The Gazette 1987

GAZETTE

JULY/AUGUST 1987

CORRESPONDENCE The Editor, Gazette Law Society, Blackhall Place, Dublin 7.

Following consultation with the Revenue Commissioners and hav- ing taken the Advice of Counsel, it would appear that when a person purchases a property held under a lease with less than fifty years left to run, such leasehold interest is regarded as a "wasting asset" and any premium payable by the pur- chaser will, at the expiration of the term of years granted by the lease, be deemed to have wasted com- pletely. To take a simple example: X purchases a property held under a twenty-one year lease with three years left to run and he pays a con- sideration of £25,000.00. When the lease expires he avails of his rights under the Landlord and Te- nant (Amendment) Act 1980 and obtains a thirty-five year lease with five yearly rent reviews at a market rent for the property. Five years later he sells the property for £45,000.00. When the Revenue Commis- sioners come to assess X's Capital Gains Tax liability, they will regard

the £25,000 paid by X initially for the interest in the premises as hav- ing " wa s t ed" over the three years remaining on the twenty-one year lease. This means no deduction can be made from the considera- tion of £45,000 received in respect of the £25 , 000 initially paid. Therefore, if X is a married man he can avail of the £4,000 exemption for chargeable gains and he may be able to seek relief for enhancement expenditure. In such a case as this X could be liable for Capital Gains Tax at the rate of 40% on £41,000.00, giving a tax bill of £16,400.00. X may be able to seek "roll over" relief, but this will merely 6e putting off the "evil day" as same is only a deferral of tax. Whilst the Revenue Commis- sioners will admit that X in such a case has paid £25,000, not only for three years left to run on the twenty oné year lease, but also in the expectation of taking up his Statutory rights for a further thirty- five year lease, they interpret

30th June, 1987

Re: Capital Gains Tax

Purchase of Business Premises held under short-term tease

Dear Sir,

A matter concerning the above has recently come to my attention and I think it should be brought to the attention of the Profession in general, as it would appear to have serious implications for anybody thinking of buying a business premises or, indeed, any property not being a principal private residence, held under a short-term lease.

CARROLL'S TAX PLANNING IN IRELAND

with precedents by Michael F. O'Reilly Consultant Author: Brian A. Carroll

Lawyers, accountants and financial advisers are constantly called upon to advise their clients in relation to proposals where difficult questions of tax law may arise. The respon- sibility of organising the management of such matters to the best advantage of the client requires careful planning. Carroll's Tax Planning in Ireland is a practical guide which covers the complete range of taxes on income and capital as applied to commercial activities as well as to personal and family matters. It deals specifically with strategic planning advice for the agribusiness sector; manufacturing companies; professional partnership and property developers; long term estate planning for indi- viduals and families; tax aspects of marital breakdown; bloodstock and commercial woodland activities. Each chapter includes summaries of tax planning oppor- tunities, tax pitfalls and a set of practical case studies, and also examines the range of advice the practitioner could and should give in relation thereto.

As a distinctly Irish text on tax planning, Carroll^ Tax Planning in Ireland will attract all who need to deal with a subject of such a wide ranging nature. 'Congratulations are due to Michael O'Reilly and Brian Carroll for producing "Carroll's Tax Planning in Ireland", an important addition to the literature available for tax practitioners. A reading of the book cannot fail to impress the reader by the range of the subjects covered - all of the many taxes imposed in the Republic of Ireland as they apply to many situations. The reader will also be impressed by the high degree of inventiveness displayed and by the high standard of research evident on almost every page. This is not a book which merely starts well but is one in which the commitment to a high fully pro- fessional standard is maintained through to the end.' Irish Tax Review, February 1987 Available from your local bookshop or from Sweet &Maxwell, NorthWay, Andover, Hants, SP10 5BE. December 1986 Hardback £48.00 0 421 36750 4

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