Key Post Capital Gains Tax on sale of shares

Discussion in 'Tax' started by Brendan Burgess, 19 Sep 2009.

  1. Brendan Burgess

    Brendan Burgess Founder

    Revenue Guides

    Revenue Forms

    from 8 April 2009 to 6 December 2011 - 25%
    from 7 December 2011 to 5 December 2012 - 30%
    from 6 December 2012 - 33%

    A return should be made by the 31 October in the year following the disposal.

    CGT Payment dates
    Disposals between 1 January and 30 Novermber : pay by 15 December
    Disposals in December : pay by 31 January of following year

    Use the payment forms to make the payment

    You still must make a return by 31 October of the following year – use CG1 for this.

    Personal exemption
    Individuals have a personal exemption of €1,270 each year

    Calculating the chargeable gain
    The sales proceeds includes the net proceeds after paying broker fees.
    The cost is the total cost including stamp duty and brokers’ fees

    You can set losses off against your gains before calculating the taxable gain

    Profit on sale of shares in CRH: €4,270
    Loss on sale of shares in AIB: €1,000
    Chargeable Gain: €3,270
    Less personal exemption: €1,270
    Net Chargeable Gain: €2,000
    CGT @25%: €500

    Losses forward
    If you make a loss on the disposal of assets, you can carry these forward and set them against future gains.

    You must use the losses first before using your annual exemption.

    Unrealised losses
    You cannot use unrealised losses.
    If you have chargeable gains, you should consider selling other assets at a loss to avoid paying CGT.

    If you have shares of nil value, you need to claim the losses in the year you intend to use them
    You cannot create artificial losses through bed and breakfast arrangements
    You used to be able to sell shares to create a loss and then buy them back immediately at the same price. This is no longer allowed.

    Check out the 4 week rule

    Part disposal of shares
    You follow the first in first out rule.

    Purchase 1,000 AIB shares at €10 in 2001
    Purchase 800 at €20 in 2006
    Sell 500 shares in 2009
    You will be deemed to have sold 500 shares which you bought in 2001.

    Indexation for shares bought before 2003
    Allowance used to be made for inflation by using indexation factors which you can find in CGT 2

    The indexation factor for shares sold in 2009 which were bought in 2001 was 1.087
    So the 1,000 shares in our example above have an allowable cost of €10,870

    Rights issues

    To be completed

    Bonus issues

    To be completed

    Married couples

    Married couples do not have double the exemption; they have €1,270 each.

    A person should consider transferring shares to their spouse to avail of the €1,270 annual exemption.

    Married couples who are jointly assessed may set off the losses of one spouse against the gain of the other.

    It is better for married couples to own shares in their separate names to avail of the personal exemption. (Is this correct?)

    Tax planning points

    You should consider selling sufficient shares each year to use up your €1270 annual exemption. However, the tax saved is only €317.50 so make sure that it is not eaten up in stamp duty and stockbrokers’ charges. However, if you were planning on selling shares anyway in the new year, you would be better off selling them before the end of December instead.

    If you have a CGT liability, can you sell any shares or other assets at a loss to wipe it out.

    Unit linked funds and some ETFs are not subject to CGT on the gains. Therefore the losses on these cannot be set off against gains on other assets.
    1dave123 likes this.
  2. pumps

    pumps Frequent Poster

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Brendan mentions that you must use up carried forward losses from a previous year before deducting this years exemption limit of 1,270. Is this correct? Or can I reduce this year's gain by 1,270 and then offset balance of larger loss from 2007?
  3. WaterSprite

    WaterSprite Frequent Poster

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    You must offset realised losses before you apply the exemption.
  4. Digger

