I made some losses on both the Elan and Waterford Crystal price collapses some years ago. Is it too late to offset these against gains made during the last four years?
Mr A.C., email
You're right. It is some years ago. Elan was sold in 2012 and Waterford Wedgwood collapsed even earlier – in 2009 – if memory serves.
Whether it is too late or not probably depends on what you have claimed or paid tax on since.
The general rule on losses incurred on the sale of assets is pretty straightforward. Where a loss arises, it is offset against any gains occurring in the same year. If there are no gains – or not sufficient games – for it to be fully offset, any residual loss is carried forward to offset against gains made in subsequent years.
And that’s where things might just get tricky for you.
If you have made no capital gains since 2009, then it should be pretty straightforward: you should be able to offset those Waterford Wedgwood losses (and the subsequent Elan losses) against any gains you make going forward.
However, there is a catch. Did you declare the losses back in the years when they occurred?
A common misconception is that you do not need to report losses on the sale, or failure, of assets. But you do. It makes sense really. If you declare the loss, then Revenue is able to keep track of how it is being offset against subsequent gains – and, given they can be particularly efficient at these things, they might even correct a return if they notice you have accrued capital losses that you have failed to offset.
But, if you don’t declare the losses, they don’t know about them. And, being Revenue, they are likely to look askance at 2009 losses they have never heard of suddenly appearing on a tax return.
Losses, like gains, are generally returned either on a Form 11 if you are self-employed or have income that is not taxed under PAYE, a Form 12 if you are a PAYE worker filing returns, or a Form CG1, which covers just capital gains/losses. These are due on October 31st of the year after the date you either sold the shares or otherwise incurred the loss – ie because they collapsed into liquidation or receivership.
Assuming the losses are declared and that you have made no subsequent gain, you’re in the clear. Equally, if the losses were declared and you made gains on which you paid tax in the last four years, you can claim a refund.
But if you did not notify the losses, you could be in trouble even if you have made no subsequent gain subject to capital gains in the intervening decade until this year. I’d certainly file to claim the offset but Revenue may baulk if they had never previously heard of the loss.
And they are certainly likely to turn you down if you never told them about the losses and you had made gains in the meantime (more than four years ago) on which you paid capital gains. In that case, as with all other customer overpayment errors going back more than four years, it is your bad luck.
If you paid tax on gains in the past four years but forgot to offset undeclared losses, again I’d apply for a refund of tax but expect Revenue to be less than obliging about it.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
