The annual exemption from capital gains tax, CGT, is €1,270. If an individual's chargeable gains in a year are no greater than this amount, there is no CGT liability in respect of those gains. If the chargeable gains are greater than this amount, €1,270 continues to be deducted from the gains before calculating the liability. A CGT rate of 20% applies, which was halved from 40% in Budget 1998.
Section 31 of the Taxes Consolidation Act 1997 provides that the total amount of chargeable gains arising in that year of assessment is arrived at after deducting: (a) any allowable losses accruing to that person in that year of assessment; and (b) in so far as they have not been allowed as a deduction from chargeable gains in any previous year of assessment, any allowable losses accruing to that person in any previous year of assessment.
This approach ensures that taxpayers in the same net situation — individuals with net gains after deducting any losses compared with individuals with gains of a similar amount without any losses — are treated equally. The annual exemption is then allowed after the net gains have been established.
This is similar to what is applied in income tax relating to the carry forward of the unused losses from earlier years. Under the normal set-off rules for income tax, any unused trading losses from a previous year would come forward against future profits from the same trade before establishing the individual's level of income for income tax exemption or marginal relief purposes in that year and before the granting of any personal allowances, reliefs or tax credits. Likewise, where rental income is involved, the normal tax rules apply which provide that any unused rental losses would be brought forward and be offset against the rental income in the subsequent year of assessment before any personal allowances, reliefs and tax credits are granted.
In view of the considerations outlined such that the current system treats taxpayers equally and is consistent with the approach adopted regarding other taxes, such as income tax, I have no plans to change the capital gains tax code as suggested by the Deputy.
