PART II

Taxation of Capital Gains

3. —(1) Tax shall be charged in accordance with this Act in respect of capital gains, that is, in respect of chargeable gains computed in accordance with this Act and accruing to a person on the disposal of assets.

(2) The tax, to be known as capital gains tax, shall be assessed and charged for the year 1974-75 and for subsequent years of assessment in respect of chargeable gains accruing in those years, and shall be so charged in accordance with the following provisions of this Act.

(3) Subject to section 6, the rate of capital gains tax shall be 26 per cent.

4. —(1) Subject to any exceptions in this Act, a person shall be chargeable to capital gains tax in respect of chargeable gains accruing to him in a year of assessment for which he is resident or ordinarily resident in the State.

(2) Subject to any such exceptions, a person who is neither resident nor ordinarily resident in the State shall be chargeable to capital gains tax for a year of assessment in respect of chargeable gains accruing to him in that year on the disposal of—

(a) land in the State;

(b) minerals in the State or any rights, interests or other assets in relation to mining or minerals or the searching for minerals;

(c) assets situated in the State which, at or before the time when the chargeable gains accrued, were used in or for the purposes of a trade carried on by him in the State through a branch or agency, or which at or before that time were used or held or acquired for use by or for the purposes of the branch or agency:

Provided that this subsection shall not apply to a person who, by virtue of the provisions of the agreements contained in Schedule 6 to the Income Tax Act, 1967 is exempt from income tax chargeable for the year of assessment.

(3) Subsection (1) shall not apply in respect of gains accruing from the disposal of assets situated outside the State and the United Kingdom (being chargeable gains accruing on or after the 6th day of April, 1974) to an individual who satisfies the Revenue Commissioners that he is not domiciled in the State, but—

(a) the tax shall be charged on the amounts received in the State in respect of those chargeable gains,

(b) any such amounts shall be treated for the purposes of this Act as gains accruing when they are received in the State, and

(c) any losses accruing to the individual on the disposal of assets situated outside the State and the United Kingdom shall not be allowable losses for the purposes of this Act.

(4) For the purposes of subsection (3), there shall be treated as received in the State in respect of any gain all amounts paid, used or enjoyed in or in any manner or form transmitted or brought to the State and section 4 of the Finance Act, 1971 (under which income applied outside the State in payment of debts is, in certain cases, treated as received in the State) shall apply as it would apply for purposes of the said section 4 if the gain were income arising from possessions out of the State.

(5) Where two or more persons carry on a trade or business or profession in partnership—

(a) tax in respect of chargeable gains accruing to them on the disposal of any partnership assets shall be assessed and charged on them separately, and

(b) any partnership dealings in assets shall be treated as dealings by the partners and not by the firm as such.

(6) Any gains accruing on the disposal of exploration or exploitation rights in a designated area shall be treated for the purposes of this Act as gains accruing on the disposal of assets situated in the State.

(7) Any gains accruing to a person who is neither resident nor ordinarily resident in the State on the disposal of such assets as are mentioned in subsection (2) (b) and subsection (6) shall be treated for the purposes of capital gains tax as gains accruing on the disposal of assets used for the purposes of a trade carried on by that person in the State through a branch or agency.

(8) In this section—

(a) references to the disposal of such assets as are mentioned in paragraphs (a) and (b) of subsection (2) and subsection (6) include references to the disposal of shares deriving their value or the greater part of their value directly or indirectly from those assets, other than shares quoted on a stock exchange;

(b) “designated area” has the meaning assigned to it by section 1 of the Continental Shelf Act, 1968 ;

(c) “exploration or exploitation rights” has the meaning assigned to it by section 33 of the Finance Act, 1973 ;

(d) “shares” includes stock and any security; and

(e) “security” includes securities not creating or evidencing a charge on assets, and interest paid by a company on money advanced without the issue of a security for the advance, or other consideration given by a company for the use of money so advanced, shall be treated as if paid or given in respect of a security issued for the advance by the company.

5. —(1) Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment, after deducting any allowable losses accruing to that person in that year of assessment, and, so far as they have not been allowed as a deduction from chargeable gains accruing in any previous year of assessment, any allowable losses accruing to that person in any previous year of assessment (not earlier than the year 1974-75).

