Q&A

Windfalls at Irish NationwideI read with interest your recent Q&A in The Irish Times re Irish Nationwide Building Society and the possibility of it becoming a plc. A couple of questions come to mind and I would appreciate if you could consider them:

1. On what date was the rule introduced whereby new account holders required a minimum deposit of 20,000, and therefore before what date is an existing account holder compliant with a minimum of 125 on deposit?

2. Will "members" be eligible for the likely windfall or account holders, that is could a member have two share accounts where "the windfall could strike twice!"?

Mr T.B., e-mail

The €20,000 threshold was introduced on March 1st of this year. However, before that there had been minimum requirement for opening new accounts that was well in excess of the €125 level you mention. When the euro came into being physically at the start of 2002, the threshold was £10,000 and this translated into €12,700.

Earlier it had been raised for the initial level of £1 to £1,000.

As a rule of thumb, the level of funds needed to open an account when you did so is the level required to continue eligibility for any eventual windfall, subject to the bottom limit of €125.

While the precise terms of any demutualisation will not become apparent for some time, if at all, the minimum balance of €125 will probably have to be maintained for the two years prior to any resolution to change the status of the society.

I should point out that the issue of a windfall for Irish Nationwide members is unlikely to depend on the society becoming a public limited company. Chief executive Mr Michael Fingleton has successfully persuaded the Government to amend legislation regarding demutualisation of building societies.

While this is not yet law, it is understood that the Government is drafting legislation that would allow building societies to demutualise in other ways.

Turning to the issue of multiple windfalls, the society has made it clear that it does not matter how many eligible savings accounts one holds, you will be entitled to only one windfall amount in respect of savings. You may, however, be entitled to a second sum, if you qualify as a borrowing member of the society.

Tax credits and UK dividends

I am in the process of doing my 2002 tax return. Apart from my PAYE income I have some UK dividends from which tax is deducted by the Inland Revenue.

In the old days tax deducted above 15 per cent could be claimed back from the Inland Revenue and the balance retained by the UK was treated by the Irish Revenue Commissioners as an Irish tax credit against Irish income tax.

My understanding now is that no tax is reclaimable from the UK and the Revenue Commissioners no longer give a tax credit even though there is a double taxation agreement. I have asked the Revenue Commissioners, over the phone, if a tax credit is given for the UK tax withheld and I've had two opposing answers. I have not had any reply to my three emails - perhaps they don't want to give an answer in writing!

Mr P.C., e-mail

It is certainly true that you can no longer claim a refund in Britain of tax withheld on dividends from UK-listed companies. That was ruled out by the Chancellor, Mr Gordon Brown, back in 1999.

After that it gets complicated and, as you say, it does tend to depend on whom you speak to. As you say, we do have a double taxation agreement with the UK and the purpose of that is to ensure you do not pay the same tax twice on the same income. On that basis, I would seek relief on the tax withheld in the UK.

However, these agreements are legalistic things and I think you would be best to get some advice from an accountant.

You are hardly the only Irish taxpayer dealing with UK share dividends and they should have the answer to hand based on their previous dealings with the Revenue.

As for the Revenue's failure to respond to your emails, I would refer the matter to the Ombudsman.

Investment and W&R Morrogh

I have bought US shares through this stockbroking firm in the last two years, which I understand were being held in a nominee account. Accepting that you would not be au fait with the exact situation of this firm as it is in receivership (PricewaterhouseCoopers), what is the likelihood of my investment being secure? I have written to PwC a number of times but it has not indicated one way or the other. Am I being naive or is there any realistic chance of me recovering my investment?

Mr J.Q., Mayo

The treatment of investors who bought shares through the Cork-based firm and had them held in nominee accounts has, in my view, been nothing short of disgraceful. Most seem to have been fobbed off with the advice that they apply for compensation to the Investor Compensation Company Limited.

They had five months to do this from June 2001, a month after the brokerage collapsed.

What they have never been told is how much of the nominee account money was raided and whose investments were intact. For some of the larger investors, whose exposure was higher than the €20,000 maximum covered by compensation, this was a critical issue.

And now it appears they never will. A ruling in the High Court last week approved the use of money from shares left in the nominee accounts - which it appears amounts now to about €5 million following two losing years for the markets - to pay the costs of the receiver, Mr Tom Grace of PricewaterhouseCoopers. His costs are thought to exceed €3 million. In addition, the accounts will also be raided to pay the costs of the High Court action.

Whatever small sum is left may diminish further as it is thought the Irish Stock Exchange is considering a challenge to the ruling by Mr Justice Murphy, over fears that it may undermine the security of nominee accounts in general.

From your point of view, it's simple. Your investment turns out to have been anything but secure and there seems no chance of recovering your investment. If you missed the deadline for applying for compensation, I suggest you contact the Irish Financial Services Regulatory Authority (IFSRA) to see if you can be included at this late stage.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.