Dáil Éireann díospóireacht -
Wednesday, 8 Jul 1992

Vol. 422 No. 4

Written Answers. - Property Speculation.

Andrew Boylan

Ceist:

29 Mr. Boylan asked the Minister for Finance if his attention has been drawn to the loophole in the tax system regarding the purchase and re-sale of properties after very short periods of ownership, especially houses that have fallen into disrepair being bought and refurbished and then sold at enormous profits under the guise of principal residences thereby avoiding any tax liability; if he intends to legislate to prevent this type of speculation which is increasing the price of such old houses for the young people who buy their homes for the resultant inflated prices; and if he will make a statement on the matter.

Minister for Finance (Mr. B. Ahern):

The Deputy's concerns relate to the provisions in the Capital Gains Tax Act which exempt the sale of a principal private residence from capital gains tax. There are safeguards in the capital gains tax legislation to deal with the type of situation mentioned by the Deputy. The Revenue Commissioners tell me that these safeguards are working satisfactorily and there is no cause for concern.

The exemption from capital gains tax is granted only under certain conditions. To qualify the vendor must have used the property as his principal private residence. An exemption will not be granted in the case of a house purchased wholly or mainly for the purpose of making a gain on its disposal. Where a residence is sold for development purposes the additional consideration arising because of the value of the property for development purposes will not be exempt from capital gains tax.

There are further provisions which enable the Revenue Commissioners to challenge persons turning over property on a regular basis. Vendors of such properties may be regarded as carrying on a trade and would therefore be liable to income tax on the gain on the disposal of the property concerned.