602 Chattel exemption

Summary

This section grants exemption from capital gains tax where the gain accrues from the disposal by an individual of tangible movable property (chattels) and the consideration for the disposal is €2,540 or less. Where the consideration exceeds €2,540, marginal relief applies so that the amount of tax chargeable does not exceed one-half the difference between the consideration and €2,540. A loss on a disposal in similar circumstances is nevertheless an allowable loss; but, where the consideration is less than €2,540, the consideration is deemed to be €2,540 and the amount of loss is restricted accordingly. There is a provision to restrict the relief where a set of chattels has been split into lots (or individual items) for separate disposal at amounts within the exemption limit, even where one of the lots is disposed of before the 6 April 1974 (but after 28 February, 1974, the date of publication of the White Paper on Capital Taxation). A further measure ensures that on the disposal of rights or interests in or over chattels account is to be taken of the market value of the interest remaining. The section does not apply to commodities, currency, or wasting assets.

Details

Definition

(1) Tangible movable property does not include a wasting asset within the meaning of section 560. There is a separate exemption for such assets in section 561.

Exemption

(2) A gain accruing to an individual on the disposal of tangible movable property is not chargeable to capital gains tax if the consideration for the disposal does not exceed €2,540.

Marginal relief

(3)(a) Marginal relief applies where the consideration for the disposal exceeds €2,540. This relief operates by providing that the amount of capital gains tax chargeable on the disposal is not to exceed one-half of the difference between the amount of the consideration and €2,540.

(3)(b) For the above purpose, the amount of the tax chargeable on the disposal is the tax which would not have been payable but for the gain made on that disposal, that is, the difference in amount between the tax chargeable on all gains for the year of assessment, including the gain on the disposal of the tangible movable property, and the tax chargeable on all gains for that year excluding that gain.

Allowable losses

(4) The availability of the exemption and marginal relief does not prevent an allowable loss arising on the disposal of tangible movable property. However, if a loss does arise on such a disposal and the consideration for the disposal is less than €2,540, loss relief is restricted by deeming the consideration to be €2,540. Thus, if an individual bought a chattel for €3,175 and sold it for €1,800, he/she would be allowed a loss of €635 and not €1,375.

Disposals in separate parts

(5) A measure is provided to prevent abuse of the section by the disposal in separate parts, to persons acting in concert or connected persons (defined in section 10), of a set of articles (for example, a stamp collection) so that the amount of the consideration for each part is below €2,540, while the total realised on the set is above this figure. In such a case the different transactions are treated as a single transaction even where the disposals occur on different occasions. Any apportionment of relief under subsection (3) or of reduced loss under subsection (4) is to be made to the different years of disposal by reference to the sale proceeds applicable to each year.

The measure applies to disposals made on or after 6 April, 1974, and also to disposals made between 28 February 1974 (the date of issue of the White Paper on Capital Taxation) and 5 April, 1974. It does not, however, impose liability on transactions concluded before 6 April, 1974. It merely restricts relief from tax on parts of a set of articles disposed of on or after 6 April, 1974 by bringing into account in applying the €2,540 limit the value of assets disposed of between 28 February, 1974 and 6 April, 1974.

Disposals of rights or interests in or over chattels

(6) Special rules apply where the disposal is of a right or interest in or over a chattel. In applying the exemption (subsection (2)), marginal relief (subsection (3)) and the restriction of loss relief (subsection (4)), the consideration for the part disposal is to be taken as including both the actual consideration for the disposal of the right or interest and the market value of what remains undisposed.

Thus, where the actual consideration for the disposal of the right or interest and the value of what remains is not more than €2,540, the exemption applies in full to the disposal. Where the aggregate of the actual consideration and the value of what remains is greater than €2,540, marginal relief (the maximum tax payable) is calculated by reference to the following formula —

Consideration for disposal plus value of what remains minus

€2,500

Consideration for disposal × ½ × Consideration for disposal plus value of what remains

Where the actual consideration for the disposal of the right or interest and the value of what remains is less than €2,540, any loss arising on the disposal is restricted. The restriction operates by deeming the consideration for the disposal to be the actual consideration plus a fraction of the difference between €2,540 and the aggregate of the actual consideration and the value of what remains. The fraction to be used is the actual consideration for the disposal divided by the aggregate of that consideration and the value of what remains.

Non-application

(7) The section does not apply in relation to disposals of commodities by or through a market dealer or to disposals of any currency.

Relevant Date: Finance Act 2019