Jill Kerby

JSL writes from Limerick: Is it true that if someone rents out their home for any length of time, they are liable for Capital Gains Tax (at 37%) when they sell? A friend, after reading the letter last week regarding the claw back of stamp duty said “That's OK but she hasn't told him that he'll have to pay CGT.” Surely this can't be true!

Normally you do not pay Capital Gains Tax on any profit you make by selling your principal private residence (PPR).  However, if you were to rent it out for any period of time, then the CGT exemption will be restricted. However, the Revenue does allow some leeway. For example, the last 12 months of ownership is regarded by them as a period of occupation; also, any period of absence working abroad, or any period of absence, not exceeding four years, during which you couldn’t live in your residence because of employment you’ve taken up somewhere else in Ireland, provided you occupied your property before and after the period of absence. A clear cut case of having to pay CGT on the sale proceeds would occur, for example, if you decided to rent out your PPR and move into another property you own, or even into private accommodation as a tenant.  Some people do this because the rent they receive for their PPR is greater than their outgoings on the other property. In either cases, once the original property is sold, the owner will have to pay a proportionate amount of CGT on any profit from the sale, based on the number of years in which it was rented out.  Finally, the capital gains tax rate is 25%, not 37%. 

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PB writes from Dublin: I'm hoping you can give me some information re. means testing of Jobseekers Allowance. I was made redundant last year and I'm currently not working. I'm debt free and received what I consider to be a reasonable redundancy package after more than 20 years working for the company. Obviously I'm seeking working currently, my question is, if in the coming months I don't succeed in getting a job and end up applying for Jobseekers Allowance do I have any options re. investing my redundancy of almost €100K, (in a pension plan, etc.) so that its not taken into account for means-test purposes.

Means testing applies to anyone who goes off Jobseeker’s Benefit after 12 months and applies for the Jobseekers Allowance. There are a number of conditions you must meet to qualify for Jobseekers Allowance (JA) and the means test calculation is very complicated, but there is a download available on the government’s www.citizensinformation.ie website.  Briefly, your total household income (including that of a spouse) plus interest on your lump sum or any other savings or investments, will be taken into account as ‘means’ to determine the size of your JA. If you were to invest your lump sum in a personal retirement savings account (PRSA) you could avoid it being included in the means test formula.  Speak to a financial advisor about this option. You don’t say whether you have a spouse, but if you do, her income would also be taken into account for means testing. That calculation deducts €20 per day, up to a maximum of €60, from her assessable earnings for each day she works including Sundays.  Next, 60% of the balance of her income is taken into account and this amount must be multiplied by €60 to establish the annual income that is taken as means in assessing your eligibility to the JA.  Since the annual Jobseekers Allowance for an individual is just €10,608, if her income exceeds this amount, after being deducted on a euro for euro basis, you may find that you do not qualify for any allowance. 

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TB writes from Sutton: In January 2009 Anglo Irish bank was nationalised. The Government, at that time, advised that an independent assessor would be appointed to value the Anglo shares. To date no assessor has been appointed nor is there any indication when this will take place. As a shareholder I am of the opinion that the shares are valueless. I would appreciate your opinion on if and when one would be in a position to claim a loss for Capital gains purposes, and therefore set the loss off against a current or future capital loss.

No official assessment of these shares has happened and I think you are being realistic in your view that your shares are now worthless.  In the light, the Section 538 of the Taxes Consolidation Act 1997 notes that where an asset, like your shares, now have a negligible value, “and the facts support the claim” and the circumstances suggest that the loss of value is permanent, the asset can then be deemed to have been disposed of at that “negligible value”.  (This also applies in the case of a receivership or liquidation, where there is little prospect of recovery in the value of the shares).  In such a case – and Anglo Irish Bank’s nationalization might fall into this category of permanent loss and negligible value – you should be able to claim the loss against any capital gains tax that you may be liable for in the year in which the loss has arisen. I suggest you confirm this with a tax advisor or your inspector of taxes.