CGT losses carried forward - is there any time limit?

[NoRegretsCoyote]

My wife owned a house with a former partner that she sold at a loss about ten years ago. It was mainly their PPR but was rented for a while too.

I haven't done the exact sums but total loss was around 50k, PPR for six years out of nine, split in two. It's not huge but not nothing either.

She has another unrealised capital gain that will crystallise eventually, but maybe not for 20 years. Can she use the loss above from the house to reduce the bill on any future capital gain? Or does it ever run out?


Other relevant details: she has never had to make a CGT return of any sort, and not much paperwork to prove the details above.

 

[Paul O Mahoney]

Would have thought her solicitor at that time would have done a calculation for this at that time, perhaps she might contact them to get the exact figure.

As they owned the house for 9 years 6 ppr that might restrict the loss to 34% but that's just my brain being my brain, there are far more experienced posters here that will give a more accurate view.

 

[Gordon Gekko]

Based on current rules, losses can be carried forward indefinitely.

Top of the head, the ‘CGTable element’ is 2/9 x 50% x €50k, i.e. a loss of €5,556.

That’s based on six years’ occupation plus the extra year of deemed occupation.

Personally, I’d start including the loss in my tax returns now as a loss brought forward/carried forward in anticipation of using it down the line.

It has a cash value of just over €1,800, which isn’t a king’s ransom, but which is better in her pocket than Revenue’s.

 

[RedOnion]

Also, if you're married and jointly assessed, she can transfer the losses to you.

Just one thing to note, losses get used before annual exemptions, so say if she was selling shares to realise 1,270 gains each year, that would reduce her losses carried forward rather than use the annual exemption.

 

[Gordon Gekko]

Also, if you're married and jointly assessed, she can transfer the losses to you.

Just one thing to note, losses get used before annual exemptions, so say if she was selling shares to realise 1,270 gains each year, that would reduce her losses carried forward rather than use the annual exemption.

Excellent points

 

[NoRegretsCoyote]

Thanks all!

That’s based on six years’ occupation plus the extra year of deemed occupation.

I wasn't aware of the "deemed occupation" part. I think it was PPR years 1-5, rental years 6-8, unoccupied year 9. Does that make a difference?

so say if she was selling shares to realise 1,270 gains each year, that would reduce her losses carried forward rather than use the annual exemption.

The capital gain is likely to be large and one off. So if the loss carried forward is €2,000 this is reduced by the annual exemption so in effect she could only use €630 (€2000-€1270)?

 

[Paul O Mahoney]

Based on current rules, losses can be carried forward indefinitely.

Top of the head, the ‘CGTable element’ is 2/9 x 50% x €50k, i.e. a loss of €5,556.

That’s based on six years’ occupation plus the extra year of deemed occupation.

Personally, I’d start including the loss in my tax returns now as a loss brought forward/carried forward in anticipation of using it down the line.

It has a cash value of just over €1,800, which isn’t a king’s ransom, but which is better in her pocket than Revenue’s.

Is deemed occupation like if you lived in a property for 6 months as your ppr its rounded up to 1 whole year?

 

[Gordon Gekko]

Is deemed occupation like if you lived in a property for 6 months as your ppr its rounded up to 1 whole year?

No, it’s just that the final 12 months of ownership are deemed to be owner occupied. Great if you make a gain, not so hot if you’re making a loss.

So if you owned it for 5 years and lived there for 3, you’re deemed to have lived there for 4.

 

[Gordon Gekko]

Thanks all!


I wasn't aware of the "deemed occupation" part. I think it was PPR years 1-5, rental years 6-8, unoccupied year 9. Does that make a difference?


The capital gain is likely to be large and one off. So if the loss carried forward is €2,000 this is reduced by the annual exemption so in effect she could only use €630 (€2000-€1270)?

The loss carried forward should be €5,556 or thereabouts.

No, it’d be 6/9 as a PPR (5 actual plus one deemed).

 

[NoRegretsCoyote]

No, it’s just that the final 12 months of ownership are deemed to be owner occupied.

So the final year unoccupied is "deemed" PPR. Makes sense.

 

[RedOnion]

Personally, I’d start including the loss in my tax returns now as a loss brought forward/carried forward in anticipation of using it down the line.

Question on the mechanics of this. I know some of the theory, but not the forms!

In this scenario, does she need to retrospectively complete a CGT form for the year of sale to 'record' the loss, or do you just do one for the current year and pop in the loss carried forward?

 

[Gordon Gekko]

So the final year unoccupied is "deemed" PPR. Makes sense.

Well really just the final year of ownership, even if a tenant was there until the last minute.

I guess the logic is to give everyone a reasonable amount of time to sell their home.

 

[Gordon Gekko]

Question on the mechanics of this. I know some of the theory, but not the forms!

In this scenario, does she need to retrospectively complete a CGT form for the year of sale to 'record' the loss, or do you just do one for the current year and pop in the loss carried forward?

Personally, I’d do the latter.

In theory, the disposal should have been recorded back in the day.

But given that the loss is expected to be carried forward for a long time, I’d stick it on the 2020 return and subsequent years.

But only if I was confident that my numbers could stand up to scrutiny in the unlikely event of a Revenue audit or query.

 

[NoRegretsCoyote]

But only if I was confident that my numbers could stand up to scrutiny in the unlikely event of a Revenue audit or query.

I agree query would be unlikely. But tenancy was not PRTB registered I think. Final sale price on PPR but documents proving purchase price (from 2003 or so) might be harder to dig out.

This is her call in any case but I just wanted to get the background right.

 

[Gordon Gekko]

If there was/is any hint of non-compliance in relation the overall scenario, she’d be mad to try to extract €1,800 of additional value from the exercise.

 

[Paul O Mahoney]

Piggybacking here, and I apologise in advance.
Is the annual allowance of €1270 for Capital Gains Tax only used when you make a gain ?
To me the answer would be yes as otherwise one would be increasing a loss and that doesn't make sense????, but I just want to absolutely sure in case I do the wrong thing.

 

[RedOnion]

Piggybacking here, and I apologise in advance.
Is the annual allowance of €1270 for Capital Gains Tax only used when you make a gain ?
To me the answer would be no, but I just want to absolutely sure in case I do the wrong thing.

I'm tempted to say yes, but I don't understand why you might even ask the question, so what's the context to make sure I've understood it?
Are you asking about when you have gains & losses in the same year?

 

[Paul O Mahoney]

I'm tempted to say yes, but I don't understand why you might even ask the question, so what's the context to make sure I've understood it?
Are you asking about when you have gains & losses in the same year?

If you had 1000 shares sold 500 at a loss would you be able to add the annual exemption to that loss?
Say €500 loss plus €1270 exemption would have you €1770 to carry foward for right off against any potential future gains.

To me it seems very generous and we all know the Revenue that generosity isn't what they are known for.

 

[RedOnion]

If you had 1000 shares sold 500 at a loss would you be able to add the annual exemption to that loss?
Say €500 loss plus €1270 exemption would have you €1770 to carry foward for right off against any potential future gains.

Ah, understood.

No.

 

[Paul O Mahoney]

Ah, understood.

No.

Thanks