Harry and Mary Kiernan, a married couple, had the following disposals in 2020. The couple are jointly assessed for capital gains tax purposes.
1) In February Harry sold 4 acres of land in Galway for €250,000, its current use value. The 4 acres were acquired when Harry bought a 10 acre site for €120,000 in October 1998 (i.e. 4 of the 10 acres are being sold). He incurred €40,000 in enhancing the site in 2007 by putting in drainage. The market value of Harry’s remaining 6 acres at date of disposal was €160,000. Note: The land is not treated as development land for tax purposes.
2) In April Mary transferred a 1.5 acre site to her son Paul. Paul is building a home on the site and intends to live there. The site had cost Mary €40,000 in May 1997 and the value of the site in March 2020 was €115,000.
3) In July Harry disposed of a holiday home in Donegal for €300,000. The legal and auctioneers’ fees on disposal were €2,500 and €4,000 respectively. Harry had acquired this holiday home as a gift from his wife Mary in 2010 when the market value was €410,000. Mary had inherited this holiday home on the death of her father in July 1996 when the market value of the property was €50,000.
4) In August Harry disposed of 30 acres of land he owned in Clare for €420,000. The current use value of the land at date of disposal is €400,000. He bought the land in January 1999 for €175,000 when the current use value was €130,000. He incurred solicitor’s fees of €5,000 on the purchase of this land. In November 2001, he spent €4,000 on connecting water pipes from the land to the local water mains.
5) In December Mary disposed of a painting for €2,700. The painting cost €2,300 in 2005.
6) In December Mary disposed of a property to her sister Fiona for €100,000. The market value of the property at date of disposal was €120,000, The property cost €140,000 when purchased in May 2000.
Cont…./
©UCD 2020/2021 Page 10 of 19
Question 2 Cont…./
7) In April Harry and Mary decided to sell their home. They received an offer of €850,000 and the contract for sale was signed on 30 April 2020 subject to getting loan approval. Loan approval was granted on 31 December 2020. Harry and Mary purchased an acre of land as the site for the house for €900 on 1 March 1973.They constructed the house at a cost of €8,000. The house and garden were revalued on 6 April 1974 at €28,000. Harry and Mary have lived in the house since it was built with the exception of the period 1 January 1980 to
31 December 1984 when Harry was seconded by his employer to manage the Donegal branch of the company. Harry and Mary lived in rented accommodation in Donegal for this period. Mary operated a business from their home and it was agreed with Revenue that 20% of the property related to the business.
Mary has unused capital losses from the sale of development land carried forward since 2016 of €20,000.
REQUIREMENTS:
1) Advise Harry and Mary of the capital gains tax implications on the above disposals and calculate their capital gains tax liability (if any) on these disposals.
You should also state each payment date. (Note: Bullet point answers will be accepted).
2) State the date of disposal of Harry and Mary’s principal private residence giving reason for your answer.
Part (b) (5 marks)
Trader Limited is an Irish VAT registered company which submits bi-monthly VAT returns. Trader Limited accounts for VAT on a cash receipts basis.
The company had the following cash receipts (VAT exclusive where appropriate) in Jan/Feb 2020.
Cash Receipts: Vat Rate (if applicable)
€
(1)Export of Goods to US 140,000
(2)Sale of Goods in Ireland 23% 8,375
(3)Sale of Goods to Vat Registered trader in Germany 12,100
During the same VAT Period, the company had the following expenses (VAT inclusive where appropriate). The expenses related to the taxable activities of the business unless otherwise stated.
Cont…./
©UCD 2020/2021 Page 11 of 19
Question 2 Cont…./
VAT Rate €
Expenses:
(1) Electricity Bill 13.5% 2,100
(2) Petrol for cars 23% 975
(3) Diesel for company vans 23% 1,300
(4) Purchase of computer 23% 3,700
In addition to the above, on 15th February 2020 the company purchased goods (23%) from a French VAT registered trader for €65,000 and quoted its Irish VAT number to the French trader.
REQUIREMENT:
Compute Trader Limited’s VAT Liability, if any, for this VAT period and briefly comment on your calculation.