Budget

Finance Bill – 7 Year Relief Capital Gains Tax

An exemption from capital gains tax was introduced in the Finance Act 2012 which provides for an exemption from capital gains tax on the disposal of a property purchased under an unconditional contract dated between 7 December 2011 and 31 December 2014. The relief applies to both residential and commercial property and to property held by individuals and corporates. 

There is a full exemption from CGT on the disposal of the property where it is held for exactly seven years from the date of acquisition. There is proportionate relief where the property is held for any period longer than seven years with the relief was lost in its entirety if the property is sold during the initial seven year acquisition period. 

The requisite holding period has been reduced from 7 years to 4 years.  The measure has created a three year period (i.e. years 4 to 7) in which the property can be sold and benefit from a full exemption whereas if held longer than 7 years, only proportionate relief is available.  

Finance Bill 2017 has clarified that this new rule will only apply to disposals made on or after 1 January 2018.   Subject to meeting the other conditions of the relief, a property purchased prior to 1 January 2014 may be eligible for a full exemption from CGT where it is sold on or after 1 January 2018. 

It is crucial that the timing of disposals eligible for this relief are managed correctly so that the relief is not inadvertently lost. 

Anyone who acquired a property to avail of this relief should review their property portfolios with particular reference to retention strategy and the acquisition date and it is recommended that advice is sought from a professional adviser prior to any disposal.