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S.604A - Relief from CGT for 7years

  • 26-01-2014 7:55pm
    #1
    littlemiss123
    Registered Users, Registered Users 2 Posts: 452 ✭✭


    Just a quick question regarding the relief from CGT on land and property for the first 7 years of ownership if bought during a certain period.

    If you were to buy land and subsequently get planning permission and build houses on such land, would the land still qualify for relief under S.604A upon sale, i.e. the gain attributable to the land had it not been developed would be calculated and exempt with the remaining amount taxable?

    Or, as I suspect, it would not qualify and the full amount be chargeable to CGT?

    Thanks.

    MOD note: I am studying for tax exams, not looking for tax advice.


Comments

  • #2
    dogsears
    Registered Users, Registered Users 2 Posts: 535 ✭✭✭dogsears


    littlemiss123 wrote: »
    Just a quick question regarding the relief from CGT on land and property for the first 7 years of ownership if bought during a certain period.

    If you were to buy land and subsequently get planning permission and build houses on such land, would the land still qualify for relief under S.604A upon sale, i.e. the gain attributable to the land had it not been developed would be calculated and exempt with the remaining amount taxable?

    Or, as I suspect, it would not qualify and the full amount be chargeable to CGT?

    Thanks.

    MOD note: I am studying for tax exams, not looking for tax advice.

    Sounds like a situation where CGT may not apply at all. If you buy land with a view to developing i.e. get pp and have houses built then you sell them, that's more akin to a trading situation - so liable to Income Tax or Corporation Tax. Not sure what point you are at in your studying for the exams so you may not have come across that yet?

    If you didn't buy the land to develop, but then decide that you should develop it, you've probably appropriated the land to trading stock - look at Section 596. A gain would be calculated based on market value at that time and I think that it could well be exempt under 604A if that happened more than 7 years after you bought the land - hence no benefit to making the election under section 596.

    If this is a scenario that you came up with yourself, it might be best to chat through with your tutor/lecturer - there are countless variations and the overall area of legislation is an absolute quagmire these days.


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