Dáil Éireann Debate, Tuesday - 26 July 2022
370. Deputy Jim O'Callaghan asked the Minister for Finance if the roll over of tax relief under a compulsory purchase order which was removed in 2002 will be reinstated for those whose apartments are to be demolished as a result of the Metrolink and who consequently will be forced into the capital gains tax net; and if he will make a statement on the matter. [40586/22]
View answerThe acquisition of a property by way of compulsory purchase order (CPO) is the disposal of an asset for the purposes of Capital Gains Tax (CGT). Any chargeable gain arising on such a disposal may be subject to CGT at a rate of 33%. The first €1,270 of total chargeable gains in respect of an individual in any year of assessment is exempt from CGT.
“Roll-over relief” (under which the CGT payable on the proceeds of a gain was deferred if the proceeds were reinvested with the result that the tax liability is not realised until the assets are eventually sold) was abolished in Budget 2003 for disposals after 4 December 2002, including disposals as a result of a CPO. Prior to Budget 2003, CGT relief in respect of the disposal of property acquired under CPOs was available where the disposal took place because of a CPO and a replacement property was acquired.
An issue with the relief was that chargeable gains which were deferred under roll-over relief were often never ultimately taxed. Therefore re-introducing roll-over relief would be likely to affect the yield from CGT. Any proposal to introduce roll-over relief specifically for CPOs could be difficult to limit in scope and scale.
I would draw the Deputy’s attention to Section 604 of the Taxes Consolidation Act, 1997, which may be relevant to the property owners referenced in his question. Section 604 provides relief from CGT on the disposal of one’s principal private residence. If an apartment is occupied by an individual as his or her principal private residence for all or part of his or her period of ownership, then full or partial relief from CGT will be available where a chargeable gain arises on the disposal of that apartment, including by way of CPO. The last 12 months of ownership of the apartment by the individual is treated as a period of occupation for the purpose of this relief. An individual cannot have more than one principal private residence at any one time.
Where the apartment was not occupied by the individual as his or her only or main residence throughout the period of ownership, only a proportion of the gain on the disposal is exempt. This proportion is the same proportion that the length of the period of owner-occupation (inclusive of the last 12 months of ownership) bears to the length of the period of ownership. The balance of the gain is chargeable to CGT in the normal manner.
The relief does not apply where the apartment was acquired wholly or mainly for the purposes of realising a gain on its disposal (i.e. an investment property) nor does it apply to any part of the gain on the disposal which is attributable to enhancement expenditure incurred wholly or mainly for the purposes of realising a gain on the disposal of the apartment.
It should be noted that the specific facts and circumstances which exist at the time of the disposal of the apartment will determine the amount, if any, of CGT which may be due.
