Davy tells property investors to lodge tax writeoff claim
Investors in Shankill site can use its near-zero value to lower their liability
Investors who have lost their entire investment in a site to be developed by builder Joe O'Reilly have been advised by Davy to lodge a claim with the Revenue Commissioners which may help recoup their money.
In a letter seen by the Irish Independent, the investors are advised to file what is known as a "negligible value claim''. This allows the investors to claim their capital has effectively been wiped out in the deal and the resulting loss can be offset against other gains.
The investors, according to the advice provided to Davy by KPMG, can make the claim even though the site at Woodbrook in Shankill, Dublin, hasn't actually been sold.
The investors in the site, owned by a subsidiary of O'Reilly's Castlethorn Construction, were recently told their investment wouldn't be repaid if the site was sold today and bank loans repaid. The investors have seen their investment written down to the nominal value of €0.05.
Whether the Revenue will agree to such writeoffs against other gains is likely to come down to the definition of the word "negligible". According to the KPMG advice, the word has a "normal'' meaning -- in other words the investment is not worth considering and is insignificant.
"The loss is calculated as if the asset was sold for no consideration. The key point to note here is that the loss is calculated as if the asset were sold,'' says the advice sent by Davy on April 8.
"A loss may therefore crystallise even if no actual disposal occurs,'' says the advice.
The Revenue Commissioners yesterday said that under tax legislation, if an asset has become of negligible value, the loss may be treated as if it has happened, even though the site has not actually been sold.
A spokesman added: "However, 'negligible' means just that -- the value must be very close to zero or at least minuscule in relation to cost of acquisition.''
He said it was not clear that properties would fall into this category.
The land at Woodbrook is held by a special purpose company called Aeval, which is a 100pc subsidiary of Castlethorn Construction.
It is possible the loans underpinning the site may go into NAMA, the toxic loans agency.
Mr O'Reilly is one of the 10 largest borrowers in Ireland, and he owns some of the largest assets in Irish retail, including Dundrum Town Centre and the Pavilions in Swords.