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Tax Collection.

Dáil Éireann Debate, Thursday - 21 October 2004

Thursday, 21 October 2004

Questions (124, 125)

Pat Carey

Question:

118 Mr. Carey asked the Minister for Finance the reason capital gains tax is being deducted from all persons, including children and old age pensioners outside of the tax net, on their free shares from a company (details supplied); and if he will make a statement on the matter. [25865/04]

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Written answers

A charge to capital gains tax, CGT, arises in respect of chargeable gains accruing on the disposal of assets. Such gains are computed in accordance with the provisions of the Capital Gains Tax Acts. The charge extends to individuals, companies and unincorporated bodies of persons.

The CGT liability of an individual is computed irrespective of age by reference to the chargeable gain on the disposal which is essentially the excess of the sale proceeds, net of incidental costs of sale, over the allowable costs of acquisition, if any, of the shares being sold. The legislation also provides that the total amount of chargeable gains arising in a tax year is arrived at after deducting any allowable losses accruing to that individual in that year together with any unused allowable losses from disposals of assets chargeable to capital gains tax in any previous year. If there were no other chargeable gains in the year, this gain is then reduced by the annual personal exemption of €1,270. The net chargeable gain is then taxable at 20%. This is the standard method and was used in other disbursements of free shares in the last few years.

I have been advised by the Revenue Commissioners that they have written to First Active members who received payment from the Royal Bank of Scotland in respect of its acquisition of First Active. As with previous disposals of shares in this type of situation, this transaction gives rise to a potential CGT liability on the members in respect of the disposal of their First Active shares. Any CGT liability on disposal of these shares is due for payment on or before 31 October 2004. First Active shareholders have been notified by Revenue of their CGT obligations.

Tony Gregory

Question:

119 Mr. Gregory asked the Minister for Finance if capital gains tax is due from a person (details supplied) arising from an account opened as a child’s savings account. [25874/04]

View answer

A charge to capital gains tax, CGT, arises in respect of chargeable gains accruing on the disposal of assets. Such gains are computed in accordance with the provisions of the Capital Gains Tax Acts. The charge extends to individuals, companies and unincorporated bodies of persons. There is no provision in those Acts to exempt children. Accordingly, gains arising on children's shareholdings are liable to CGT in the same manner as gains arising to other individuals.

I have been advised by the Revenue Commissioners that they have written to First Active members who received payment from the Royal Bank of Scotland in respect of its acquisition of First Active. As with previous disposals of shares in this type of situation, this transaction gives rise to a potential capital gains tax, CGT, liability on the members in respect of the disposal of their First Active shares. Any CGT liability on disposal of these shares is due for payment on or before 31 October 2004. First Active shareholders have been notified by Revenue of their CGT obligations.

From the information supplied to the Revenue Commissioners, the person referred to by the Deputy received a payment of €3,069 from Royal Bank of Scotland and, provided she had no other gain or loss, her CGT liability is calculated as follows:

Cash Received

€3,069

Allowable Costs

Nil (as the shares were acquired at no cost they have a nil base)

Chargeable Gain

€3,069

Less Personal Exemption

(€1,270)

Net Chargeable Gain

€1,799 @ 20% = €359.80

The chargeable gain above can be reduced by any allowable losses arising in 2004 together with any unused allowable losses from disposals of assets chargeable to capital gains tax in any previous year.

I have also been informed by the Revenue Commissioners that the Revenue documentation sent to the person includes a computation sheet and a payslip. The payslip and payment should be sent to the Collector General's office. The documentation issued also includes a special Revenue help-line number for any further assistance required by the person referred to by the Deputy.

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