My son is going to university in Wales. He gets a half loan from Student Finance UK(£3,750 per year ) and a half student grant (£3,500 per year) from the Welsh Assembly.
I have been saving up and want to make the full repayment of the student loan when he finishes university, hopefully in June 2016. Can I claim this payment and get any tax relief on it from Revenue?
Ms AB, Dublin
Funding study in the UK is becoming an issue for more and more Irish parents and students, given the crazy points requirements for so many courses due to limits on numbers.
The good news, as you have discovered, is that there tends to be a more structured approach to funding college in Britain and Northern Ireland, unlike here where either you qualify for a full or partial grant for maintenance and/or fees (which may or may not arrive on time) or see if your parents can stump up the cost.
The need for reform of the grant system and of funding for education have been recognised in Ireland for decades but it is a political nettle that no party has yet shown itself willing to grasp.
What we do have here, however, is tax relief on college fees – at least over a certain threshold.
Against this, you need to assess the structure of the UK student loan system.
As I understand it, your son will be on what they call Plan 2, which is for students who started college in England or Wales on or after the beginning of September 2012.
Under this structure, your son starts to repay his loan when he leaves college and starts to earn more than £21,000. He will then be required to contribute 9 per cent of his salary to loan repayments.
If he returns to Ireland, the threshold below which he will not repay his loan is £29,400 – that’s sterling and, as of now, equates to €38,680. The difference is to take account of local standards of living and is adjusted annually. Importantly, if your son is going to be outside the UK for more than three months at a time, he will need to complete an Overseas Income Assessment Form. Failure to do will see him face accelerated payments and higher interest.
On that subject, interest on UK student loans is charged at the UK retail price index plus three percentage points while he is studying (3.9 per cent this year). Once he is working, the rate of interest that accrues depends on his income. Below the threshold, only the retail price index applies. This increases on a sliding scale to RPI + three percentage points above an upper threshold of £41,000 (or the euro equivalent of £57,400 in Ireland – €75,550 at the moment).
The general view in the UK is that student loans are about the cheapest money a student will ever borrow and available lump sums could be better used to help them get started, including possibly as part of a mortgage deposit.
Getting back to the Irish tax relief option, you can claim relief at 20 per cent on annual tuition fees above a threshold. The maximum you can claim per student per academic year is €7,000 and, in your case, assuming your son started in college in September 2013, you will not get anything for the first €2,500 in fees for 2013, €2,750 (2014) and €3,000 (2015).
At the moment, the £3,750 paid by your son via the loan translates to just under €5,000, That means you would get 20 per cent of about €2,000 back – or €400.
As sterling has strengthened in recent times, the cost of the fee in earlier years would be lower, but then so is the amount discounted. In all, in very general terms, tax relief on about €15,000 in tuition fees over the three years would be about €1,200.
Of course, you are paying off his loan rather than paying the fees directly. My understanding is that if you pay the fees, you can claim. In paying back the loan you would be doing that, although clearly you get no allowance for any interest accruing, just the amount that went to pay the actual tuition fees.
So the choice appears to be yours. You can pay back the money and get some relief or your son can pay back his loan at fairly reasonable rates (assuming his earnings exceed the threshold) and you, or he, can use the money for something else.
Muddle over inheritance and valuation dates
My wife is the executor of her mother’s will. The thing is she is stuck on one question. It asked her to put the valuation of the property on it. Is that today’s valuation or the valuation when her mother died?
Mr DP, email
Probate is a tricky exercise, especially so for relatives who may have been appointed executor but who have no legal training.
As it is a legal process, accuracy is critical: otherwise the whole thing can get bogged down or, worse still, Revenue can pursue the executor for sums outstanding that should have been taken into account.
That being said, where the affairs of the deceased and the will are straightforward, there’s no reason why any executor cannot complete the process.
Valuation is a case in point. The obvious thing is that it should be the value of the property at the date of death. And, if the beneficiary is living in the property at the time the owner dies, then this is indeed the case. Otherwise, under section 30(4) of the Capital Acquisitions Tax Consolidation Act 2003, there is a structure laid down.
It is the earliest of:
– the date the property can be retained for the benefit of the beneficiary;
– the date it actually is retained for the benefit of the beneficiary;
– the date it is transferred or actually paid over to the beneficiary.
I'm no lawyer but, having spoken to a couple, my understanding is that, in the case of property subject to probate, the valuation date is likely to be the date probate is granted. As they need a valuation as part of the probate application, the most appropriate date would be now rather than the date of death.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
