Some of the £30 million proceeds of the sale of Mr Charles Haughey's Kinsealy estate are expected to go towards settling his and his family's mounting tax liabilities and legal bills. But new tax liabilities will arise on the sale.
The affairs of the former Taoiseach are being examined by the Revenue Commissioners to assess his tax liabilities on previously undisclosed payments to him revealed at the Moriarty tribunal. It also emerged last February that three of his four children paid no tax on the transfer of most of the Kinsealy land to them in 1990.
In addition to their tax liabilities, Mr Haughey and his children will have to meet interest charges and possible penalty charges on any unpaid taxes.
As the Revenue Commissioners examine possible Capital Acquisition Tax (CAT) and Capital Gains Tax (CGT) implications of the 1990 transfer of the Kinsealy land to a company owned by the four Haughey children, the estate has changed hands again. The Haughey family apparently sold the 270 acre estate in north County Dublin for some £30 million.
The deal agreed with the purchaser, Treasury Holdings, involves Mr Haughey retaining residency of the property for his lifetime. The sale of the 270 acres is arranged in two separate tranches - the house and 20 acres of land sold by Mr and Mrs Haughey, and the sale of 250 acres by Larchfield Securities, the company owned by the Haughey children.
While the latest deal has its own tax implications, some of the proceeds of the sale will have to go to meet tax bills, interest and penalties on earlier payments and deals.
The tax implications of the latest deal revolve around CGT, which arises when someone sells an asset that has accumulated value during his term of ownership. The amount taxed is the difference, if any, between the selling price and the cost price indexed to allow for inflation.
The rate of CGT is now 20 per cent - it was reduced from 40 per cent in 1999. The CGT liability on an asset originally received as a gift would be significantly more than on bought assets because there is no cost on the gift.
As the house is Mr Haughey's principal private residence, he can take his profits on the sale of the house and one acre tax-free - no CGT applies on the sale of a family home and one acre of land. He would be liable for CGT on the other 19 acres sold - the profit on this portion of the sale would be taxed at 20 per cent.
Profits on all the land sold by Larchfield Securities would be liable to CGT at a rate of 20 per cent. The Haughey children's liability is complicated by problems about the valuation of the land at the time of the transfer from Mr Haughey. Last February, the Moriarty tribunal was told that three of the four children paid no tax on the gift because the land was valued at only £1.2 million by the Revenue. The tribunal was told the land could then have been worth up to £8 million.
Last year, the Haughey family sold 10 acres of the Kinsealy estate to Treasury Holdings for £6 million. Some of the proceeds of that sale went towards settling Mr Haughey's £1 million bill for CGT and interest on payments on a £1.3 million gift he received from businessman Mr Ben Dunne. Because the settlement involved no penalties, Mr Haughey avoided being listed in Iris Oifigiuil as a tax defaulter. But tax liabilities on payments revealed at the Moriarty tribunal stretching back to 1979 have yet to be determined.