I am advised by the Revenue Commissioners that the receipt of a lump sum by a club member in the circumstances outlined is chargeable to tax in the hands of the recipient. If the social club is an incorporated body which is liquidated, the distribution to members from the proceeds of the sale of club assets is a capital distribution chargeable to capital gains tax, CGT, in the members' hands. If, however, the proceeds of sale are distributed prior to liquidation, or if the company is not liquidated, the members are chargeable to income tax on the distributions received. If the social club is an unincorporated body, the members are liable for the CGT arising on the disposal of club assets. In practice, the chargeable gain is computed on the sale of the property and the lump sum payment received by each member represents their share of that chargeable gain.
Where CGT applies, each member is charged on his/her net chargeable gains for the relevant year. These are the aggregate of all gains, including the gain on the sale of the social club, less capital losses. The resultant gain is reduced by the personal exemption of €1,270, €2,540 in the case of a married couple where both had chargeable gains. The balance is taxable at 20%. Indexation relief will apply in respect of the annual contributions paid in the period 6 April 1974 to 31 December 2002.
Where income tax applies, each member is charged to tax on the aggregate of the distribution received and the dividend withholding tax of 20%. However, the dividend withholding tax may be set off against the income tax payable for the relevant tax year.
As will be seen from the foregoing, the issues are somewhat complicated. If the person or persons concerned require further advice on this matter, it is advised that they contact the Revenue Commissioners who will be pleased to assist.