Taxation of lapsed share rights - Capital Gains or Income Tax?

MIDLANDSMAN

Hi. I have a question which I have not got an answer to after searching the revenue site and online and even the stockbroker. Basically, I was offered a rights issue earlier this year but I decided not to take up the rights offer. A few weeks later, money was lodged to my trading account and on checking with the stock broker, it turned out that the payment was due to my lapsed rights issue and this particular actually gave a cash payment to anyone who did not elect to take up the rights.

Does any body know would this payment be considered as taxable under CGT (in which case I need to make a payment soon) or would it be classed as income and have to be included (next year) in Form 11 for 2021? Thanks

ShelbyInc

My opinion - no new shares were issued to you for CGT purposes. An allotment was dependent on you exercising your 'rights' which you failed to do and so I do not think the payment would be subject to CGT.

nompere

https://www.boards.ie/discussion/comment/118248664#Comment_118248664

Revenue explain it here:

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-04-07.pdf

You can see a worked example at Para 7.2.

Sometimes sales of rights give rise to a gain and sometimes they can give rise to a loss. But they are always within the CGT regime.

ShelbyInc

read 7.4

nompere

https://www.boards.ie/discussion/comment/118250536#Comment_118250536

I have - it's not relevant.

Revenue commentary on S.584(5) TCA 1997 (from https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part19.pdf

"Sale of rights Where a person sells rights in respect of shares instead of taking up those rights, the amount received for the disposal of those rights is treated as a capital distribution and section 583 applies accordingly."

ShelbyInc

Good shout

MIDLANDSMAN

Hi. Many thanks to all for taking the time to reply and for the advice. I really appreciate it.