    Digger Frequent Poster

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Does FIFO still apply if you buy and sell shares a few times within a 4 week period ?
    E.G Buy 500 week 1 , 600 week 2 and then sell 300 week 3 ?
  5. alexcoll

    alexcoll Registered User

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Hi Brendan
    Question about CGT allowance for marrieds. What is the position of shares held in joint names? Is it possible to claim the double allowance if they are sold at profit?
  6. jpd

    jpd Frequent Poster

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    For those accounts held jointly, I apportion the sales and the net gains/losses to myself and my wife equally and then we both claim the annual allowance. I believe that thios is the correct treatment, as far as I am aware.
  7. alexcoll

    alexcoll Registered User

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Thanks JPD
  8. John Conlon

    John Conlon Frequent Poster

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    This is a good summary of a complex area. I would like to make a few points

    Unrealised losses
    There is one area of possible use. If an asset has become of nil or negligible value you may seek approval from Revenue to realise the loss without having to sell the asset. A good example is Anglo-Irish bank shaers after nationalisation. The loss may then be used against gains in the year of assessment.

    Married couples Losses
    The reference to joint assessment is not quite accurate. The losses may be offset between married couples treated as such for the purposes of Capital Gains Tax. This means a married couple living together as such i.e. not separated.
    They do not have to also opt for joint assessment for Income Tax.

    Spouses holding shares in separate names
    If spouses jointly hold any asset including shares the proceeds will be split on disposal. Therefore, it is not necessary to hold them separately.

    Some additional items

    4-week rule. You refer to this in relation to the "bed and breakfast" arrangement. It works like this

    If you buy and sell the same class of shares within a 4 week period the FIFO rules do not apply. Instead the shares sold will be identified with the shares bought within the 4 week period.

    If you make a sell shares at a loss and re-acquire the same class of shares within 4 weeks, the loss can only be used against the re-acquired shares.

    Bonus issue
    A bonus issue occurs when a shareholder gets "free" bonus shares in proportion to their existing holding.

    A shareholder has 1,000 shares bought at €1 = €1,000. He/she bought these on 1/1/2000.
    There is a 1 for 5 bonus issue on 1/1/2002
    He gets 200 shares but pays no money.

    The new holding is 1,200 shares

    However, the cost is unchanged at €1,000

    If all the shares are sold the allowable cost is €1,000.

    The 1,200 shares are deemed to have been all bought on 1/1/2000 for indexation purposes.

    Rights Issue
    A rights issue occurs where, to raise cash, a company issues shares at a discounted price to existing shareholders. The main issue for CGT is the indexation if any to apply to the rights issue costs.

    Say in the above example there was a further rights issue of 1 share for 4 on 1/1/2009. The per share was €2. The market value was €2.50

    Holding after bonus issue 1,200 shares

    Buys rights issue 1:4 300 shares

    Cost of rights €800

    On eventual sale at say €3

    Shares sold 1,500

    Proceeds €4,500


    Deemed 1/1/2000
    €1,000 x 1.193 €1,193

    Rights 2009 € 800

    Total Cost €2,993

    Chargeable Gain €1,527
  9. Petal

    Petal Frequent Poster

    Last edited: 1 Feb 2010
    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Sorry, I am totally confused about this. I bought bank shares last year between March and June (3 times bank A and twice for Bank B both at different prices) and then sold shares in July (twice bank A and twice Bank B, again at different prices).

    When do I have to pay CGT? Was I supposed to have done this by Oct 09 or is this due Oct2010? And I'm also not entirely clear on how to calculate this. From what I read assume the following: I bought 1200 shares in March and 300 in June, then I sold 1000 on 14th July and 500 on 15th July, so I start with the 1200 and deduct from that the 1000 I sold first, and then another 200 of the 500 I sold subsequently and the remaining 300 then from the next 300 I bought, is this correct?