(2) Capital gains tax assessed on any person in respect of gains accruing in any year shall be payable by that person at or before the expiration of the three months following that year, or at the expiration of a period of two months beginning with the date of making the assessment, whichever is the later.

6. —(1) Subject to the provisions of this section, an individual shall, in respect of any year of assessment for which he was resident or ordinarily resident in the State be entitled to an adjustment of his capital gains tax for that year of assessment.

(2) The adjustment shall be such as to secure that the amount of capital gains tax to which he is chargeable for that year of assessment shall not exceed the further amount of income tax to which he would be chargeable if, in addition to any other liability to income tax, he was chargeable to income tax for that year under Case IV of Schedule D—

(a) where the amount on which he would, but for this subsection, have been chargeable to capital gains tax for that year under section 5 does not exceed £5,000, on a sum equal to one-half of that amount, and

(b) where that amount exceeds £5,000, on a sum equal to £2,500 plus the excess of that amount over £5,000.

(3) That amount of income tax shall be arrived at on the assumption that the income to which the individual would be so chargeable to income tax—

(a) is not available for set off under any of the provisions of the Income Tax Acts against any loss, or against any payments which may be made out of profits or gains brought into charge for tax, and is not available for the purpose of any other relief under the Income Tax Acts other than the personal reliefs, and for this purpose it shall be assumed that all such provisions of the Income Tax Acts are applied without regard to the income so chargeable under Case IV of Schedule D, and

(b) is to be treated as the highest part of the individual's income for the year, notwithstanding any provision of the Income Tax Acts directing other income to be treated as the highest part of the individual's total income.

In this subsection “personal reliefs” has the same meaning as in section 193 of the Income Tax Act, 1967 .

(4) The provisions of this section shall not affect the provisions of section 5 as to the circumstances in which an allowable loss accruing in one year may be deducted from chargeable gains accruing in any other year.

(5) If capital gains tax is chargeable under section 5 in respect of chargeable gains accruing to a married woman who in the year of assessment is a married woman living with her husband, then, whether or not the husband is chargeable to capital gains tax for that year of assessment under the said section 5, and whether or not the married woman is separately assessed to income tax—

(a) in determining the adjustment, if any, to be made under subsection (2), account shall be taken of income tax chargeable on the husband as well as of income tax chargeable on the woman,

(b) the reference to the individual's income in subsection (3) (b) shall be a reference to the husband's income including income of his wife which under the Income Tax Acts is deemed to be his income,

(c) if both the married woman and her husband are chargeable to capital gains tax for that year of assessment, the adjustment under subsection (2) shall be by reference to the sum of the capital gains tax so chargeable on them under section 5, and the further amount to which the husband would be chargeable to income tax if, in addition to any other liability to income tax, he was chargeable to income tax for that year of assessment under Case IV of Schedule D shall be computed—

(i) where the aggregate amount to which he and his wife would, but for subsection (2), have been chargeable to capital gains tax for that year under section 5 does not exceed £5,000, on a sum equal to one-half of that amount, and

(ii) where that aggregate amount exceeds £5,000, on a sum equal to £2,500 plus the excess of that aggregate amount over £5,000, and

(d) account shall be taken of the provisions of section 13 (3) and, where applicable, the proviso to that subsection and any reduction in capital gains tax effected by paragraph (c) shall be apportioned to the husband and wife in proportion to the respective amounts on which they would, under the said section 5, be chargeable to capital gains tax for the year of assessment.

(6) Any chargeable gain which accrued to an individual in a year of assessment on the disposal of an asset which the individual acquired (otherwise than as legatee) not more than two years before the disposal from a person who, in the terms of section 33, was a person connected with the individual shall be left out of account for the purposes of this section, and—

(a) capital gains tax shall be charged on the amount of that chargeable gain in accordance with the foregoing provisions of this Act,

(b) no loss shall be deductible under section 5 (1) or 13 (3) from that amount if relief is given under this section in respect of any other chargeable gain which accrued to the individual or, in accordance with subsection (4), to the husband or wife of the individual, in the said year of assessment.

