Thursday, 16 December 2021
Department of Finance
276. To ask the Minister for Finance if he will reconsider a previous proposal by this Deputy to eliminate capital gains tax for a two-year window for sellers selling homes, sites and currently uninhabitable properties to first-time buyers as a measure to bring more properties onto the market and give the first-time buyer a more competitive edge in that market versus investors; and if he will make a statement on the matter. [62925/21]
As the outset the Deputy should note that as per my previous replies, I have no plans to make any changes to the CGT rate in the way suggested by him.. However, he should be aware that all taxes are subject to ongoing review which includes the consideration and assessment of rates along with any associated reliefs and exemptions. Tax policy in relation to CGT is reviewed by the Tax Strategy Group as part of the annual Budget and Finance Bill process and considered in the wider tax policy context.
The Government has undertaken a number of initiatives to help first time buyers .
Earlier this year the Government brought in a 10% stamp levy on institutional investors purchasing in excess of 10 houses in any 12 month period, in response to large numbers of houses bring purchased by funds before they could go on the open market. This measure was complemented by guidelines introduced by the Minister for Housing, Local Government and Heritage under section 28 of the Planning and Development Act 2000 titled Regulation of Commercial Institutional Investment in Housing.
Secondly, the Government launched the comprehensive "Housing for All" strategy. "Housing for All" is intended to deliver more homes of all types for people with different housing needs and this government has allocated a record amount of funding for housing under the strategy.
In addition to the above, as outlined in my response to the Deputy of 24 March 2021, there are existing reliefs that are already available to property owners selling their home and to first-time buyers. They are as set out below.
Help to Buy Scheme
The Help to Buy incentive is a scheme that is targeted at first time purchasers and assists them with a deposit to buy or build a new house or apartment. The incentive gives a refund on Income Tax and Deposit Interest Retention Tax (DIRT) paid in the State over the previous four years, subject to certain limits set out in section 477C Taxes Consolidation Act 1997.
In August 2020, an enhancement to the Help To Buy scheme was made as part of the July Stimulus package, which was later extended in Finance Act 2020. In summary, where a first-time purchaser
(i) enters into a contract for the purchase of a new home, or
(ii) makes the first draw down of the mortgage in the case of a self-build;
during the period 23 July 2020 and 31 December 2021, they can avail of increased relief under Help to Buy scheme, based on the lesser of:
- €30,000 (increased from €20,000),
- 10 per cent (increased from 5 per cent) of the purchase price of a new home or the completion value of the property in the case of self builds, or,
- the amount of Income Tax and DIRT paid in the four years prior to making the application.
This is subject to the person meeting a number of conditions set out in the legislation. Further guidance on the Help To Buy scheme is available on the Revenue website at: revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-46.pdf
To date, the Help to Buy scheme has helped individuals and couples buy or build more than 28,000 homes. These enhanced arrangements were initially extended until the end of 2021 and, subsequently, in my Budget 2022 address, I announced an extension for a further year until the end of 2022. The intention is that the HTB extension will allow time for other Housing for All measures with similar policy objectives to be put in place in the period ahead.
In that speech I also announced that a formal review of the HTB scheme would take place in 2022. It is the intention that the review will be fundamental in nature, and that it will inform decisions for Budget 2023 and Finance Bill 2022.
Capital Gains Tax
Capital gains tax (CGT) is chargeable on any 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. Where certain conditions are met, a person may be able to avail of relief from CGT in respect of a gain arising on the disposal of a property. These include the following:
(i) If the property was occupied by an individual as his or her principal private residence for all or part of his or her period of ownership, then full or partial relief from CGT will be available where a chargeable gain arises on the disposal of that property. The last 12 months of ownership of the house by the individual is treated as a period of occupation for this purpose.
(ii) If the property was acquired between 7 December 2011 and 31 December 2014, then full or partial relief from CGT will be available where a chargeable gain arises. Full relief will apply if the property has been owned by an individual for a period of 7 years. Where the property has been owned by an individual for a period of more than 7 years, relief is given on the gain in the proportion that the period of 7 years bears to the period of ownership. For example, if the property was owned for 8 years, relief will be given on 7/8ths of the gain. Where the property is held for at least 4 years and less than 7 years, any gain will not be liable to CGT where the disposal is made on or after 1 January 2018.
To be eligible for principal private residence relief and the relief for property acquired between 7 December 2011 and 31 December 2014, a person is not required to dispose of a property to a buyer within a particular category.
(iii) In addition, CGT will not be payable on the disposal of a site from a parent to a child, where the child builds their principal private residence on the site. To qualify for this relief, the site in question must be one acre or less and have a value of €500,000 or less. A clawback of the relief may arise if the child fails to build a house on the site or does not occupy a house built on the site as their only or main residence for at least three years.
Guidelines on the reliefs outlined above are available on the Revenue website at: www.revenue.ie/en/gains-gifts-and-inheritance/cgt-reliefs/index.aspx