Taxpayers won't be thrilled with having to pay the tax a year earlier thanpreviously, writes Dominic Coyle

Charlie McCreevy is looking forward to a windfall of at least €250 million this month but it will give investors a right headache.

The Minister for Finance will welcome the cash, which comes at a time when he is struggling to balance the books ahead of what is expected to be a tough Budget, but taxpayers will be less enamoured at having to pay tax on capital gains to the State a year earlier than previously.

The changes to the capital gains tax regime were announced by Mr McCreevy in last year's budget. He said he was making the change to put capital gains tax "on a similar footing as other tax charges".

Until now, capital gains tax had to be paid within 10 months of the end of the tax year in which the gain arose. For instance, a tax gain made on Jefferson Smurfit shares following its leveraged buyout in the third quarter of 2002 will fall due this October 31st.

Now, however, the Minister has brought forward the payment date. Tax due on gains made on the sale of assets - shares, property, antiques and the like - in the first nine months of the year must be paid by October 31st in the same tax year.

Tax on any money made in such deals between October 1st and December 31st is payable to the Revenue by January 31st in the following tax year - in this case 2004.

What this means, in effect, is that some taxpayers will have to pay capital gains tax to the Revenue in respect of both 2002 and 2003 by the end of this month.

When the Minister announced the changes to the system, he estimated that bringing forward the date when the tax was due would earn the Exchequer around €250 million in 2003. However, this year has seen a host of companies leaving the Irish Stock Exchange either through takeovers or management buy-outs.

This has resulted in payouts to shareholders that probably exceeds anything that the number-crunchers in the Department of Finance would have imagined when formulating last year's budget.

Investors in Arnotts, Riverdeep, Alphyra, Conduit, SMF Technologies and Sherry FitzGerald will all have to consider their position, although several of these will be nursing losses rather than gains.

Shareholders in First Active may not have to worry yet about the impact of the takeover by Royal Bank of Scotland, which is unlikely to be completed until the next tax year. However, some of those who received cheques in June of €1.12 per share held - as part of the capital reduction programme - might have capital gains issues if they were substantial investors.

Other elements of the capital gains tax legislation have also changed to the detriment of the investor even if the tax-free allowance remains unchanged - €1,270 per person. This has been tightened up in recent budgets to ensure that it is non-transferrable even between spouses.

The Minister has put an end to indexation from the end of 2002. Indexation allowed investors selling assets to recalculate the original purchase price using a Revenue-dictated multiplier to take account of the effect of inflation in the intervening period.

Investors can still use indexation between purchase dates and the end of 2002 but not thereafter.

Mr McCreevy also put a stop to rollover relief from capital gains on disposals reinvested in companies and elsewhere, and on the deferral of capital gains for people taking payment in loan notes (a feature of the Smurfit deal, which got in ahead of the change).

Mr McCreevy defended the move saying that, while the reliefs were justified in an era when capital gains were taxed at 40 or 60 per cent, the broadening of the tax base was appropriate to the current 20 per cent capital gains tax rate.

By the Minister's figures, these measures will cost investors €20 million this year and €100 million a year thereafter. Between that and the bringing forward of the date when capital gains tax is payable, there'll be little left for Hallowe'en trick or treaters.