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Friday 21 July 2017

Bonus shares could turn your tax return into a headache

tax returns
tax returns
Independent.ie Newsdesk

Independent.ie Newsdesk

Bonus shares received from your employer could turn into a major headache when filing your tax return.

You must declare any tax you owe on money made from the sale of such shares - and this is easier said than done.

"An employee making a disposal of shares may have received such shares in their employer company over a number of years through various incentive schemes," said Denise Connell, owner of Elite Personal Tax Consulting. "There are complex rules associated with the computation of such capital gains."

To ensure you calculate the correct capital gains tax bill on such shares, bear four things in mind, advised Ms Connell.

"First, any chargeable gain arising on a disposal of shares should be calculated by deducting the cost of acquiring the shares from the sales proceeds," said Ms Connell. "Where shares are awarded to the employee, the cost is generally the market value of the share on the date it is acquired. Incidental costs of the sale of shares, such as transaction fees, may also be deducted.

"Second, where the individual holds shares of the same class acquired at different dates, it is those acquired first that are treated as being disposed first - unless the shares acquired are sold within a four-week period.

"Third, where shares were received by way of a bonus or rights issue in respect of the taxpayer's original shareholding, special rules apply whereby the new shares are deemed to have been acquired on the date on which the original holding was purchased.

"Fourth, inflation should also be factored into the cost price of any shares acquired up until 31st December 2002."

Another new headache you could have to grapple with this year is PRSI. Since January 2014, most people must now pay 4pc PRSI on any unearned income. That includes rents, investment income, dividends - and interest earned on savings.

"Remember too that while rental losses carried forward may be used to shelter current rental income from income tax, this is not the case for PRSI," said Ernst & Young's Audrey Lydon.

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