    Date Amount Price
    bought 24-Mar 1200 @ 516.80
    bought 08-Jun 300 @ 556.19
    sold 14-Jul 1000 @ 1408.00
    sold 15-Jul 500 @ 558.00

    Shares Total (incl Commission and SDRT)
    bought 1200 @ 516.80
    sold 1000 @ 1408.00
    sold 200 @ 223.2
    GAIN -1114.40

    bought 300 @ 556.19
    sold 300 @ 334.8
    LOSS 221.39

    This leaves me with a gain and a loss, so I deduct the loss from the gain to get the overall gain, then i do the exact same thing with Bank B and then add up the overall gains from the two banks and deduct the 1270 exemption and calculate 25% and that's what I have to pay?
    Last edited: 1 Feb 2010
  10. alexcoll

    alexcoll Registered User

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Your calculation of your capital gain works out correctly but I think this is a clearer calculation:

    bought 24-Mar 1200 @ 516.80
    bought 08-Jun 300 @ 556.19

    sold 14-Jul 1000 @ 1408.00 which were bought for 516.80/1200*1000=430.67
    Gain: 977.33

    sold 15-Jul 500 @ 558.00 of which 200 were bought for 516.80/1200*200=86.13 and 300 were bought for 556.19 Total purchase price =642.32
    Loss: 84.32
    Overall capital gain 977.33-84.32=839.41 (the same figure that you arrived at)

  11. alexcoll

    alexcoll Registered User

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Also see Brendan's post at top of this thread for payment dates, etc.
  12. Petal

    Petal Frequent Poster

    Re: Capital Gains Tax on sale of shares - reviewer wanted!

    Thanks for that, I'll do that the next time round!
    And yes, I did some more reading and realised I was supposed to have paid this by October 31st last year, so I am late and will have to pay interest. I've contacted the Collector General to find out how much extra I have to pay for missing the deadline... I think it's either 5 or 10% but I gave up reading in more detail....
  13. claire.ezo

    claire.ezo Guest

    the payment date for CGT tax has changed from 31st oct to For 2009 and subsequent years the tax year is divided into a revised set of two periods for CGT payment purposes, as follows:

    'initial period' - 1 January to 30 November, both inclusive.
    'later period' - 1 December - 31 December, both inclusive.
    The due dates for payment of CGT are now as follows:

    Disposals in the initial period: Tax due by 15 December in the same tax year.
    Disposals in the later period: Tax due by 31 January in the following tax year.
  14. TEDDY H

    TEDDY H Guest

    loss on share sales against previous years CTG

    i have a general question to ask.

    If I sold an investment property in 2008 and paid CTG OF €12,000
    i then sell shares in AIB in 2010 and make a loss of €12,000.
    Can I apply for a refund of CTG paid in 2008?
  15. WaterSprite

    WaterSprite Frequent Poster

    No - gains cannot be carried forward, only losses.
  16. Zenith63

    Zenith63 Frequent Poster

    Is there any rolling for CGT? For instance I buy €3000 worth of shares, a year later they're now worth €5000 so I sell off €2000 of them and buy €2000 shares of something else. Do I have to pay CGT on the €2000 in that year?
  17. jpd

    jpd Frequent Poster

    Yes, you have a CGT liability.

    You sold shares for € 2,000 ie 40% of your holding of € 5,000.

    These cost you 40% x € 3,000 = € 1,200.

    You made a gain of € 800 which is taxable - although you have an annual allowance of € 1,270 so if no tax is due, unless you have further gains in the year.
  18. Zenith63

    Zenith63 Frequent Poster

    Thanks for that jpd. I take it you don't need to declare anything if you've no tax due? ie. You don't need to say to them what you're offsetting against what?
  19. onlyonpaper

    onlyonpaper Registered User

    Can I ask a quick question on this please.

    If I sell a property in 2011 at a significant loss and sell shares at a gain also in 2011, can I offset the gains on the shares against some of the property loss.
  20. Zenith63

    Zenith63 Frequent Poster

    Assuming you sell the shares to realise the gain then yes you can. I'm not allowed post URLs, so Google the following for more info " Capital Gains Tax FAQs".