Below is a compact “toolkit” of practical guides and short case studies, all CGT‑audit focused.
1. Practical mini‑guides (checklists)
A. Property / land disposal – CGT audit checklist
Documents to have ready
- Contract for sale, completion statement, auctioneer correspondence.
- Proof of base cost: purchase deed, stamp duty receipt, legal fees invoices.
- Enhancement costs: builders’ invoices, planning permission, architect/engineer fees.
- Valuation reports where:
- Part of a larger holding was sold,
- Connected‑party transactions,
- Pre‑/post‑rezoning issues.
- Rental history (to support/deny PPR relief).
- Loan / bank statements showing:
- Purchase funding,
- Repayment on sale.
Risk points Revenue will probe
- Was the property ever your principal private residence? Evidence: utility bills, LPT classification, register of electors.
- Were all disposals returned in the relevant years? (cross‑check with NPPR/LPT, stamp duty, land registry, bank lodgements).
- Any “informal” disposals: transfers to family, part sales to developers, rights of way/options.
- Any development element that might suggest trading (i.e. income tax instead of CGT).
B. Share / business sale – CGT audit checklist
Documents
- Share purchase agreement (SPA), side letters, earn‑out clauses.
- Cap table pre‑ and post‑sale; CRO filings.
- Accounts proving 10‑year ownership, trading status, etc., for retirement relief.
- Board minutes explaining:
- Rationale for any pre‑sale reorganisations,
- Issue of new shares,
- Transfers to holding companies or family members.
- Valuation for minority transfers or management buy‑ins.
Key Revenue focus areas
- Retirement relief:
- Age ≥ 55, 10 years’ ownership, working director test, farming / business genuinely carried on.
- Pre‑sale restructures:
- Was there a swap into a holding company just before sale?
- Was the main purpose tax saving (e.g. extracting proceeds at lower CGT vs income tax)?
- Earn‑outs and deferred consideration:
- Correctly valued and returned,
- Foreign currency elements captured.
C. Losses and “tax engineering” – CGT audit checklist
Evidence to assemble
- Full deal files for each loss‑making transaction: term sheets, contracts, broker statements.
- Clear timeline: why each deal was done, commercial rationale, risk analysis.
- Independent pricing/valuation evidence for derivatives or structured products.
- Calculations showing how each loss was derived.
Where Revenue will push back
- Matching exempt gains with artificial losses (e.g. using derivatives or forwards with no real commercial risk).
- Circular flows of funds or pre‑ordained steps.
- Connected‑party disposals at contrived prices.
- Losses claimed without proof (loan agreements, proof of default, legal actions).
2. Short case studies (based on real‑life patterns)
Case Study 1 – Artificial loss scheme denied
Scenario
High‑net‑worth individuals enter into matched financial contracts:
- One leg produces large exempt gains,
- Another leg produces equal losses, claimed to shelter genuine gains on other assets.
Revenue’s approach
- Investigate motive: were the transactions primarily for tax advantage?
- Examine if there was any real market risk or commercial purpose.
- Invoke anti‑avoidance to:
- Re‑characterise or ignore artificial steps,
- Deny loss relief.
Practical lessons
- If a product is sold as “tax efficient” first and commercial a distant second, it’s at risk.
- Keep contemporaneous notes explaining non‑tax reasons for entering complex instruments.
- Do not rely on synthetic or circular losses; assume Revenue will challenge.
Case Study 2 – Share‑for‑share into a new holding company before sale
Scenario
- Owner‑manager forms a new company (“HoldCo”).
- Swaps his trading company shares for shares in HoldCo (claiming share‑for‑share CGT relief).
- Shortly afterwards, sells HoldCo to a third‑party buyer.
- Objective: obtain lower CGT or other tax advantages from using a holding company.
Revenue’s approach
- Review offer letters and contracts to see if a third‑party sale was already in play.
- If sale was effectively agreed before the swap:
- Argue that the main purpose of the share‑for‑share was tax avoidance.
- Deny relief and tax the gain as if the original shares were sold directly.
Practical lessons
- If a third‑party sale is already on the table, any pre‑sale reorganisation must have strong non‑tax reasons.
- Draft offer letters and board minutes carefully; they will be dissected in an audit.
- Avoid “window‑dressing” holding company structures created days/weeks before a sale with no real business function.
Case Study 3 – Loss on “debt on a security” not accepted
Scenario
- Individual lends money to a company and later claims a CGT loss when the loan becomes worthless.
- Also claims trading losses on complex financial instruments.
- Evidence provided is incomplete: unclear contracts, no proof of final non‑recovery, patchy trading records.
Revenue’s approach
- Ask: is the asset a qualifying chargeable asset at all (e.g. a “debt on a security”)?
- Require clear documentation:
- Written loan agreement, terms, interest, security.
- Evidence of default, attempts to recover, insolvency.
- If records are insufficient, reject the losses and uphold CGT assessments.
Practical lessons
- For any CGT loss on loans or financial instruments:
- Have full contracts, broker statements, and proof of real loss.
- A bare assertion that “it’s gone” will not wash in an audit.
- Poor paperwork is enough to lose the argument even where the economic loss is real.
Case Study 4 – Undeclared rental property sale
Scenario
- Individual sells a long‑term rental property, lodges large funds to bank.
- CGT return is not filed; individual assumes solicitor handled “all the tax”.
- Revenue cross‑matches:
- Stamp duty returns,
- LPT/NPPR history,
- Bank data,
and opens a CGT audit.
Revenue’s approach
- Treats this as at least careless behaviour; possibly deliberate if there is a pattern.
- Assesses CGT, interest, and penalties; may consider publication.
Practical lessons
- Always:
- File a CGT return for property sales (unless clearly exempt PPR with no doubt).
- Retain a simple file: purchase docs, sale docs, enhancement invoices.
- If you realise a disposal was missed, make an unprompted disclosure before any Revenue contact.
If you outline a specific type of CGT case you are dealing with (e.g. family company share sale, farm transfer, crypto disposals), a tailored practical guide and a closer case‑study analogue can be set out for that scenario.
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