Dominic Coyleanswers your questions.

Playing safe with stamp duty

With the promise of first time buyers' stamp duty being entirely removed as Fianna Fáil comes back into government, I find myself in a very interesting situation.

My fiancee and I are looking to buy a house in the region of €500k. However, I currently own my own house (in my own name only) and as such am no longer a first-time buyer.

My fiancee, on the other hand, would be a first-time buyer. I am aware that if we buy together, we could not avail of first-time buyer's exemption.

Our wedding is booked for April 2008 and my query is that if we were to buy the house now, or more precisely if my fiancee were to buy the new house solely in her own name, could we avoid a hefty stamp duty tax bill?

Whilst appreciating difficulties could arise with my fiancee being granted a mortgage of this size on her income alone, there is a possibility that her parents might loan her the money required, and once we get married, we take out a mortgage together on the house and repay this loan to her parents.

Would any clawback issues arise in this scenario? If so, is there any tax planning that could prevent such?

It can be taken as an assumption that I am not selling my current house, and would thus not be reinvesting any such proceeds into the new house.

Mr PN, Dublin

Minister for Finance Brian Cowen this week published the second Finance Bill of the year - this one dealing specifically with the issue of stamp duty and first-time buyers. While this promises to continue the existing inequitable design of the stamp duty tax code, it will at least mean that first-time buyers will face no stamp duty at all on their purchase, regardless of the type or price of the property - and that applies to anyone who has bought a property since the end of March last.

In the situation you outline, where your fiancee is buying the property in her own name as a first-time buyer, she will not be liable to stamp duty. And, following your marriage, if you both assume ownership of the property and the debt, I am told by the Revenue that there is no question of a clawback of the stamp duty relief granted.

However, your fiancee will need to be careful that she does not fall foul of the rules governing the financing of first-time properties by people claiming stamp duty relief.

In general, anyone providing part of the money used to buy the property - or anyone who is seen as party to any borrowings related to the purchase (such as going guarantor on a loan) - is regarded by the Revenue as also being a buyer of the property, regardless of whether their name appears on the deeds. Unless they too are first-time buyers, that can present problems.

However, after coverage in this paper of the predicament in which this placed many first-time buyers who relied on their parents' for support in buying their first home, Revenue now accepts that, in general, a person relying on parental support will not lose out on first-time buyer relief on stamp duty as long as:

• the parent is not expected to be contributing to the mortgage repayments;

• the parent's name does appear on the deeds and they will/have no beneficial interest in the house;

• parents joined on a mortgage are there solely at the request of the lender for the purpose of security.

Of course, if you follow the course outlined, you will, after your marriage, have two properties, only one of which can be the family principle private residence.

To avoid the prospect of a clawback, the property your fiancee is buying will need to be that property as one of the conditions of the stamp duty relief is that the purchaser needs to be the owner-occupier of the property. Equally, any move to rent her property within five years will trigger a clawback.

The other property - your current home - will be seen as an investment property from that point on regardless of whether it is actually rented out or not and you would find yourself liable to a possible capital gains tax liability when you eventually go to sell it.

PRSAs at 75

You have spent a lot of time on the issue of older people being obstructed in moving their SSIAs into a pension and getting a bonus for doing so from the Government. I find myself in just that situation.

You keep referring to the fact that people can open one of these pension products until the age of 75 but my bank says I cannot do this because I will be 75 within 12 months of opening the account. Is that the case and, if so, why?

Ms SP, Dublin

Basically you've been kiboshed by Cowen.

As you say, the inability of the financial services sector to provide proper service to customers - often customers of very long standing - has taken up a disproportionate amount of this column's space in the past year or so.

Essentially, under an incentive scheme announced by Minister for Finance Brian Cowen, people who transfer up to €7,500 from a maturing special savings incentive account into a pension receive a 33 per cent Government bonus - €1 for every €3 transferred up to a maximum bonus of €2,500 - provided they earned less than €50,000 the previous year.

The scheme was specifically designed to encourage pension provision for the less well off - a group in which pensioners are over-represented.

For people in retirement, the best way to avail of the incentive was to open a personal retirement savings account (PRSA). However - and this is where your bank comes in - while the rules of the PRSAs state that they can be opened any time up to the age of 75, they also state that the proceeds must be drawn down at 75.

Under the original scheme, this did not present a problem.

As long as you were not yet 75, you could open a PRSA and then close it when you turned 75.

However, in an era when the Government has been slow to end tax breaks that have made many already well-off people extremely wealthy, Mr Cowen decided to insist such accounts were kept open for a minimum of one year.

The net result of this is that, although the rules of PRSAs state that it is perfectly legitimate to open and close such an account within a 12-month period, the Government has decided that people must effectively be younger than 74 in order to avail of the Cowen incentive.

Quite why the Government - or more particularly Mr Cowen - decided to clamp down on a group that, in general, has suffered through the era of very high taxation only to miss out on the benefits of more enlightened recent tax policy, is something of a mystery.

In a week when the Government has moved to the very top of its priority list the implementation of stamp duty reform that it appears will benefit only about 2,000 comparatively well-off first-time homebuyers, the treatment meted out to pensioners in this situation is stark by contrast.

While the precise number of elderly people adversely affected by Mr Cowen's clampdown is not known precisely, it is hardly likely to be much more than the 2,000 benefiting from the new stamp-duty regime - you are only talking about SSIA holders who, when the accounts mature, are between 74 and 75 years of age.

And, at a maximum of €2,500 each, the total cost to the Government would be considerably less than the €9,500 minimum forgone in stamp duty in each case for homebuyers.