Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 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.
Deferred purchase
I understand that there are financial institutions in the UK which will purchase a residential property from an owner (usually an elderly or retired person) under an agreement whereby that owner can continue to reside in the house for as long as he or she lives. Are you aware of any Irish based institutions offering a similar product?
Mr T.L., Dublin
As you say, there are a number of institutions in Britain, which provide the service you mention. Unfortunately, at present, no Irish-based institution offers a similar service although, with demand rising and foreign institutions increasingly looking for business opportunities here, there is every likelihood of change in the near future.
Stamp duty
I am thinking of purchasing a new house costing about £200,000 within the next few months. I am a first-time buyer and the house is 1,290 sq ft and I intend to reside in it. I believe I will not have to pay stamp duty, is this correct? Also, I would like to know if I had to re-locate and sell this house, would I have to pay Stamp Duty on a second house if it is (a) new or (b) second-hand?
B.G., e-mail
Yes it is correct. If you have never previously owned a home and intend to reside in it as your principal private residence, you will be entitled to the first-time buyer's grant and to exemption from stamp duty. The upper limit on size is 1,345 sq ft or 125 square metres.
If you had to move from the house for relocation or any other reason, you would be liable to stamp duty. This would be the case whether you sold the existing house and bought again, or, more punitively, if you retained the current house and bought another.
Pensions
In a recent report, you said that people who withdraw their money from pension schemes when they leave companies before they have rights under those schemes receive their contributions minus the tax relief they enjoyed when they first made the contributions. Though not an expert, my personal experience is that tax is deducted at 25 per cent on returned contributions not at the higher marginal rate. Can you confirm whether this is in fact the case?
Mr S.H., e-mail
The situation you refer to relates to people who leave employment before they have vesting rights under that company's occupational pension scheme. As of now, the law says that employees must have pension rights under such schemes once they have been employed by the company for five years. Under legislation due before the Oireachtas, this "vesting" period is due to come down to two years and some companies already respect this.
When contributions are made into a company pension scheme, tax relief is available - within limits - on those payments at the individuals' marginal or higher rate of taxation, currently 44 per cent. If departing employees opt to have their contributions returned because they have not served enough time to enjoy vesting rights, they receive such payments minus taxation at a "notional" rate of 25 per cent, as Mr S.H. correctly points out.
This rate is levied regardless of the rate at which the employee pays tax. For higher rate taxpayers this year, it means an effective tax break of 19 per cent - the difference between the tax they would have paid if the money had never gone into the pension and the rate at which they are taxed upon the money's withdrawal from the pension scheme.
This is merely an added bonus for the original correspondent, who wanted to know what their situation was with pension contributions made to an employer with whom they enjoyed no pension rights because they were leaving the company too soon. The original advice to take the money and put it into AVCs or their new employer's pension fund is still valid, as few of us get close to the upper limit of contributions permissible into pension schemes.
Bacon report
I hold an Irish passport, but I am not ordinarily resident in Ireland. I have never been a homeowner and I am now considering buying a house in Ireland for my own private use and not for rental purposes. If I am to proceed with this purchase, will I be treated as a first-time buyer for stamp duty purposes? Is my residency status relevant in this regard?
Mr A.N., e-mail
The emphasis in the Bacon report and the subsequent legislation on second homes has sown great confusion in relation to a large number of people like yourself, who, while Irish, do not live in the State but do not own property elsewhere.
It is particularly so for people who entertain some expectation of returning home in the future and watch with horror as house prices in the Republic escalate to extraordinary levels.
Having taken yet more advice on the latest Finance Act, which encompasses the Bacon III proposals, it appears that the Revenue might take a strict interpretation of the residence requirement. The law refers to the property being occupied "as the only or principal place of residence" of the purchaser.
That indicates that one would have to live in it to qualify for the first-time buyers' exemptions, or indeed the standard owner/occupier exemptions. For practical purposes, this would be well nigh impossible for most people not ordinarily resident in Ireland.
As I say, there is confusion surrounding this whole area, as many people initially believed the provisions were designed only to prevent people buying for rental purposes. The best I can offer is that it increasingly appears as though the latest provisions will work against you and are intended only for first-time buyers actually living in the accommodation purchased. But, if I were you and especially given the rapid rise in house prices, I would pay for some professional legal interpretation of the new provisions.
