Capital gains for companies
A company can make a capital gain from selling or transferring an asset. Any capital gain will be subject to tax at the rate of Capital Gains Tax (CGT).
A capital gain made by a company is usually included in the profits for Corporation Tax (CT). The tax is assessed in the same accounting period that the gain is made on an online CT1 using Revenue Online Service (ROS).
Capital gains on development land
Capital gains from selling or transferring development land are not included in a company's profits. Instead, these gains are fully within CGT rules.
The company must report these gains in the Capital Gains (Development Land) section of the online CT1. This is subject to the CGT pay and file deadlines.
Capital gains on assets other than development land
Capital gains are subject to the rules and rate of CGT. However, the tax liability on chargeable gains from assets, other than development land, are included in the company’s CT payment. This means the chargeable gain will be calculated at the CT rate.
As the rates of CT and CGT are different, the capital gain needs to be adjusted so CGT liability calculates correctly. When the adjusted amount calculated at the CT rate, the result is the same as when calculated at the CGT rate.
For example, a company that has a capital gain of €10,000 would be subject to the rate of CGT. This means the company have a CGT liability of €3,300. The company must then adjust the amount to €26,400. When €26,400 is included in the CT return, it is calculated at the CT rate and will result in a liablity of €3,300.
How to calculate the adjusted gain
To calculate the adjusted gain:
- calculate the amount of CGT tax liability would be at the CGT rate (33%)
- divide this amount by the CT rate (12.5%)
You must report the adjusted gain in the capital gains section of your online CT1.
- Example
In 2020, the CT rate was 12.5% and the CGT rate was 33%.
In November 2016, Atosom Ltd company bought a building for €100,000. Atosom Ltd sold the building In October 2020 for €250,000. CT is chargeable on the capital gain.
Atosom Ltd must calculate the chargeable gain on the disposal
Calculation of chargeable gain
| Description | Amount |
|---|
|
Disposal proceeds
|
€250,000
|
|
Deduct allowable expenses:
|
|
|
Cost of acquisition
|
€100,000
|
|
Chargeable gain
|
€150,000
|
Atosom Ltd then calculate the amount of CGT tax liability would be at the CGT rate (33%).
Calculate CGT tax liability
| Description | | Amount |
|---|
|
Chargeable gain
|
|
€150,000
|
|
CGT (33% of 150,000)
|
€150,000 x 0.33
|
€49,500
|
Atosom Ltd now can adjust the gain for the taxable amount they need to include in their CT1.
CT capital gain adjustment
| Description | Amount |
|---|
|
Amount of CGT due
|
€49,000
|
|
Divided by CT rate (12.5%)
|
0.125
|
|
Adjusted gain
|
€396,000
|
The company adjust the gain up to €396,000.
Calculation check
| Rate | Amount | Calculation | Liability |
|---|
| CGT 33% |
€150,000 |
150,000 x 0.33 |
€49,500 |
| CT 12.5% |
€396,000 |
396,000 x 0.125 |
€49,500 |
Non-resident companies
A non-resident company must pay CGT on gains it makes from the disposals of ‘specified assets’. These include:
- land and buildings located in Ireland
- mineral rights or interests in Ireland
- assets which are used or held for the purposes of:
- trade carried on in Ireland
- an Irish branch.
- shares deriving the greater part of their value from:
- land and buildings located in Ireland
- mineral rights or interests in Ireland.
Losses
A company can offset a loss it makes on the sale or transfer of:
- development land against gains from the sale of all other assets
- non-development land against gains on other non-development land assets.