Dominic Coyle answers your queries.

Home ownership after divorce

Under current law, if a person owns a house in their own right (bought and paid for in full) then gets legally married under Irish law, what happens in the case of a subsequent divorce (say, three years later)?

Does the original owner retain sole possession as before the marriage or will a court give the person who owned and paid for no part of the property entitlement to some portion of the property?

Mr K.M., e-mail

I think you know yourself that the answer to this - as with any question involving the division of assets in the courts as part of a legal separation or divorce - is never going to be black and white.

The courts have extensive discretion in how they provide for the parties in a dissolving marriage.

Muriel Walls, who is a partner in the private client group of lawyers at McCann FitzGerald and co-author of The Law of Divorce in Ireland and the Irish Family Legislation Handbook, says that marriage doesn't automatically alter the legal ownership of a house that had been owned by one spouse before the marriage.

However, if the house becomes the family home, the spouse acquires certain rights. These include a right to live in the property unless ordered to leave by a court and the right to block any mortgage or sale of the house without their consent.

In the event that the marriage breaks down and the couple separate or divorce, the court would certainly take into account that a family home had been purchased before the marriage by one spouse, but it would not necessarily be a clinching argument.

The court would also take into account a list of other factors such as the length of the marriage, the financial circumstances of the couple, whether there were any children in the marriage and what their ages and needs might be. The ability of the spouses to provide alternative housing for themselves - and even the extent to which one spouse may have given up career opportunities to support the other and take care of the family - would also be taken into account, according to Ms Walls, even if you were only talking about a three-year marriage.

In short, the longer the marriage, the less important it is that one spouse owned the property before the marriage.

British inheritance

My wife has inherited approximately €100,000 from a deceased relative in the UK. How much tax liability has she to the UK government on this sum and what is the position once she receives the balance in Ireland? Will the Irish Government have any more tax demands?

Mr L.G., e-mail

Your wife should have no liability to the British Inland Revenue because in the UK inheritance tax is levied on the overall estate if it exceeds certain financial thresholds, rather than on individual bequests as in Ireland.

The executor of the estate of your wife's relative was responsible for squaring things with the British tax authorities.

However, because the Irish capital acquisitions tax is levied on the beneficiary and not the estate, your wife may still have a liability to the Irish revenue, especially as the inheritance significantly exceeds the exemption threshold for inheritances between linear relatives other than parents and children.

Tax on dividends

You answered a query on taxation of scrip dividends last week. You rightly pointed out that Irish companies deduct the DIRT before forwarding the shares, but then you went on to say that taxpayers who pay income tax at the 42 per cent rate are liable for the balance (22 per cent) in their annual tax return. This is surely wrong, as all DIRT on dividends (scrip or cash), deposits, etc is at the 20 per cent band, irrespective of the amount involved.

Mr A.F., Cork

There are countless investors out there who would wish that you were correct - and, indeed, from the advice friends were giving last week's correspondent, there appears to be a perception out there that people need not worry about tax on dividends beyond the money deducted at source.

Unfortunately, they are wrong. In this case, so are you. The tax involved in company dividends (whether cash or in scrip) is not DIRT, which as you rightly state is always deducted at the 20 per cent level.

Dividends are income in the same way as your salary, pension, etc. As such they come under the income tax code.

The situation is somewhat complicated by the fact that a portion of tax is deducted at source with the rest, where applicable, due later. The deduction at source is called dividend withholding tax and it is levied at the standard rate of income tax, not the DIRT rate.

The Revenue states: "Irish shareholders are taxable on the gross dividend at their marginal rate but are entitled to a credit for the tax withheld by the company paying the dividend."

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. No personal correspondence will be entered into.