or nature of the asset.


A person buys for 50,000 (expenses included) a piece of land (not the garden of a house) and at a cost of 3,000 lays out a tennis court. Some years later she does away with the tennis court and in its place has a swimming pool built at a cost of 30,000. She then sells the land with the swimming pool for 100,000 (after expenses). The 3,000 which she spent on the tennis court would not be allowable as it was not reflected in the state of the land at disposal. Thus, disregarding indexation relief under section 556, the gain would be computed as follows —

Cost of land


Cost of swimming pool


Allowable expenditure


Sale price (net)


The demolition of a tennis court is not the “entire loss, destruction, dissipation or extinction of the asset” within section 538(1) because it is not an “asset” being only part of an asset (the land) and it is not within section 538(3) because it would not be regarded as a structure in the nature of a building.

(1A) Where expenditure, allowed as a deduction, was incurred in a foreign currency, it must be converted to Irish currency at the exchange rate pertaining at the date the expenditure was incurred. This could involve a conversion to Irish pounds followed by a conversion to euro.

(1B)(a) Subsection (1B)(b) contains definitions necessary for the purposes of the subsection. Subsection (1B) applies to disposals on or after 1 January 2014.

(1B)(b) Where the cost of acquisition or expenditure on the enhancement of an asset was borrowed and all or any part of the debt related to the borrowings are released, whether before, on or after the disposal of the asset, the amount of the debt released is to be deducted from the expenditure otherwise allowable in computing a gain or loss under the section. This restriction is not to apply so as to create a chargeable gain, where a loss would arise if this subsection did not apply.

(1B)(c) The date on which a debt is released for the purposes of this section is to be determined by reference to the same factors as in section 87B(4).

(1B)(d) Where a debt is released in a year of assessment after that in which the disposal of an asset takes place, a deemed chargeable gain equal to the amount of the debt released is deemed to arise where an allowable loss arose on the disposal of the asset. The allowable loss is effectively clawed back by means of this deemed chargeable gain – but only to the extent of the reduction in the allowable cost that would have been made under subsection (1B)(b).

Also, if the disposal giving rise to the allowable loss is to a connected person, any deemed gain under this subsection is to be treated as if it acquired on the disposal of an asset to that connected person – so that the loss in the earlier year can be offset against the deemed gain in the later year.

(1B)(e) Subsection (1B)(d) cannot operate to create a chargeable gain where the underlying asset disposed of is not a chargeable asset.

(1B)(f) Subsection (1B)(f) provides that subsection (1B) will not apply to the release of a debt in respect of borrowing by one member of a group of companies from another member of the group because loans funded from within a group and subsequently released are neutral as regards the group as a whole.

(2) To qualify as incidental costs of acquisition or disposal, the expenditure must be wholly and exclusively incurred on the acquisition or disposal and must be within the following categories —

  • fees, commission or remuneration for the professional services of a surveyor or valuer, auctioneer, accountant, agent or legal advisor,
  • costs of transfer or conveyance (including stamp duty), and
  • costs of advertising and, in the case of a disposal, costs reasonably incurred in making any valuation or apportionment required for the purposes of computing the gain arising on the disposal.

(3) No deduction is allowable in respect of interest except in the case of a company incurring interest on money borrowed to defray expenditure on the construction of any building, structure or works. To qualify, the company must have charged the interest to capital and there must be no possibility that the interest could be allowed against income or profits for income tax or corporation tax purposes. The relief, therefore, applies only to the case of a company which is not trading or has no income during the period when a building is being constructed. Where the company is trading, the interest is deductible from profits for corporation tax purposes.

(4) Section 554 is concerned with the general exclusion of revenue type expenditure from allowance as a deduction in computing chargeable gains. Provision is made to ensure that premiums or other amounts paid under a policy of insurance to cover risks of damage or depreciation to an asset which are not within this general exclusion are nevertheless not allowable as a deduction in computing chargeable gains.

(5) Where property, which was transferred to a legatee or to a person absolutely entitled to it as against the trustee, is subsequently disposed of, certain costs of the transfer may be allowable as a deduction in computing any chargeable gain on the disposal. The costs so allowable are of a kind which would otherwise be allowed but for the fact that the expenditure was incurred by the trustee and not by the person making the disposal although ultimately borne by him/her.

Relevant Date: Finance Act 2021