7. —(1) All forms of property shall be assets for the purposes of this Act whether situated in the State or not, including—

(a) options, debts and incorporeal property generally,

(b) any currency, other than Irish currency and sterling, and

(c) any form of property created by the person disposing of it, or otherwise becoming owned without being acquired.

(2) If under this Act an asset is not a chargeable asset, then, no chargeable gain or allowable loss shall accrue on its disposal.

8. —(1) For the purposes of this Act—

(a) references to a disposal of an asset include, except where the context otherwise requires, references to a part disposal of an asset, and

(b) there is a part disposal of an asset where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal, and generally, there is a part disposal of an asset where, on a person making a disposal, any description of property derived from the asset remains undisposed of.

(2) (a) Subject to subsection (4) and to the exceptions in this Act, there is for the purposes of this Act, a disposal of assets by their owner where any capital sum is derived from assets notwithstanding that no asset is acquired by the person paying the capital sum, and this paragraph applies in particular to—

(i) capital sums received by way of compensation for any kind of damage or injury to assets or for the loss, destruction or dissipation of assets or for any depreciation or risk of depreciation of an asset,

(ii) capital sums received under a policy of insurance of the risk of any kind of damage or injury to, or the loss or depreciation of, assets,

(iii) capital sums received in return for forfeiture or surrender of rights, or for refraining from exercising rights, and

(iv) capital sums received as consideration for use or exploitation of assets.

(b) Without prejudice to paragraph (a) (ii) and notwithstanding the other provisions of this section, neither the rights of the insurer nor the rights of the insured under any policy of insurance, whether the risks insured relate to property or not, shall constitute an asset on the disposal of which a gain may accrue and in this paragraph “policy of insurance” does not include a policy of assurance on human life:

Provided that paragraph (b) shall not have effect where the right to any capital sum falling within paragraph (a) (ii) is assigned after the event giving rise to the damage or injury to, or the loss or depreciation of, an asset has occurred and, for the purposes of this Act, such an assignment shall be deemed to be a disposal of an interest in the asset concerned.

(3) In relation to assets held by a person as nominee for another person, or as trustee for another person absolutely entitled as against the trustee, or for any person who would be so entitled but for being an infant or other person under disability (or for two or more persons who are or would be jointly so entitled), this Act shall apply as if the property were vested in, and the acts of the nominee or trustee in relation to the assets were the acts of, the person or persons for whom he is the nominee or trustee (acquisitions from or disposals to him by that person or persons being disregarded accordingly).

(4) The conveyance or transfer by way of security of an asset or of an interest or right in or over it, or transfer of a subsisting interest or right by way of security in or over an asset (including a retransfer on redemption of the security), shall not be treated for the purposes of this Act as involving any acquisition or disposal of the asset.

(5) Where a person entitled to an asset by way of security or to the benefit of a charge or incumbrance on an asset deals with the asset for the purpose of enforcing or giving effect to the security, charge or incumbrance, his dealings with it shall be treated for the purposes of this Act as if they were done through him as nominee by the person entitled to it subject to the security, charge or incumbrance; and this subsection shall apply to the dealings of any person appointed to enforce or give effect to the security, charge or incumbrance as receiver and manager or judicial factor as it applies to the dealings of the person entitled as aforesaid.

(6) An asset shall be treated as having been acquired free of any interest or right by way of security subsisting at the time of any acquisition of it, and as being disposed of free or any such interest or right subsisting at the time of the disposal; and where an asset is acquired subject to any such interest or right the full amount of the liability thereby assumed by the person acquiring the asset shall form part of the consideration for the acquisition and disposal in addition to any other consideration.

(7) In this section “capital sum” means any money or money's worth which is not excluded from the consideration taken into account in the computation under Part I of Schedule 1 .

