A number of Revenue Guidance Documents have been introduced following Finance Act 2014 being signed into law on 23rd December 2014.
6. Capital Gains Tax – Finance Act 2014 – Vodafone Shareholders – eBrief no. 107/14 (24th December 2014).
On 14th May 2014 the Irish Revenue Authorities issued a detailed Tax Briefing outlining the tax treatment of the Vodafone Return of Value to its Shareholders. I wrote an Explanatory Blog, which was published on this site on 16th May 2014, outlining the comprehensive guidance on the calculation of the base cost for Capital Gains Tax purposes. In my Blog, I discussed the Income Tax Treatment for shareholders who opted for “C Shares”:
“individuals who opted for the ‘C Shares’ received a dividend from Vodafone which consisted of (a) a cash amount and (b) shares in Verizon.
The individual was then required to include both amounts in his/her annual Income Tax Return i.e. (a) the cash actually received and (b) the market value of the Verizon Consideration Share Entitlement received.
Income Tax, P.R.S.I. and the Universal Social Charge were then levied on this dividend.”
On 23rd December 2014 Revenue issued additional guidance on the tax treatment where Returns of Value of €1,000 or less were received by Vodafone shareholders. eBrief 107/14 contains details of a tax relieving measure which was introduced by Section 48 Finance Act 2014.
What is this Tax Relieving Provision?
Section 48 Finance Act 2014 allows individuals who received a “Return of Value” payment of €1,000 or less under the terms of the Return of Value to be treated as having received a Capital Sum which, if the individual had acquired the Vodafone shares as a result of originally investing in Eircom back in 1999, would result in a NIL Capital Gains Tax liability.
It should be noted that individuals can opt to have the payment treated as income should they wish in which case the payment sum would be liable to Income Tax, PRSI and the Universal Social Charge.
What are the filing requirements?
In situations where Vodafone shareholders made a capital loss on the “Return of Value” of €1,000 or less and providing these individuals had no other chargeable gains arising in the 2014 tax year, then there is NO requirement to file a Tax Return in relation to the Vodafone “Return of Value” unless of course, these individuals are otherwise required to do so under a different section of the Taxes Consolidation Acts 1997.
Why is this provision so beneficial to Taxpayers?
The loss arising on the “Return of Value” can be carried forward and written off against gains that may arise in the future resulting in a reduced Capital Gains Tax liability in that tax year.
Any other points to consider?
If a taxpayer prefers to have his / her “Return of Value” of €1,000 or less treated as Income, this information must be included in his / her annual Income Tax Return as outlined in Revenue’s Tax Briefing dated 14th May 2014.