Dominic Coyleanswers your questions
Capital gains on ICG shares
I have shares in ICL since BES days. Recently, instead of paying a dividend with withholding tax deducted, they pay a capital redemption sum with no deduction. How should this be noted on my income tax returns? Is it a capital gain?
D F, Dublin
In July 2003 Irish Continental Group (ICG) cancelled all its existing share certificates and issued new ones. These new certificates cover ICG units - which each contained one ordinary share and 10 redeemable shares.
Since that date, only these new certificates are valid for share transactions and if yours are not of this type, you would need to contact Computershare, which organises the company's share register.The board of the shipping group can redeem some or all of these shares at their discretion and, since October 2003, it has done so at regular intervals. As you have noted, such shares tend to be redeemed instead of the company granting a dividend.
In relation to taxation, there are two issues to note. In the first place, according to the company, these redeemed shares are not subject to dividend withholding tax, which is generally levied at 20 per cent on dividends paid to shareholders. Instead, the full amount paid is subject to capital gains. The normal annual capital gains tax exemption of €1,270 applies as do the rules regarding the calculation of the base costs of "acquiring" the shares before assessing liability to capital gains tax of 20 per cent.
Bond losses
In relation to your reply to Mr J F of Wicklow last week, could a loss from bonds be offset against income, thereby reducing one's income tax bill by either 41 per cent or 20 per cent?
Mr J T, Galway
Last week, we confirmed that you could not offset losses from a bond against gains on stocks because the bond returns are liable for income tax, whereas gains on investments in shares come under the capital gains tax code. There is no provision for offsetting one against the other across separate parts of the tax code.
The Revenue Commissioners have subsequently clarified that, while gains on the bond investment are liable under the income tax code, there is no provision to permit the offsetting of any losses arising from such an investment against other income for the purpose of reducing overall liability to income tax.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or e-mail dcoyle@irish-times.ie.
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.
