Use of Annual Tax Free Exemption
The annual tax free exemption must be used up every year. It cannot be carried forward from year to year.
If you have shares that have increased in value you could make a disposal of a sufficient number of shares each tax year to give a gain of €1,270 which is equal to the annual tax free exemption. The cash value benefit of using the annual exemption is €419 per person. If a married couple own shares in joint names and they jointly make the disposal the cash value increases to €838. The shares disposed of can be immediately re-acquired if you wish to retain ownership of them.
These transactions are referred to as “Bed & Breakfast” sales/repurchase. You need to check the charges e.g. Stockbrokers and Stamp Duty costs, for dealing in such transactions and compare it to the tax saving.
Losses on Shares
If you have shares which have gone down in value and you wish to use the loss incurred on the shares against other gains then you must dispose of the shares in the same tax year as other shares sales upon which you have made a gain.
Sometimes you may want to keep the shares which have gone down in value in the hope of them increasing in value in the future. To get the tax benefit of the reduction in value you must dispose of the shares. You can, if you wish, re-acquire the shares but you must wait for a period of four weeks before doing so to ensure that the loss realised can be offset against other gains. This is one of the so-called Bed & Breakfast anti-avoidance rules.
Shares with Negligible Value
On occasions share investments may become worthless because the company in which the investment was made ceases trading or has traded very badly. There may not be a way to dispose of the shares as nobody will want to buy them.
To cater for such situations a written claim must be made to the Revenue during the tax year for which you want to offset the loss against other gains to claim a tax allowance for the loss incurred. You must be able to demonstrate to the Tax Office that the shares are of little or no value.
Anglo Irish Bank is an example of public company shares being deemed worthless. The Revenue accept that the cost price of the shares may be treated as a loss for tax year 2009. If any compensation is paid in the future for the shares the amount received will be treated as a gain at that time. You do not have to give written notice of this to the Revenue but simply include the claim for the loss in your Capital Gains Tax computation.