Disposals of Shares in Landowning Companies

TCA 1997 Section 643 charges certain gains which would not otherwise be liable to income tax and which have been obtained from either the disposal of land (including buildings) or from property deriving its value from land (PDVL) as income under Sch D Case IV. This will generally prove particularly expensive for an individual facing income tax, PRSI and levies at a potential combined top rate of 46.5%. However, where the land concerned qualifies as residential development land, a flat rate of 20% may apply if the taxpayer so elects (TCA 1997 Section 644A (2) (b)); in the writers’ view, the 20% rate will potentially apply even where the taxpayer disposes of PDVL rather than the land itself. PDVL can include shares in a land-owning company and the aim of this article is to highlight some surprising scenarios where a disposal of shares in such a company could be attacked under Section 643. The section represents a real trap for the unwary since it would be highly unusual for such gains to be taxed as income on general principles (see e.g. Guinness & Mahon Ltd v Browne 3 ITR 373).

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