Capital Gains Tax (CGT) reliefs
Principal Private Residence (PPR) Relief
A Principal Private Residence (PPR) is a house or apartment which you own and occupy as your only, or main, residence.
You will be exempt from CGT if you dispose of a property that, for the entire period of ownership, you:
- lived in it as your main residence
- used all the property as your home.
This exemption also applies to land, up to one acre (0.405 hectares), around a house. This excludes the site of the house, which is not taken into account when applying the relief.
PPR Relief is restricted if you did not fully occupy the property or the sale price has development value.
Note
The last 12 months of ownership of a PPR is considered to be included in your period of occupation.
This allows for the possibility that you have moved into your new home, but have not sold your previous home.
Restriction if only part of your property was used as a home
You can only claim for the part of the house you used as your home. For example, you might have used half your house as your home, and half for your business. You can claim exemption on half of the chargeable gain.
The Rent-a-Room scheme will not affect your claim for full exemption.
- Example 1
Barry bought property in 2004 for €480,000 (including costs). He sells the house in September 2018 for €580,000.
Barry used one-fifth of his house for his business for the whole time that he owned it. He can only claim four-fifths (80% or 0.8) exemption on the proportion of the house he used as his home.
He will have to pay CGT on one-fifth (0.2) of his chargeable gain.
Calculation of Barry's CGT
| Description | Calculation | Value |
|---|
|
Sale price
|
|
€580,000
|
|
Deduct allowable expenses:
|
|
|
|
Purchase price
|
|
€480,000 |
|
Chargeable gain
|
|
€100,000
|
| Apply partial PPR Relief |
€100,000 x 0.8
|
€ 80,000
|
|
Deduct personal exemption
|
|
€1,270
|
|
Taxable gain
|
|
€18,730
|
|
CGT due (33% of €18,730)
|
€18,730 x 0.33
|
€6,180.90
|
Barry paid his CGT before 15 December 2018. He filed his CGT return before 31 October 2019.
Restriction if you have not always lived in the property
You can only claim for the time you lived in the property.
Absences considered as living in the property
You will be considered to have lived in your property where:
- you could not live in the property because your employer required you to live elsewhere (up to a four-year maximum.)
- you had a job, all the duties of which were performed outside the Republic of Ireland
- your PPR remained unoccupied and you were either:
- receiving care in a hospital, nursing home or convalescent home
- resident in a retirement home on a fee-paying basis.
- Example 2
Carla bought a house in June 2004 for €380,000. The house was her PPR from June 2004 until June 2018. She let the house from June 2014 until June 2018, when she sold it for €480,000.
Carla paid solicitor’s fees of €700 when she bought the house. She paid solicitor’s fees of €1,000 and auctioneer’s fees of €1,500 when she sold it.
Carla owned the house for 14 years. She can claim exemption for the period during which it was her PPR (10 years) and the last 12 months of ownership.
She can claim PPR relief for 11 years out of the 14 years she owned the property. She has an exemption on eleven-fourteenths (0.79) of the gain. Carla did not have any other gains in 2018.
Calculation of Carla’s CGT
| Description | Calculation | Value |
|---|
|
Sale Price
|
|
€480,000
|
|
Deduct allowable expenses:
|
|
|
| Purchase price |
|
€380,000
|
|
Solicitor’s fees (purchase)
|
|
€700
|
|
Solicitor's fees (sale)
|
|
€1,000
|
|
Auctioneer's fees (sale)
|
|
€1,500
|
|
Total chargeable gain
|
|
€96,800
|
|
Apply partial PPR Relief
|
€96,800 x 0.79
|
€76,472
|
|
Deduct personal exemption
|
|
€1,270
|
|
Taxable gain
|
|
€19,058
|
| CGT due (33% of €19,058) |
€19,058 x 33% |
€6,289.14 |
June paid her CGT before 15 December 2018. She filed her CGT return before 31 October 2019.
Restriction if your property has development value
Your property might have a higher potential value than the value it has based on how you currently use it. The higher value is known as ‘development value’.
You might sell your home and land up to one acre for its development value. PPR Relief only applies to the value of the house or land without its development value.
Before you can calculate your partial PPR Relief, you must work out your 'notional gain'.
How to calculate notional gain
You will need to deduct part of the expenses from the current use value.
- Work out the part of the expense:
- Multiply the total expenses of sale by the current use value.
- Divide this by the sale price.
- Deduct this amount from the current use value.
How to calculate partial PPR Relief
- Work out your notional gain.
- Deduct the value at the date you bought the residence.
- Example 3
John and Mary bought their home (their PPR) in May 1979, for a total of €54,000 including acquisition costs.
They sold it for €400,000 in October 2018, when it had a commercial development potential. The current use value as a private residence was €300,000 on the date of sale. The expenses of sale were €10,000.
Calculate the notional gain
| Description | Calculation | Value |
|---|
|
Current use value
|
|
€300,000
|
|
Deduct part of expenses of sale
|
€10,000 x €300,000/€400,000
|
€7,500
|
|
Notional gain
|
|
€292,500
|
Calculate partial exemption
| Description | Calculation | Value |
|---|
|
Notional gain
|
|
€292,500
|
|
Value in May 1979
(adjusted by 1979/80 multiplier)
|
€54,000 x 3.742
|
€202,068
|
|
Partial PPR relief
|
|
€90,432
|
John and Mary had other gains in 2018. Both personal exemptions for 2018 have been used on other gains.
Calculation of John and Mary's CGT
| Description | Calculation | Value |
|---|
|
Sale price
|
|
€400,000
|
|
Deduct allowable expenses
|
|
|
|
Purchase price and costs
(adjusted by 1979/80 multiplier)
|
€54,000 x 3.742
|
€202,068
|
|
Disposal cost
|
|
€10,000
|
|
Total chargeable gain
|
|
€187,932
|
|
Apply partial PPR relief
|
|
€90,432
|
|
Taxable gain
|
|
€97,500
|
|
CGT due (33% of €97,500)
|
|
€32,175
|
John and Mary pay their CGT by 1 December 2018, and file their return by 31 October 2019.
How to claim the relief
Include the relief when you calculate CGT and file your return.
Next: Property acquired between 7 December 2011 and 31 December 2014