Dáil Éireann debate -
Tuesday, 20 Oct 1998

Vol. 495 No. 4

Written Answers. - Tax Collection.

John Gormley

Question:

201 Mr. Gormley asked the Minister for Finance the tax collection procedures, if any, which apply in respect of windfalls accruing to private tax-liable parties arising from land rezoning effected by local authorities; and if he will make a statement on the matter. [20005/98]

Minister for Finance (Mr. McCreevy)

Tax will only arise from any possible increase in land values attributable to rezoning in the event of a disposal of such rezoned land at which point capital gains tax would be charged on any gain arising.

The value to the Exchequer of any capital gains tax arising should landowners dispose of such rezoned land will, in general, be 40 per cent of the landowner's chargeable gain. The chargeable gain accruing on the disposal of an asset is calculated by deducting from the consideration received for the disposal the cost of the acquisition of the asset and any expenditure incurred on its enhancement. The amounts so deductible may be adjusted to take account of inflation. In the case of a disposal of development land this indexation relief is confined to the amount of the current use value of the land at its time of acquisition or at 6 April 1974, if acquired prior to that date. The first £1,000 of an individual's chargeable gains in any year of assessment is exempt.

It should be noted that Finance (No. 2) Act, 1998, introduces a provision whereby gains on disposals in the period 23 April 1998 to 5 April 2002 of development land which on the date of disposal has planning permission for residential development will be liable to capital gains tax at 20 per cent. In addition, disposals of land in that period to a housing authority for the purposes of the Housing Acts will qualify for the 20 per cent rate whether or not the land has planning permission. From 6 April 2002 onwards the rate of tax on gains on disposals of all land zoned for residential purposes will be 60 per cent.

Capital gains tax is administered under the self-assessment system. This means that taxpayers are obliged to make returns and payments in relation to capital gains tax without being requested to do so by Revenue. Payments of capital gains tax must be made by 1 November in the tax year after the tax year in which the chargeable gain arises. The payment made on this date is known as preliminary tax and must be at least 90 per cent of the full capital gains tax liability. Any balance of capital tax outstanding must be paid by 31 January in the tax year after the preliminary tax date at the latest and the capital gains tax return must also be submitted by that date.

Finally, as with all returns submitted under the self-assessment system, capital gains tax returns are subject to audit by Revenue for verification purposes. Taxpayers who submit incorrect or late returns, or who make underpayments, in relation to capital gains tax are liable to a number of penalties depending on the severity of the default. These penalties can include the imposition of interest, surcharges and monetary fines, including fines imposed by the courts.