Taking a punt on Shares?Posted Tuesday, May 11, 2021
Here is a reminder on Capital Gains Tax (CGT) payment and filing dates
By Eva Byrne, Tax Manager, Contracting PLUS
Ok, so here is my confession about shares.
I am old enough to remember getting caught up in the Eircom shares hype back in 1999. It was heavily promoted by the Government of the day and it was almost a patriotic gesture to take out a small loan to invest.
While some 50,000 investors bought and sold shares within weeks of flotation and made money, I was one of the 450,000 shareholders who lost 30% of my investment.
Even though it was only a very small investment, and I don’t like to dwell on the past, I learnt two very important lessons:
1. Only invest with money that you can afford to lose.
2. A tip on a good investment in shares is about as good as a tip on a horse in Cheltenham!
In the past year, I have noticed a rise in people dabbling for the first time in shares. This is possibly in part, due to many factors; banks are giving virtually no interest on savings; people have nothing to spend their money on and it has become easier than ever to start trading shares and crypto currencies with trading apps and e-Money services.
As a tax professional I understand the tax requirements for investors. They are often unknown by first-time traders and they can be complex and arduous. Here are some basics you need to be aware of:
No matter what type of saving or investment you have your money in, the chances are you will be liable for some level of tax on any gains made on your investment. This could be deposit interest retention tax (DIRT), stamp duty, capital gains tax, income tax and so on.
Tax is a significant consideration when deciding what to invest in and different types of investments carry different levels of tax.
Your own personal circumstances, such as your tax resident position and your domicile can also significantly impact your tax position in Ireland. You are deemed to be resident in Ireland if you spend 183+ days here in the calendar year or 280 days over two consecutive calendar years. Domicile can be much trickier to determine and is an article in itself, but a good tax advisor will help you determine yours. So, before you spend your hard-earned cash give some thought to what you are getting into.
Capital Gains Tax (CGT)
The rate for gains is 33%, but everyone has an annual allowance of €1,270. This means you can have an annual gain of up to €1,270 tax free.
Capital Losses (i.e., when you lose money on shares and other investments) can be offset against future gains, useful if you had losses on property or assets in the past.
Tax obligations for CGT
A tax return to report any capital gains or losses applies to everyone whether self-employed or a PAYE employee.
So, if you make a disposal (sell your investment) you need to ensure that you calculate and pay the tax on time (see timing of payments below) and file the details on the appropriate form (see tax return filing below). Otherwise, you will incur interest and penalties potentially wiping out the value of any gain you made.
Common question: Do I have to make a return if my annual gain was less than the annual exemption of €1,270?
Answer: Yes, the obligation to make a return exists even where no tax is due because of the use of reliefs or allowable losses.
Timing of payments for CGT
For any disposals in the period from 1 January to 30 November, known as the ‘initial period’ the tax is due to be paid by 15 December in the same year. Therefore, if you sell shares in November, you only have a few weeks to get your calculation and payment into Revenue.
If you have disposals in December, known as the ‘latter period’, the tax is due to be paid by 31 January in the following year (just a month to get everything sorted).
Making of CGT payments
Most people must register with Revenue to arrange their payment and can simply register for CGT purposes only. To do this login to (or register for) ‘MyAccount’ with Revenue. If you are already registered for income tax (this will apply to both contractors in Umbrella Director companies or those with their own Personal Limited Company) then you can be linked up for CGT purposes also. Your tax agent, if you have one, can do this on your behalf.
Now, to make things a little bit more confusing, this is not your tax return for CGT, this is merely the making of the payment. The tax return comes next.
Tax Return filing for CGT
Even if you have paid your tax on time, you must also file your tax return on time, which is due on a different date which is 31 October in the year after you sold your asset/investment. Be aware that if you miss this date, then you will be subject to a potential surcharge or penalty even if your tax was paid on time.
For Professional Contractors and other self-employed individuals, the Capital Gains Tax return can be completed on the Form 11, which is the same form used to complete your Income Tax return every year and must be filed through ROS.
PAYE employees can include their CGT details on their form 12, which is done through Revenue’s ‘myAccount’ online facility.
If you do not usually submit an annual personal tax return, then you can prepare and post a Form CG1 to your local tax office.
The recent death of Bernie Madoff, a well versed and active member of the financial industry, is a traumatic reminder to many high-profile investors who thought their money was safe. His elaborate Ponzi scheme used new money from investors to pay off promised returns to older members while at the same time putting strategies in place to avoid investors reclaiming their profits. When it fell apart, he had about $300 million in the bank with clients looking for their combined $7 Billion back.
Whether you are a high-profile investor or just dabbling for the first time don’t let the Irish tax system catch you out!
If you’re a Contractor with Contracting PLUS, then don’t worry about doing anything. When we’re completing your Income Tax Return each year we’ll ask you about your Capital Gains as well.