Capital Gains Tax - Finance Act 2014 - Vodafone Shareholders

Revenue has issued an Additional Guide on the tax treatment of Returns of Value of €1,000 or less received by Vodafone shareholders in February 2014. This additional Guideline contains details of a relieving measure introduced by Section 48 of the Finance Act 2014 which will benefit many small shareholders who inadvertently found themselves subject to an unintended liability to income tax, PRSI and Universal Social Charge ("USC"), rather than a NIL capital gains tax liability.

Section 48 of Finance Act 2014 provides that individuals who received a "return of value" payment of €1,000 or less, arising from the receipt of "C Shares" under the terms of the return of value, will be treated as having received a capital sum subject to capital gains tax rules rather than an income sum subject to income tax, PRSI and Universal Social Charge (unless they opt to have the payment treated as income).

This means that individuals who acquired shares in Vodafone as a consequence of an original investment by them in Eircom shares in 1999 and who received a return of value of €1,000 or less will not pay either Income Tax, PRSI, USC or capital gains tax on the return of value (unless they opt to have the payment treated as income). The return of value will be subject to capital gains tax rules – but because the base cost of the Vodafone shares (having their origin in Eircom shares acquired in 1999) is higher than the amount of the return of value received, no capital gains tax will be payable on returns of value of €1,000 or less.

Vodafone shareholders who made a capital loss on the "return of value" of €1,000 or less and who had no other chargeable gains on other disposals in 2014 need not submit a tax return in respect of the Vodafone "return of value" for 2014, if they are not otherwise required to submit a tax return. They should however keep a record of the loss accrued on the "return of value" which can be offset against any gains that might accrue in future years. Taxpayers, who are required to submit a tax return, can include details of the amount of the Vodafone return of value and the amount of the loss available for offset against other chargeable gains in 2014 (if any) or for carry forward to the following year.

Should any taxpayers wish to have the return of value (of €1,000 or less) treated as income, they can simply include the amount as income in their tax returns – see the main Guidelines in this regard.

The main Guidelines on the Tax Treatment of the Vodafone Return of Value to Shareholders should be read in conjunction with this additional Guideline.

This additional guide can also be accessed in Part 19-04-06AA of the ITCGTCT manual.

23 December 2014