CPOs - How much will the taxman take?
There have in recent years been a significant number of CPOs, to deal with the acquisition of land required by local/government authorities for the purposes of road development. The N5 and other projects in Mayo are likely to result in a number of landowners being affected.
It would be incorrect to assume that because the property is being disposed of under CPO, no taxation liability arises. A sale of land under CPO, to a local or government authority, is generally a disposal of an asset for the purposes of Capital Gains Tax (CGT ). Any gain arising is assessable to CGT in the normal way. In the absence of reliefs CGT, currently at 25 per cent, arises on the gain.
Following a welcome recent change to the tax rules the CGT is now only payable after the compensation is actually received.
CGT retirement relief is available to individuals aged 55 years or over on the disposal of assets used in a business (including farming ), for at least 10 years. Where the disposal is to a third party, no CGT liability will arise provided that the sale proceeds (aggregated with earlier qualifying disposals ) do not exceed the current limit of €750,000. The relief can also apply to farmland no longer being farmed but let to others. Actual retirement is not required.
With the proper advice and guidance there may be scope to significantly reduce the tax arising on a CPO. For a confidential discussion on this or any other taxation matter contact Tom Donnelly, phone 094/9044786, email [email protected]
Obtain professional advice before taking action.