Tuesday, 27 May 2014

Ceisteanna (30)

Denis Naughten


30. Deputy Denis Naughten asked the Minister for Finance his plans to review capital gains tax reliefs; and if he will make a statement on the matter. [22176/14]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I have no plans at this time to carry out a general review of existing capital gains tax reliefs. In recognition of the economic climate in recent years I and previous Ministers for Finance have sought to obtain an additional contribution from capital gains tax by increasing the rate as outlined in the following table.

Disposals Made



on or before 14 October 2008


from 15 October 2008 to 7 April 2009


from 8 April 2009 to 6 December 2011


from 7 December 2011 to 5 December 2012


from 6 December 2012 onwards


Capital gains tax is one of a suite of taxes that plays an important role in the overall taxation system in place in Ireland. In terms of equity, it is appropriate that those who make capital gains should make a contribution in tax terms so that the entire tax burden does not only significantly fall on those who pay income taxes. Capital gains tax also plays a role in mitigating opportunities for tax avoidance by discouraging the conversion of income into capital gains to reduce tax liability.

Reliefs play an important role in relation to most taxes and capital gains tax is no different in this regard. Targeted business related capital gains tax reliefs are provided principally to ensure that business, while paying its share of capital gains tax, is not unduly hampered in terms of developing and growing its business or in passing on businesses to the next generation of business people.  The following capital gains tax reliefs are all geared towards assisting business:

- Appropriation to and from stock in trade (section 596 Taxes Consolidation Act (TCA) 1997)

- Entrepreneur relief (section 597A TCA 1997) (subject to a commencement order due to requirement for EU State Aid approval)

- Retirement relief (sections 598/599 TCA 1997)

- Transfer of business to a company (section 600 TCA 1997)

- Replacement of Qualifying Premises (certain rented residential premises (section 600A, TCA 1997) [now only available in limited circumstances]

- Relief for farm restructuring (section 604B TCA 1997)

- Disposals to authority possessing compulsory powers (section 605 TCA 1997)

- Transfer of assets on company reconstructions or amalgamation (section 615 TCA 1997

- Reliefs in relation to inter-group company transactions (sections 617 et seq.).

 All reliefs are reviewed periodically and maintained, adjusted or abolished by reference to the circumstances that exist at the time relative to those that gave rise to their introduction.  Take Roll-over relief (Section 597), for example. Roll-over relief was introduced in 1975 when capital gains tax was first enacted. It allowed chargeable gains on disposals of business assets to be deferred provided the proceeds of disposal were reinvested in new business assets.  This relief was reviewed and was removed in Finance Act 2003 from 4 December 2002 onwards, except in the case of eligible taxpayers who had rolled-over assets prior to that date. The abolition of rollover relief in late 2002 must be seen in the context of the introduction at that time of the single 12.5% rate of corporation tax on trading profits.Another example of a business relief that was reviewed and amended is the capital gains tax farm retirement relief which was amended in Finance (No 2) Act 2013. This was extended to allow relief to a farmer who farmed for 10 years, has no children to whom to pass on the land, and who lets the farm for a period following retirement from active farming before ultimately disposing of the land. Prior to this such a farmer would not have been entitled to retirement relief.

Certain reliefs are introduced from time to time with a view to achieving a particular objective in particular circumstances.  Examples of such reliefs include:

- relief for certain disposals of land and buildings (section 604A TCA 1997 -introduced by section 64, Finance Act 2012). This short-term relief was introduced to provide a stimulus to the property market at a time when there was virtually no activity in it. The intention being that the impact would be both direct (on estate agents, surveyors, etc) and indirect (on construction related activities) as well as encouraging the sale of commercial premises and long term investment in productive assets, thereby assisting in the creation of longer term employment. This is a targeted relief which only applies to certain land and buildings acquired during the period 7 December 2011 to 31 December 2014. Any such property acquired must be held for 7 years in order to qualify for full relief. Any disposal within the 7 year period gets no relief.

- Relief for farm restructuring (section 604B TCA 1997 introduced by section 48, Finance Act 2013). This relief was identified as desirable to assist farmers to become more viable by enabling them to restructure their land holdings without incurring a capital gains tax.  This relief is a more focused form of relief than the more general roll-over relief that was in the main abolished from 4 December 2002.

- Entrepreneur relief (section 597A TCA 1997,introduced by section 45 Finance (No. 2) Act 2013). This is a CGT relief for individuals who reinvest the proceeds of previous asset disposals into new business ventures. The commencement of this relief is subject to EU State Aid approval.

Lastly, I announced in my Budget 2014 speech, in conjunction with the Minister for Agriculture, Food and the Marine, that I would commission a review of tax reliefs available to farming. This review will include CGT reliefs available to farming. Any recommendations of the review will be considered in the context of Budget 2015.