CGT on sale of holiday home

[LondonIrish]

Hi all,

My parents are selling a holiday home (in Ireland) that they had built on land they aquired in the early 1970s. They have been very poor record keepers so they have no receipts for the purchase price of the land or the costs of the build. Through the solicitor we know that the registration date for the property was June 1975. So, to calculate the CGT payable on the sale how to we estimate the cost base? The solicitor suggested getting a QS to estimate the 1975 build cost and use that as a cost base for subsequently calculating the level of indexation relief. Would this be acceptable to the Irish Revenue authorities? If not is there an acceptable approach to calculating the cost base?

Thanks in advance.

 

[T McGibney]

Hi all,

My parents are selling a holiday home (in Ireland) that they had built on land they aquired in the early 1970s. They have been very poor record keepers so they have no receipts for the purchase price of the land or the costs of the build. Through the solicitor we know that the registration date for the property was June 1975. So, to calculate the CGT payable on the sale how to we estimate the cost base? The solicitor suggested getting a QS to estimate the 1975 build cost and use that as a cost base for subsequently calculating the level of indexation relief. Would this be acceptable to the Irish Revenue authorities? If not is there an acceptable approach to calculating the cost base?

Thanks in advance.

Are your parents resident in Ireland?

If the property was registered in June 1975, it was quite likely built a good while before then. If it was completed before 5 April 1974, the date on which CGT came into being in Ireland, the appropriate reference point is not the build cost but the market value of the property on that date.

Your parents should seek advice from an accountant or tax consultant on this, rather than from their solicitor. I suspect a retrospective valuation from an estate agent may be more helpful than one from a QS.

 

[LondonIrish]

Thank you for your response. Yes they are tax resident in Ireland. I think the solicitor was not offering them tax advice per se, but was suggesting that CGT was not payable on the full sale price. I'll have a word with a friend who is an IFA to see if they can recommend a tax advisor.

 

[T McGibney]

Thank you for your response. Yes they are tax resident in Ireland. I think the solicitor was not offering them tax advice per se, but was suggesting that CGT was not payable on the full sale price. I'll have a word with a friend who is an IFA to see if they can recommend a tax advisor.

Thanks, CGT is most definitely not payable on the full price, and your parents are fully entitled to claim the indexed base cost of the property including site value at 5/4/74 as a deduction against their taxable gain, but the fact that it involves values from almost 50 years ago is a complicating factor.

Feel free to PM me on this if you wish.