Q and A

An Irish Times guide to the world of personal finance -  this week Capital gains on taxi plates, Missing companies and Eircom

Capital gains on taxi plates

Are capital gains taxes due on the profit from the sale of a taxi plate? If so, is the indexation of the sale price for a plate bought in 1995 and sold in 2000 (October in both cases) correct at 1.116? It seems very low at approximately 2.2 per cent per annum.

Mr D.M., Limerick

Taxi plates owned by individuals do count as an asset for the purposes of capital gains tax and so you will be liable to tax on the difference between the price at which you bought the plate and the money you got for it five years later.

The indexation figure to which you refer is correct. The relevant figure is laid down by the Revenue Commissioners each year and is intended to allow for the impact of inflation on the purchase price of the asset.

As you note, the relevant multiple for something bought in the 1995/96 tax year and sold in the 2000/01 tax year is 1.116.

It is worth mentioning that you also have a €1,270 capital gains tax-free allowance each year. In addition to deducting this sum from the difference between the sale and purchase prices of the plate before assessing tax, you can also offset expenses involved in the purchase or sale of the plate.

It's not much but it's about all that's on offer.

Missing company

I hold shares in Revelation Piccadilly Holdings PLC. I cannot find a quotation anywhere for this company. Can you let me know if the shares are of any value?

J.K., Galway

It doesn't look good I'm afraid. Revelation was in the luggage retail business for most of last century. It was founded in 1923.

The company joined the British Alternative Investment Market in 1995 but went into receivership in March 1999 after its bankers, Bank of Scotland, withdrew their support.

One week earlier, on St Patrick's Day, trading in the shares was suspended after the company pulled an open offer of more than 218 million shares. Trading was formally cancelled by the stock exchange on July 29th, 2002. Bearing all that in mind, and given the fact that shareholders are the first to suffer when a company collapses, I would not hold out any hope for your investment.

If you want to check with the company's receivers to confirm the state of affairs, you should contact Mr Simon Morris or Mr Scott Barnes, both of accountants Grant Thornton.

Eircom

My husband and I used savings to buy Eircom shares when they were initially issued. In each case, we spent £4,497.55 for the shares and, when we sold them, we got £1,601.12 each along with Vodafone shares.

This seems to my simple mind like a loss of £2,896.43, less the Vodafone shares. Now the Revenue wishes to levy capital gains tax on what, to any sensible person, seems like a capital loss. The net result will be a total loss of £3,327.63 (tax and the actual loss in value of the investment) minus the value of the Vodafone holding for each of us. How can a loss be considered a gain?

Has every ex-Eircom shareholder received such a tax demand or is it just the captive PAYE ones? How was the net chargeable gain of £2,896 arrived at? Why was the allowable loss calculated at nil when there clearly is a loss?

Ms A.McQ., Louth

As you say, something seems amiss. You helpfully included some of the relevant paperwork and, while I still find it hard to understand how the Revenue got the answer it did, there are mistakes and omissions in the original tax return.

The simple answer, of course, is that you cannot be liable for capital gains tax on a capital loss and, in respect of those Eircom shares that were compulsorily acquired after the group was taken private by the Valentia consortium, headed by Sir Anthony O'Reilly, you have definitely sustained a capital loss.

Equally, what you cannot do, at this stage, is simply subtract the money you received at that time from your original investment and label this a capital loss, as you seem to have done on your return.

As you say yourself, you still have the Vodafone shares and until, those are sold, no capital gain or loss will materialise on that part of your initial Eircom investment.

You also neglected to complete the final box in your tax return where you are supposed to show how you reached the figures you have and state the chargeable gain or loss.

That doesn't excuse the Revenue, which should still have been able to see at a glance that there was no gain on the deal - even if it would not necessarily have known it was an Eircom-related transaction.

The only way they can have reached their conclusion was by a wild transposition of the figures. If they had questions over the information presented (which they should have) or the information missing (which they would have), they should have simply communicated that rather than sending the confusing and distressing assessment they did.

For what it is worth, for every share you held following your purchase in the Eircom flotation at €3.90 per share, the loss upon compulsory purchase was 35.5 cents.

The odd figure in your account suggests you bought at other prices, which would alter the figure somewhat. Basically, the compulsorily acquired portion amounts to about 43.29 per cent of your original investment and the price paid by the Valentia consortium for that part of your holding was €1.335 per share.

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.