9. —(1) Subject to the provisions of this Act, a person's acquisition of an asset shall, for the purposes of this Act, be deemed to be for a consideration equal to the market value of the asset—

(a) where he acquires the asset otherwise than by way of a bargain made at arm's length (including in particular where he acquires it by way of gift),

(b) where he acquires the asset by way of distribution from a company in respect of shares in the company, or

(c) where he acquires the asset wholly or partly for a consideration that cannot be valued, or in connection with his own or another's loss of office or employment or diminution of emoluments, or otherwise in consideration for or recognition of his or another's services or past services in any office or employment or of any other service rendered or to be rendered by him or another.

(2) Subject to the provisions of this Act, a person's disposal of an asset shall, for the purposes of this Act, be deemed to be for a consideration equal to the market value of the asset—

(a) where he disposes of the asset otherwise than by way of a bargain made at arm's length (including in particular where he disposes of it by way of gift), or

(b) where he disposes of the asset wholly or partly for a consideration that cannot be valued:

Provided that this subsection shall not apply to a disposal by way of gift made prior to the 20th day of December, 1974, and any loss incurred on a disposal by way of gift made prior to the 20th day of December, 1974, shall not be an allowable loss.

10. —(1) (a) Subject to subsection (3) and paragraph (b), where an asset is disposed of and acquired under a contract, the time at which the disposal and acquisition is made is the time the contract is made, (and not, if different, the time at which the asset is conveyed or transferred);

(b) if the contract is conditional (and, in particular, if it is conditional on the exercise of an option), the time at which the disposal and acquisition is made is the time when the condition is satisfied;

(c) where an interest in land is acquired, otherwise than under a contract, by an authority possessing compulsory purchase powers, the time at which the disposal and acquisition is made is the time at which the compensation for the acquisition is agreed or otherwise determined (variations on appeal being disregarded for this purpose) or, if earlier, the time when the authority enter on the land in pursuance of their powers.

(2) A hire purchase or other transaction under which the use and enjoyment of an asset is obtained by a person for a period at the end of which the property in the asset will or may pass to that person shall be treated for the purposes of this Act, both in relation to that person and in relation to the person from whom he obtains the use and enjoyment of the asset, as if it amounted to an entire disposal of the asset to that person at the beginning of the period for which he obtains the use and enjoyment of the asset, but subject to such adjustments of tax, whether by way of repayment or discharge of tax or otherwise, as may be required where the period for which the person has the use and enjoyment of the asset terminates without the property in the asset passing to him.

(3) For the purposes of subparagraphs (i) to (iv) of section 8 (2) (a), the time of the disposal shall be the time when any capital sum is received.

11. —(1) The amount of the gains accruing on the disposal of assets shall be computed in accordance with Part I of Schedule 1 , and subject to the further provisions in Part II of Schedule 1 and in Schedules 2 and 3.

(2) Every gain accruing on or after the 6th day of April, 1974, shall, except so far as otherwise expressly provided by this Act, be a chargeable gain, but subject to the provisions of Part II of Schedule 1 (which restrict the amount of chargeable gains accruing on the disposal of assets owned on the 6th day of April, 1974).

12. —(1) Except as otherwise expressly provided, the amount of a loss accruing on a disposal of an asset shall be computed in the same way as the amount of a gain accruing on a disposal is computed.

(2) Except as otherwise expressly provided, all the provisions of this Act which distinguish gains which are chargeable gains from those which are not, or which make part of a gain a chargeable gain, and part not, shall apply also to distinguish losses which are allowable losses from those which are not, and to make part of a loss an allowable loss, and part not; and references in this Act to an allowable loss shall be construed accordingly.

(3) Subject to the provisions of this Act and, in particular, to section 47 (options), the occasion of the entire loss, destruction, dissipation or extinction of an asset shall, for the purposes of this Act, constitute a disposal of the asset whether or not any capital sum by way of compensation or otherwise is received in respect of the destruction, dissipation or extinction of the asset.

(4) If, on a claim by the owner of an asset, the inspector is satisfied that the value of an asset has become negligible, he may allow the claim and thereupon this Act shall have effect as if the claimant had sold, and immediately re-acquired, the asset for a consideration of an amount equal to the value specified in the claim.

