Phil Lynch
Q. I have a Capital Gains Tax query.
We are both in our 60’s and have a 4,000 sq ft industrial unit to sell this year.
It was built in 1982 and then let long term. We claimed the full 10 years capital allowance on it.
I would like to know how much capital gains tax we will have to pay.
A. Special provisions exist for dealing with expenditure qualifying for Capital Allowances on a disposal for Capital Gains Tax purposes.
Expenditure qualifying for capital allowances is allowable in full in computing a gain on the disposal of an asset. Similarly, receipts which are effectively taxed by way of a balancing charge are not excluded from the proceeds taken into accounting in computing the gain for CGT purposes. Capital allowances are, however, taken into account in computing an allowable loss.
In effect, capital allowances are not taken into account in arriving at a gain for CGT purposes. However, in deciding whether a loss is to be allowable, capital allowances obtained on expenditure incurred must be taken into account.
When you work out your figures, sale price less cost price, if a gain results, that gain is charged to CGT in the normal manner ignoring the effect of any capital allowances granted in respect of the asset.
If a loss results that loss is restricted – it must be computed by deducting the net allowances effectively granted in respect of the asset from the deductible expenditure (before taxation).
I am assuming that given the increase in the value of property over the last 24 years that you will not be looking at a loss on disposal of the property, therefore your computation should look something like the following, for which I have assumed figures:
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€
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Sales Proceeds
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500,000
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Cost (ignoring indexation)
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100,000
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Gain
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400,000
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As a gain arises capital allowances granted have no relevance to the computation.
In computing the computation for tax return purposes you will be allowed indexation up to the year 2002.
The capital gains tax rate is currently 20%.
In the event you feel you may have a loss then you should contact your accountant as it may be necessary to take into account the capital allowances given as this will restrict any allowable loss for capital gains tax purposes.
If the disposal of the property is complete prior to the 30 September this year then your capital gains tax will be payable on the 31 October 2006. If the sale is completed between 1 October and 31 December then capital gains tax will be payable by 31 January 2007.
Please note that you may suffer a drawback of Capital allowances claimed on the industrial building if the tax life or the industrial building has not expired before you sell the building.
Q. I read somewhere recently that some people are entitled to medical cards irrespective of means. The article stated that those receiving state pensions from other EU countries who are neither employed nor self employed are entitled to a medical card and there is no means test. I am in receipt of a state pension from the UK and am not employed or self employed, however I have been informed that I do not qualify as I am also in receipt of a much reduced Irish pension.
The UK pension board say that I am entitled to free medical care as it is been financed by them on foot of my 40 years of social insurance contributions in the UK.
I cannot understand the Health Boards position. They state that because of my small Irish pension which is a state pension that my entire income is therefore means tested.
Can you throw any light on this.
A. I have looked up the website of the Health Service Executive and it includes a section showing guidelines for eligibility for medical cards.
The section dealing with EU regulations lists the following situations where automatic entitlement occurs and where entitlement is not automatic. For your convenience I have set these out below.
Cases where automatic entitlement occurs:
· An insured worker and their dependants where the worker is employed by a firm in another EU state.
· Dependants who are resident in Ireland, of a person employed and resident in another EU state.
· A Person with a Social Security Pension from a member state with an Irish Occupational Pension.
· A person with a Social Security Pension only from a member state.
· A person with a Social Security Pension with a Occupational Pension from another state.
Cases where entitlement is not automatic (Means Tested):
· A person whose only income is an Occupational Pension from another member state.
· A person with a Social Security Pension and Irish Department of Social, Community & Family Affairs Pension.
· A person in receipt of a Social Security Pension from another EU state who is engaged in insurable employment/self-employment in this country
· If the spouse of such insured workers or pensioners has an income from Social Welfare or is engaged in insurable employment/self employment in this country he/she will be assessed on the basis of combined total means and may result in being deemed ineligible for medical card services.
· If a spouse is in receipt of a pension/allowable from the Social Security System of a member state and her husband is in receipt of an allowance for her in his contributory pension payable by this country she is not automatically eligible for a medical services card and her eligibility is based on assessment of combined income.
The actual EU regulations setting out the relevant rules are also attached to this guideline and you may access these at
www.mwhb.ie.
If you have any queries on money or taxation matters which you would like answered, please send them to "Your Money", c/o Examiner Publications (Cork) Ltd., P.O. Box No. 21, Academy Street, Cork.
Phil Lynch/Josephine Lane
6 Lapps Quay, Cork.
© First published The Cork Examiner
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Page Last Updated: 09 May 2006
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Source: Deloitte & Touche - Ireland (English)
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