Dáil Éireann Debate, Wednesday - 11 December 2013
39. Deputy Sean Fleming asked the Minister for Finance if interest paid to persons in respect of the lump sum agreed with them by a State body following the acquisition of their land by compulsory purchase order for motorway purposes is subject to capital gains tax or income tax; and if he will make a statement on the matter. [53195/13]
View answerI am informed by the Revenue Commissioners that compensation paid by an authority exercising its compulsory purchase powers to acquire land is consideration in the hands of the disponer of the lands. Any chargeable gain arising on such a disposal is subject to capital gains tax, calculated in accordance with the Capital Gains Tax Acts. Where, in addition to compensation for the acquisition of the land, interest is paid to the landowner, that interest is income for tax purposes. The interest is paid subject to deduction of tax at source at the standard rate of 20% by the authority by virtue of section 246(2) Taxes Consolidation Act 1997. The interest is taxable in the hands of the landowner under Case IV of Schedule D (with a credit given for the tax deducted at source) in the year in which it is paid by the authority.
If the taxpayer were only liable to income tax at the standard rate on his total income in the year in which the interest is paid, the income tax deducted by the authority would be his or her full liability on that interest. However, if the taxpayer's level of total income were to exceed the standard rate threshold for that year additional tax at the marginal rate of tax would be payable. Universal Social charge would also be payable on the taxpayer's income – details of the rates of income tax and universal social charge are available in Leaflet IT1 on the Revenue Commissioners website, www.revenue.ie.