(5) For the purposes of subsections (3) and (4), a building and any permanent or semi-permanent structure in the nature of a building, may be regarded as an asset separate from the land on which it is situated, but where either of those subsections applies in accordance with this subsection, the person deemed to make the disposal of the building shall be treated as if he had also sold, and immediately re-acquired, the site of the building or structure (including in the site any land occupied for purposes ancillary to the use of the building or structure) for a consideration equal to its market value at that time.

(6) A loss accruing to a person in a year of assessment for which he is neither resident nor ordinarily resident in the State shall not be an allowable loss for the purposes of this Act unless, under section 4 (2) (charge on non-resident persons), he would be chargeable to capital gains tax in respect of a chargeable gain if there had been a gain instead of a loss on that occasion.

(7) Except as provided by section 14 (loss sustained in year of death) an allowable loss accruing in a year of assessment shall not be allowable as a deduction from chargeable gains accruing in any earlier year of assessment, and relief shall not be given under this Act more than once in respect of any loss or part of a loss, and shall not be given under this Act if and so far as relief has been or may be given in respect of it under the Income Tax Acts.

13. —(1) Subject to the provisions of this section, the amount of capital gains tax on chargeable gains accruing to a married woman in a year of assessment, or part of a year of assessment, during which she is a married woman living with her husband shall be assessed and charged on the husband and not otherwise, but this subsection shall not affect the amount of capital gains tax chargeable on the husband apart from this subsection nor result in the additional amount of capital gains tax charged on the husband by virtue of this subsection being different from the amount which would otherwise have remained chargeable on the married woman.

(2) Subsection (1) shall not apply in relation to a husband and wife in any year of assessment if, before the 6th day of July in the year next following that year of assessment, an application is made by either the husband or wife that subsection (1) shall not apply, and such an application duly made shall have effect not only as respects the year of assessment for which it is made but also for any subsequent year of assessment:

Provided that if the applicant gives, for any subsequent year of assessment, a notice withdrawing that application, the application shall not have effect with respect to the year for which the notice is given or any subsequent year but such notice of withdrawal shall not be valid unless it is given before the 6th day of July in the year next following the year of assessment for which the notice is given.

(3) In the case of a woman who, during a year of assessment or part of a year of assessment, is a married woman living with her husband any allowable loss which, under section 5 (1), would be deductible from the chargeable gains accruing in that year of assessment to the one spouse but for an insufficiency of chargeable gains shall, for the purposes of that subsection, be deductible from chargeable gains accruing in that year of assessment to the other:

Provided that this subsection shall not apply in relation to losses accruing in a year of assessment to either if an application that this subsection shall not apply is made by the husband or the wife before the 6th day of July in the year next following that year of assessment.

(4) In applying the provisions of section 16 (gains of £500 and under), and in particular in ascertaining the amount of an individual's chargeable gains for a year of assessment for the purposes of those provisions, it shall be assumed that subsection (1) applies for all years of assessment but where, by virtue of subsection (2), any amount is chargeable and assessable on a married woman, the exemption afforded by the said section 16 shall be apportioned between the husband and the wife according to the respective amounts of their chargeable gains for the year of assessment.

(5) Where in any year of assessment in which, or in part of which, the married woman is a married woman living with her husband, the husband disposes of an asset to the wife, or the wife disposes of an asset to the husband, both shall be treated as if the asset was acquired from the one making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal:

Provided that this subsection shall not apply if, until the disposal, the asset formed part of trading stock of a trade carried on by the one making the disposal, or if the asset is acquired as trading stock for the purposes of a trade carried on by the one acquiring the asset.

(6) Subsection (5) shall have effect notwithstanding the provisions of paragraph 15 of Schedule 1 or of any other provisions of this Act fixing the amount of the consideration deemed to be given on a disposal or acquisition.

(7) Where subsection (5) is applied in relation to a disposal of an asset by a husband to his wife, or by his wife to him, then in relation to a subsequent disposal of the asset (not within the said subsection) the one making the disposal shall be treated for the purposes of this Act as if the other's acquisition or provision of the asset had been his or her acquisition or provision of it.

(8) An application or notice of withdrawal under this section shall be in such form and made in such manner as may be prescribed.