Paul Kehoe (Wexford, Fine Gael)
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Question 162: To ask the Minister for Finance the reason a farmer who involuntarily makes a disposal under a compulsory purchase order can be forced into a situation whereby they have to pay 20% of the market value back to the State, if the capital gains tax should be an allowable expense and awarded to the land owner; and if he will make a statement on the matter. [43519/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Capital gains tax (CGT) is a tax on a capital gain arising on the disposal of an asset. A 20% rate of CGT generally applies on the gain arising on the disposal of assets.

Where compensation is received for land that is compulsorily acquired, any gains arising from the amount paid for the acquisition of the land are chargeable to capital gains tax. In other words, if there is a sum paid by a public authority for the compulsory acquisition of land, then irrespective of its components (for example disturbance, injurious affection etc.), that total sum will be the amount to be assessed for tax. If additional sums were paid in respect of land acquired (however described), they would still be regarded as part of the consideration payable and would be liable to tax in the normal way.

The CGT due on a disposal of land under a CPO is calculated in the same way as any other disposal of land.