Dominic Coyle answers your finance questions.

Renting a room

I recently purchased a house in Dublin. To help with the mortgage repayments I have decided to share the house with two others. I receive 500 a month from each. I understand that under the Rent-a-Room allowance I can receive €7,600 a year in rental income tax free. However, all going well, I shall receive 12,000 a year in rental income. Do I have to pay tax on the amount exceeding 7,600 (i.e. 4,400) or on the 12,000 in total? Is there any way I can reduce my liability to tax on my rental income - e.g. can I offset any home expenses (mortgage repayments, capital expenditure, ESB, phone, etc) against any rental income I receive? What implications would this have if I decided to sell my house at a later date?

I currently pay tax at the higher rate. Ms Y. McC., Dublin.

You are right about the existence of the Rent-a-Room allowance but I am afraid it is not going to be a lot of use to you. As I think you suspect, the allowance is on rental income up to the €7,620 threshold. The trouble is that, once you go above that figure, you are liable for income tax on the whole lot.

As a higher rate taxpayer, that will be a significant hit for you. In fact, at 42 per cent, you would face a bill of more than 5,000, which would make you think twice about the wisdom of taking two tenants on board.

Worse still, you are expressly not allowed to claim expenses against rental income. These are assumed to be covered by the €7,620 allowance.

This area is covered by section 216A of the Taxes Consolidation Act 1997. Guidance notes to the Act state: "The total relevant sum is a gross figure - i.e. no account is taken of any expenses incurred in generating the relevant sums. Any capital allowances which could have been granted under section 284 are deemed to have been granted.

As to any later sale of the property, it is still your principal private residence and, as long as you yourself reside there, the fact that you are renting out rooms will not create any future tax liability. Nor does renting rooms affect your entitlement to mortgage interest relief.

Pensions

With reference to the article by Laura Slattery, "Pension Options for Career Twist and Turns" (March 19th), could you possibly answer the following question. I worked for a company from 1993-1996, building up total service of 3.5 years.

This year I have received notification of my entitlements, which do not include the company's contributions of 3 per cent of pensionable salary. Am I entitled to company's contributions? Mr M.M., Dublin.

It is your bad luck that you worked for the company a little bit too early. Back in the period to which you refer, the vesting period for membership of occupational pension schemes was five years.

What this meant, in essence, was that you had to be a member of the scheme for five years before the company's contributions would count towards your pension fund.

Once you were there five years, the company contributions would come into play. Of course, the company would pay up front but have the right to withdraw this amount if you left early. In such cases, you only get to transport your own contributions and any money they have made.

While five years was the outside limit, some more progressive employers did allow staff vesting rights in occupational schemes at an earlier stage. Unfortunately, yours was not one of them.

It was because of the increased mobility of the workforce and the manifest injustice of the old protocols that pension scheme rules were reformed.

Initially, this saw the vesting period reduced to two years - a figure that would have allowed you to benefit from your former employer's contributions to the occupational scheme while you were in their employ.

More recently, the same mobility and consequent lack of pension cover led the Government to introduce the personal retirement savings account, although these still have to prove their worth.

Smurfit Stone

I have some shares in Smurfit Stone that I received when Jefferson Smurfit left the Irish Stock Exchange. I want to sell them but a stockbroker I approached said they could not handle them for me. How do I go about getting rid of these shares? Mr P.G., Dublin.

There is no real reason why a stockbroker could not handle the transaction for you although it is a little more complex than a standard transaction and, of course, you can not force a stockbroker to take on unwanted business.

The problem is that you hold your shares in certificate form and dealings in US markets - where Smurfit Stone trades - are conducted electronically.

This means that any broker will first have to "dematerialise" your certificate, a process that I am told could take a couple of weeks.

Once that is done, however, trading Smurfit Stone is a straightforward transaction, the same as any other share dealing.

The only issue I can imagine that would cause problems would be if you went to an execution-only service. They might insist on the stock being in tradable form - i.e. held electronically - at the outset.

As to cost, that will differ from broker to broker but one leading Irish group suggested the minimum charge on such a deal would be around €100. Given the small nature of some of the Smurfit Stone holdings, that might be an issue.

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.