8 Year deemed disposal

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ryaner

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From reading the other threads, I think I've got the tax treatment understood but I'm hoping someone can confirm the following. Or if anyone knows of any revenue documents talking about this people point me in their direction.

Year1 - buy 10k
Year2 - buy 10k
Year8 - Value 25k

Deemed disposal is
acquisition cost of 20k, disposal of 25k

So 5k libel for tax? Or is the year2 amount not counted until year 9.

Secondly what happens in the follow situation
Year1 - buy 10k
Year8 - Value 8k
No tax liability

Year16 - Value 10k
Is the liability zero or 2k?
 
ryaner said:
From reading the other threads, I think I've got the tax treatment understood but I'm hoping someone can confirm the following. Or if anyone knows of any revenue documents talking about this people point me in their direction.

Year1 - buy 10k
Year2 - buy 10k
Year8 - Value 25k

Deemed disposal is
acquisition cost of 20k, disposal of 25k

So 5k libel for tax? Or is the year2 amount not counted until year 9.
Click to expand...
It probably depends on whether the second €10k was a separate policy or a top -up to the existing one

ryaner said:
Secondly what happens in the follow situation
Year1 - buy 10k
Year8 - Value 8k
No tax liability

Year16 - Value 10k
Is the liability zero or 2k?
Click to expand...
Zero.

From memory the tax calculated on encashment is based on value less premiums with a credit given for tax paid at previous deemed disposal points.
 
Firstly - I have taken the position that the deemed disposal is separate for each purchase, so a deemed disposal of 12.5k in year 8 and another 12.5k(if value unchanged) in year 9

It isn't clear which purchase cost is applied - average cost or actual cost - I think you get to choose.

Second question - no liability
 
So in the first case, what happens when someone is making quarterly, or even monthly purchases? It'd get really messy to do deemed disposals every month after 8 years.
I'm going after iShare ETFs in case that makes any difference. So it'll be more units of the same eft purchased on each occasion.
 
Actually thanks jpd. One of your posts from 2007 actually answers this question indirectly. You pointed to a Revenue document, S27 which has the following, last line being the important one.

4.1 When must the investment undertaking deduct exit tax ?
In general, exit tax must be deducted on the occurrence of a chargeable event. Such chargeable events happen: -


  • on the making of a regular payment by a fund to a unit holder (e.g. an annual dividend) including where a payment is made on the death of a unit holder;
  • on the making of any other payment by a fund to a unit holder (e.g. on redemption of units);
  • on the transfer by a unit holder of his or her entitlement to units in a fund including where a payment is made on the death of a unit holder;
  • on the appropriation or cancellation of units by a fund to discharge tax payable on a gain arising from a transfer of units by a unit holder;
  • on the ending of an 8-year period beginning with the acquisition of a unit in a fund, and each subsequent 8-year period beginning when the previous one ends.
Click to expand...
 
Personal Tax on foot of a EFT disposal

Have read the document part 27 and understand the 8 year deemed disposal rule and the following bit
Calculation of gain subsequent to a gain arising on the ending of a relevant period.
Where a chargeable event (including a chargeable event consisting of the ending of an 8-year period) occurs after a chargeable event on an 8-year deemed disposal, a previous “8-year event” is disregarded in calculating the gain.

I have an elderly neighbour who paid tax at the rate of 30% in July 2011 on the first 8 year deemed disposal. I believe he invested first in 2003

He disposed of the lot in January 2014 and tax at 41% was deducted from the entire gain from 2003 as per the clause above.

He is over 70.
Is he entitled to any tax refund on the tax paid in 2011, as it seems a bit draconian to him to be paying a tax of 71% on the first 8 year gain.
Is he liable for USC or similar on the gain from 2003.
Much obliged for any help here.
 
Yes, although the deemed disposal is ignored for the calculation of the exit tax due, he should have got credit for the tax paid on the deemed disposal.

I believe that the gains are exempt from the USC
 
jpd said:
Yes, although the deemed disposal is ignored for the calculation of the exit tax due, he should have got credit for the tax paid on the deemed disposal.

I believe that the gains are exempt from the USC
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jpd, much obliged.
when u said ...should have...re the deem disposal, do you mean when he made his tax return for 2011 or when he makes his 2014 tax return.
Thanks
 
As far as I know, when the investment was disposed of in 2014, the insurance company, or whoever provided/managed the investment, should have deducted the tax paid on the deemed disposal in 2011 from the exit tax due and only deducted the difference from the investment value before paying it over.

If they didn't, then I think he will have to reclaim it from the revenue - I'd check with the provider. It I their responsibility to deduct the correct tax.
 
ETFs are listed funds and dealt in via a stockbroker, not a life company. Stockbrokers are not obliged to deduct gains tax so it is self-assessment, in which case there could not have been double tax.

Some of the Irish insurance companies buy ETFs and then wrap them into a life policy (extra costs, of course) and the life company does have to deduct gains taxes. But it is a unit-linked fund you are invested in, and not an ETF.

Of course, the vast majority of ETFs are not, in practice, gross roll-up funds, and it is a joke they way our Revenue treats them from a tax perspective. No other country taxes them like that.
 
Rory Gillen said:
Of course, the vast majority of ETFs are not, in practice, gross roll-up funds, and it is a joke they way our Revenue treats them from a tax perspective. No other country taxes them like that.
Click to expand...

Agreed. In consequence, I have now reverted to direct investment in shares where practical but this is not very convenient at all.
 
Well there is still investment trusts as a fund type. Most likely taxed same as shares but I haven't been able to get a definitive view on that from experts.
 
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