740. Deputy James Geoghegan asked the Tánaiste and Minister for Finance to review correspondence from a constituent (details supplied) to support the reintroduction of capital gains tax rollover relief for individual investors; and if he will make a statement on the matter. [60408/26]

The Deputy will be aware that, in general, Capital Gains Tax (CGT) is chargeable on a gain arising on the disposal of an asset at the rate of 33%. The first €1,270 of chargeable gains of an individual in any year are exempt from CGT.

A number of “rollover” or deferral provisions in the Taxes Consolidation Act 1997 (TCA 1997) allowed CGT on certain gains to be deferred, where the disposals took place prior to 4 December 2002 and the disposal proceeds were reinvested in qualifying assets. The provisions were as follows:

Section 591 TCA 1997 provided for a relief which, subject to conditions, allowed an individual to defer CGT on any gains arising from the sale of shares or securities in their own company. The relief applied to a material disposal by an individual of shares in a company which, for the period of 3 years before the disposal (or, if shorter, from the date the company commenced to trade), had been a trading company or a holding company of a trading group and in which they had been a full-time employee, part-time employee, full-time director or part-time director of the company or, if that company was a member of a trading group, of one or more companies which were members of the trading group. Full relief was given where the entire proceeds from the disposal were reinvested within a period of 3 years from the disposal in acquiring a qualifying investment, being shares in a qualifying company. Partial relief was available where only part of the proceeds were reinvested.

Section 597 TCA 1997 enabled a person carrying on a trade to defer CGT arising on the disposal of certain business assets, where the proceeds were reinvested in acquiring new assets for use exclusively in the trade. The relief operated on the basis that the chargeable gain on the disposal of the old asset was “rolled over”, that is, it was deemed not to arise until the new asset ceased to be used in the person’s trade. The investment in the new asset must have been made within the period starting 1 year before the date of the disposal of the old asset and ending 3 years after that date.

Section 600A TCA 1997 provided for CGT “rollover” relief from 5 January 2001 where a person disposed of certain residential rental property and reinvested the proceeds in certain other residential rental property. The property must have contained one or more (and at least three for disposals prior to 1 January 2002) separate residential units and must have complied with certain housing regulations. The relief provided that no CGT was payable where the proceeds from the sale of the property were reinvested in another residential rental property which had at least the same number of separate residential units, but not less than three, as the property which was sold. Instead, the gain was deferred until such time as the replacement premises was disposed of.

Section 605 TCA 1997 provided relief from CGT for a person who made a disposal of property to an authority possessing compulsory purchase powers, where the authority had given formal notice of its intention to acquire the property or had actually exercised those powers. Where the whole of the consideration for the disposal was invested in comparable assets, the property being disposed of (the “original assets”) and the property being acquired (the “replacement assets”) were treated as a single asset and a disposal was deemed not to have taken place on the occasion of the acquisition of the property by the authority.

Section 67 of Finance Act 2003 amended sections 591, 597, 600A and 605 TCA 1997 such that the deferrals provided for within those sections were no longer available in respect of disposals which were made on or after 4 December 2002. However, any chargeable gains arising on the disposal of ‘‘old assets’’ which, under these sections, had been deferred on the acquisition of ‘‘new assets’’ before 4 December 2002 could continue to be deferred so long as the consideration for the disposal of the ‘‘new assets’’ continued to be reinvested in other permitted assets. The gain on the disposal of the ‘‘new assets’’ themselves cannot, however, be deferred. Furthermore, as respect sections 597, 600A and 605 TCA 1997, where ‘‘new assets’’ were acquired before 4 December 2002, with the intention of disposing of the related ‘‘old assets’’, but the owner had not disposed of those related ‘‘old assets’’ by 4 December 2002, the gain on the disposal could still be deferred so long as the disposal of those related ‘‘old assets’’ took place on or before 31 December 2003.

I and my officials have noted the correspondence forwarded by the Deputy and the points made therein. However, as previously stated in my response to PQ 57483/26 from the Deputy, the issue remains with the relief that chargeable gains which were deferred under roll-over relief were often never ultimately taxed. Therefore re-introducing roll-over relief would be likely to affect the yield from CGT, and could require additional revenue-raising measures.

As with all taxes, CGT is subject to ongoing review. This involves the consideration and assessment of the rate of CGT and the relevant reliefs and exemptions from CGT as part of the annual Budget and Finance Bill process, as well as consideration of CGT in the wider tax policy context.