Jackie Cahill (Tipperary, Fianna Fail) | Oireachtas source

Will the Minister accept two amendments to the Finance Bill 2020? Both are closely related. The first relates to an amendment to the provisions of the capital gains tax legislation to ensure that in a particular instance of partition or severance of land, that property owners would not be liable for a charge.

On the partitioning of land for a site, under the law as it stands, the relief provided for a parent transferring a building site to a child is defeated by the capital gains rules on the partitioning of an asset where the land is held as a tenancy in common or a joint tenancy. Section 603 of the Taxes Consolidation Act 1997 grants an exemption of the capital gains tax were a parent transfers land up to one acre to a child to enable him or her to build a principal private residence, as long as the site is not valued at more than €500,000. This makes sense and it is only natural that a parent would want to give a site to a child.

However, this exemption does not stand if the land is owned jointly, either as a tenancy in common or a joint tenancy. In order to transfer a site to child to build a home, two joint owners would first have to petition the land. This is where we face an issue. Under section 534 of the Taxes Consolidation Act, the joint owners are exposed to capital gains tax once they partition their land. The tax bill in such cases can be significant and certainly enough to beat the entire purpose of transferring the site to begin with.

I suggest addressing this by amending section 603A of the Taxes Consolidation Act by the insertion of a new subparagraph to ensure that when a parent acquires a site for onward transfer to a child it will not trigger a capital gains tax charge for either of the joint owners in these specific circumstances. I have drafted an amendment to achieve this required outcome.

My second amendment relates to the severance of a joint tenancy. In this instance, capital gains tax is applied to a property held as a joint tendency that undergoes severance. Even in a situation where there is no sale of assets and the two people continue as normal after this technical change to land, the owners can be made liable for capital gains tax. This is wrong.

To put this in context, I will use a hypothetical situation. A brother and sister, Sean and Julia, acquired 38 acres of farmland for €300,000 in 2014 as joint tenants. In 2018, they decided to divide the land equally between them to pursue different farming interests which constitutes severance of the joint tenancy. The market value of the land at the end of 2018 was €400,000. The €100,000 difference between 2014 and 2018 valuations would be subject to capital gains tax. This means that both Sean and Julia would be subject to pay capital gains on €50,000 each. We should not be expecting two people to pay capital gains tax on a property from which they have not yet profited. There is no material benefit to them. They still own the land. They are not selling it. However, because of this severance under the Act, they are expected to pay for profits they have not actually made. In this situation, both Sean and Julia are disposing of a lesser interest in a larger part of land for a greater interest in a smaller piece of land. This constitutes a part disposal of an asset for capital gains tax purposes. Sections 537 and 557 of the Taxes Consolidation Act are relevant here. There is no immediate financial gain to this. Will this technicality be addressed in this area to avoid unfair and unjustified hefty tax bills?

I thank the Minister for listening to these proposed amendments. I sincerely request him to take these issues on board. They are a common-sense approach to take two specific areas with little or no impact on the Exchequer. For families who are affected by these two measures, they can have severe financial impacts. I earnestly request the Minister to take those two amendments on board.

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