When is the date of disposal of an asset for CGT purposes?
When is the date of disposal of an asset for CGT purposes?
The recent Court of Appeal decision in Sean Flaherty v. The Revenue Commissioners has significant implications for tax advisors, particularly regarding the interpretation of the “date of disposal” for Capital Gains Tax (CGT) purposes. This case highlights the importance of understanding contract conditions and their impact on the date of the disposal of an asset for CGT purposes.
Case Background:
Sean Flaherty, a fisherman from Rossaveal, County Galway, disputed the “date of disposal” of his fishing vessel, Glór na dTonn, with the Revenue Commissioners. Flaherty argued that the disposal occurred after January 1, 2016, making him eligible for Entrepreneurial Relief from CGT. The Revenue Commissioners contended that the disposal occurred on October 21, 2015, making the relief unavailable.
The key dates in question were:
- Contract Date: October 21, 2015
- First Payment: December 17, 2015
- Bill of Sale: December 21, 2015
- Fishing Licence Issued: January 11, 2016
- Second Payment: January 19, 2016
- Final Payment: February 10, 2016
Legal Arguments:
- Flaherty claimed that the contract was conditional, and the disposal date should be after January 1, 2016.
- The Revenue Commissioners argued that the contract was unconditional, and the disposal date was October 21, 2015.
Tax Appeal commission and High Court judgements:
The Tax Appeal Commission found that the contract in question was an unconditional contract and the date of disposal for CGT purposes was 2015, the consequence of this was that Entrepreneurial Relief was unavailable to Flaherty. This Tax Appeal Commission determination was appealed by Flaherty to The High Court which found in favour of the Revenue Commissioners. Flaherty appealed this decision, arguing errors in contract interpretation and the application of the business efficacy test.
Court of Appeal Judgment:
Following an extensive discussion on conditional contracts, The Court of Appeal upheld The High Court’s decision, confirming that the contract was unconditional and the “date of disposal” was October 21, 2015.