An Irish Times guide to the world of personal finance

Accountants

I changed my permanent residence from Northern Ireland to the Republic two years ago. I receive a retirement pension from the Northern Ireland health service. My wife owns a property in the North which pays a rent of £3,000 sterling per annum. My Dublin accountant informs me that we will have to employ a Northern Ireland accountant to deal with the income from the North. Paying two accountants seems an unnecessary expense. Surely the many citizens of the Republic who have recently invested in property in Belfast will not have to engage a second accountant from there?

Dr C.McC., Dublin

I agree that it sounds unnecessary but, according to a number of people in the accounting world to whom I have spoken, it isn't. Apparently, the real bugbear could turn out to be your wife's rental income, which might, regardless of residence, require the completion of a UK tax return. You are talking about two separate jurisdictions here with different tax laws. Many accountants here would not feel sufficiently comfortable with the UK accountancy regime to undertake work relating to a UK tax return, and that includes some who might have earned their spurs north of the Border but now work down here. The problem is that the rules change all the time and, as one person put it to me, it is difficult enough to keep abreast of the changes in your own jurisdiction without having to worry about those elsewhere.

However, as you say, there are many people, North and South, and particularly those whose lives and business straddle the Border, who must be in a position similar to yours. I would be surprised therefore if there were not accountants quite capable and comfortable dealing with your tax affairs on both sides of the Border. You might try talking to anyone you know in a similar position.

My experience is that these things travel faster and more comprehensively by word of mouth than by any other mechanism. An alternative might be to go through a larger company with offices North and South or expertise in both areas, which might tackle your accounts under the one roof.

Inheritance

I plan to leave my home equally between my two sons, one of whom lives permanently in London.

As the value of the property is about €450,000, I understand my son living here won't be liable for inheritance tax but I'm anxious to know what the tax situation is regarding my son in London.

Ms M.R., Dublin

As you say, assuming he has no other inheritances, the position of your Dublin-based son is that he should not face a tax liability in relation to the inheritance of half your home upon your death. You need not worry about the position of your other son either. The tax-free allowances under inheritance tax law in Britain are more generous than here, so there should be no inheritance tax issue for either son as a result of the inheritance of the house.

Endowments

In 1986, we took out a 16-year endowment mortgage for £27,000. The principal was to be paid off at the end of the 16 years, with a with-profits insurance policy, with a guarantee of payment of the principal in the event of death.

In 1997, circumstances allowed us to pay off the principal to the building society. However, we continued to contribute to the with-profits policy, costing approximately £1,120 per year. This policy matures this year. Am I right in assuming there will be no tax implications, as this policy was to pay off the principal of the mortgage and, as such, I presume would not be taxed? However, I have heard of the new regulations that came into effect recently regarding the taxing of insurance policies. I would be grateful for clarification, bearing in mind that we will have contributed nearly £18,000 to this policy by its maturity date.

Ms M.M., Limerick

There are a couple of issues confused here but the part of the answer in which you are most interested is that you probably face no tax charge on the maturing endowment.

In general, up to the beginning of last year the profits within with-profit funds, such as that underpinning your endowment, were taxed each year within the fund. In other words, the fund manager would deduct the tax payable and pass it on to the Revenue.

What happened at the beginning of last year was that provisions announced by the Minister for Finance, Mr McCreevy, in the previous budget kicked in. This new "gross roll-up" provision, quite common in countries outside of Ireland and Britain, saw the profits within policies such as yours go untaxed during the life of the product.

Tax was levied only when the fund matured or the money was withdrawn. The argument was that this made it easier administratively for the tax authorities and that the fund had the best chance to maximise performance without being depleted each year to meet tax debts.

In return, the Revenue charged an exit tax at the end of the policy, which amounts to the basic rate of tax plus three percentage points.

These new funds are called gross roll-up or gross funds, compared with nett funds of the type you hold. The nett funds still exist but any new funds must comply with the new rules.

Anyway, as your fund was taken out pre-2001, you need not concern yourself with the new regime. Of more relevance is a practice back in 1986 which, I am told, allowed people taking out such policies to decide if they wanted to defer tax until the end of the policy.

Now this was extremely rare, I gather, and I cannot imagine why you would have opted for such an alternative in an endowment mortgage. Equally, if you had, I am sure you would be aware of it; it would certainly be down in the small print of the policy.

Unless there is some reference to it, you can safely assume your tax liabilities have been paid by the manager from the fund on an annual basis during its lifetime and the money you receive from the endowment will be yours to spend as you see fit.

Given the recent performance of endowments, it is probably no bad thing that you are not relying on it to meet the repayment of the principal on your loan.

As an aside, the fact that the policy was backing up a mortgage would have nothing to do with whether it would be taxed or not.

• 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.