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.
Renting
Does a person who rents a room in a house qualify for tax relief on the rent paid to the landlord or does that only apply where a rent book is given and the unit is self contained?
Ms L.P., e-mail
Like the Government savings scheme, the rent-a-room scheme has yet to be passed into law. It too is part of the Finance Bill 2001. I am not aware that the scheme will absolve those renting rooms from the need to provide rent books. Certainly, there will have to be some record of the rent paid to assess whether the person renting the room is eligible for tax relief.
Equally, I am not aware that the scheme deprives tenants of the tax relief on rent paid. My understanding is that the measure is designed to provide more options in the private rented sector while taking advantage of the space available in the homes of many young people who are struggling with heavy mortgage payments.
Savings
I know the limit under the new Government savings scheme is £200 per month, but what is the situation if I open a joint account with my wife?
Mr P.B., e-mail
Logically, you would assume that the limit would be doubled. However, the Department of Finance tells me that joint accounts will not be allowed under the new scheme. Quite how this will work out, I cannot imagine. After all, I am sure the institutions would prefer two small savers to team up in one account, halving the administrative time and cost to the institution.
What does seem certain though is that even if two people are allowed open an account, the limit will still be £200, so it seems impractical for people able and intending to save towards the maximum permitted under the scheme.
Housing
Further to a question from B.A.S. of Wicklow recently, I have just purchased a second house and moved into it. I have yet to decide whether to keep my first house or not. If I sell my first house within a year am I liable for stamp duty and, if so, how much? If I rent out my first house, say from now, and sell it later, what is my tax liability?
Mr S.McC., e-mail
You are liable to stamp duty on the house you have just bought. The rate depends on the value of the property but, as you are now using it as your principal private residence, it will be at the lower rate - from 0 per cent to 9 per cent depending on value.
In terms of renting out your first house, your major tax issues are income tax and capital gains. You will be liable to income tax on your rental after expenses - not including mortgage costs - at your marginal rate. On capital gains, you will face a bill if and when you eventually sell the house. This will be calculated on the portion of your ownership of the property for which it was not your principal private accommodation and was rented.
For instance, if you owned the house for 10 years, of which you lived in it yourself for five years and rented it for the other five, capital gains would be levied on half the capital gain you made on the house. The capital gain is the difference between the purchase price and the sale price.
This is adjusted to allow for inflation using an indexation factor, which is available from the Revenue Commissioners. You are also entitled to claim expenses involved both in buying and selling the property before assessing the liability to capital gains. The current capital gains tax rate is 20 per cent.
Stamp duty
I'm very confused about Ireland's stamp duty practices and I can't get a same answer out of two people. I am selling my house in the US and moving back to Ireland. I am purchasing a house in Dublin for £180,000. I have never owned property in Ireland before. Am I eligible for first-time buyer status, as I'm a first-time buyer in Ireland, or am I considered an owneroccupier because I owned property in the US?
Ms G.P., e-mail
It may not be the answer you want but the rules state clearly that you will not be considered a first-time buyer in Ireland if you have owned property before, regardless of where that property may have been. This is true even if you have only been a joint owner.
Income tax
I received a revised assessment earlier in the year from my tax inspector showing an overpayment by me for the past tax year. The notice stated that the overpayment would be dealt with "as soon as possible".
However, several months later no repayment has been made and an enquiry to the tax office elicited the information that it could take another month or so before I will get my money back.
As the Revenue charge interest on late payments of taxes can I take it that they will automatically add on interest when they finally get around to making the repayment?
P.F.C., e-mail
It appears that you may be entitled to interest on your overpaid tax but it might be a little much to expect that you will receive it automatically.
The situation is that where the repayment occurs in preliminary tax, the Revenue will pay interest on any overpayment. Otherwise, it will not. Having said that, such an event is generally likely to happen with preliminary tax - where self-employed people pay either 90 per cent of what they themselves forecast will be their income tax liability in the year in question or a sum equal to last year's income tax bill.
With circumstances changing all the time, it is possible that the preliminary payment may prove too generous, in which case the Revenue will pay interest.
However, if your situation relates to a top-up payment to meet a final assessment which proves too high, I would imagine it would certainly be worth looking for interest on the same basis. After all, you have paid what was requested and lost the use of that money - wrongly as it turns out - for the intervening time. In that time, the State has had use of it.
