In this week's Q&A Dominic Coyle answers questions relating to credit cards and inheritance.

Credit cards

I was interested to read your reply to a reader's query on avoiding the 40 credit card stamp duty.

In the interest of having the most cost-effective credit card for my own use, I examined the options available and settled on an American Express Blue Card because it offers a 1 per cent cash back on purchases. In the first two months alone I received cash back of €15.03.

I then set about cancelling the Bank of Ireland Visa card that I had previously held. With the April 1st deadline in mind and aiming to avoid the Government levy, I wrote to my bank in early January to cancel the card. I was surprised to receive a letter from Bank of Ireland stating that 40 would be applied to my account in respect of Government stamp duty for the year 2003/04 prior to the account being closed.

Surely the 40 that was applied to my Visa statement in April 2003 covered this period? - Ms M.O'R., email

You are not the only person to have got in touch with me in the past week over this. In fact, some of the banks contacted me, worried that they were being seen as the devil of the piece for unfairly levying stamp duty on closing accounts.

To be fair to them, the banks are only doing what is prescribed by the Minister of Finance. When he introduced the charge in December 2002, he set it retrospectively so that no one would have a chance to escape the net. Thus the charge that was levied on your card in April 2003 was for the 12 months usage of the card up to the end of March 2003.

Similarly, if you close your account now you will still be liable for a charge for its use in the 2003/04 year, a charge that would normally be levied on you by your card provider on April 1st.

Thus, for those looking to change to Tesco, Ulster Bank or any other provider offering to pay the stamp duty, you might as well hold off and get that new card on April 1st. Sorry for the confusion. Mea culpa.

Turning to the second - effective credit card usage, it is certainly true that people need to look at the totality of the offering before deciding which card is best for them. After all, someone who relies on a hefty card balance and pays off only a small amount each month would do well to pay more attention to the interest rate charged on balances than on any offer on stamp duty.

It is also the case that as with all offers in financial services, the devil is in the detail. I have not seen the full conditions attached to the Tesco offer, but from what I have seen, it appears that the company is committing itself to bearing the cost of the stamp duty only once. Thus, if you switch to Tesco next year, you will not pay stamp duty in 2004/05 but might well find yourself liable the following year.

The same, as far as I can tell, is the case with Ulster Bank which commits itself to paying one set of stamp duty by way of a refund if you spend a certain amount on the card in a two-year period, a period in which we are now well advanced.

American Express, as with all providers, has its pluses and minuses and I certainly concede that it may be the right card for you based on your spending habits.

However, it is not nearly as widely accepted as Visa and MasterCard and the gap appears to be widening.

This is particularly so in certain countries and may be a factor for those who travel regularly on business or otherwise.

Inheritance

I have just inherited a five-figure sum of money from England. This sterling sum has been received in two instalments, one last year and the other this month. Can you please advise me of the current inheritance tax situation? Will I be liable to any other taxes? Are there ways of reducing this tax liability? - Mr D.A., email

You are liable to Irish capital acquisitions tax. Whatever chance you might have of ducking liability disappears once you are Irish tax resident and paying your taxes here.

The rate of tax is 20 per cent but there are thresholds below which no tax is payable. These thresholds depend on the relationship between you and the deceased and can be quite substantial.

For instance, children getting an inheritance from a parent can receive close to 450,000 while assets passing between other "linear" relations, for example, brothers, sisters, uncles/aunts and grandparents, are subject to a threshold which is 10 per cent of that. Money or gifts received from anyone else are subject to a threshold that is half of the lower sum again but still in excess of 22,000.

Another factor is that the threshold depends on the year in which you receive the inheritance.

Until recently, the thresholds were adjusted manually or not at all by the Minister for Finance in his annual budget. However, over time, they came to be wildly out of kilter with the value of assets and people receiving even modest bequests were discovering that they had to sell them in order to meet the tax liability.

Now, sensibly, the thresholds are index-linked and rise every year in line with inflation.

Another point to note of relevance to your case is that thresholds applying to your case would be those for last year. The fact that you received some of the inheritance this year is irrelevant. As far as you are concerned, the inheritance was granted last year. As such, you could receive €441,148 from a parent, 44,120 from other "linear" relations and 22,060 from anyone else.

Any inheritance received under one threshold must be added to other inheritances already received under the same heading. So, if you have previously received say 30,000 from one sister and are now receiving 30,000 from another, the latest inheritance would bring you over the threshold even though neither bequest is above the limit in itself.

Your liability in such a case would be 20 per cent of €15,880 - the amount above the threshold.

Finally, you will face a currency translation. I am not certain but I believe the relevant exchange rate will be the official rate on the date you actually receive the cheques.

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.