Finance (No.2) Bill 2013

Capital tax

Niall Glynn, Partner, Deloitte

Individuals can breathe a sigh of relief that there has been no increase in Capital Gains Tax or Capital Acquisitions Tax – which had been a recurring trend since the 2008 Finance Act.

On a positive note, a number of CGT reliefs have been introduced or extended, including an incentive for entrepreneurs to reinvest in new business ventures. The extension of the seven year CGT relief for properties will continue to assist the national deleveraging process by promoting property investment.

The move to incentivise entrepreneurs to invest in trading activities is a welcome development. However, its focus clearly benefits those who have already disposed of assets as opposed to those establishing their first enterprise. Given the relative performance of certain asset classes over the last number of years and with some investors having capital losses carried forward, in practice, the relief may have limited application.

As is well publicised, there is a 10% rate of CGT for entrepreneurs in the UK. An alternative measure of a similar nature may have had broader application here in Ireland, in particular in encouraging first timers in an entrepreneurial endeavor.

Prospective investors will have to consider the relative benefits of the reinvestment credit and the seven year CGT exemption for investing in property. The right decision will be very much down to each individual but we would question whether the right balance has been struck between encouraging entrepreneurship versus making a passive property investment.

On a separate capital taxes note, it is welcomed that the Minister has not gone for a further short term gain by increasing the rates of CGT or CAT to the detriment of the longer term survival of family businesses. The fact that there has been no curtailment of reliefs is also positive.

The stamp duty exemption for companies that choose to list on the Enterprise Securities Market is of assistance in reducing their equity funding costs and also compares favourably with the 0% stamp duty rate applying on London’s AIM.

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