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.
Stocks and the euro
Will all stock exchanges begin dealing in the euro from January 1st, 2000, or will that be confined to the Irish Stock Exchange?
Ms A.M.NicP., Florida
Since January 1st this year, the stock exchanges of those 11 states in the European Economic and Monetary Union (EMU) have traded all stocks in euros and quoted them in the currency, which is now officially the currency of those states. The pound is, in strict legal terms under the accord setting up EMU, only a denomination of this currency. Having said that, for many people, the pound is still the effective currency and will be until the formal changeover of January 1st, 2002, when the euro will physically enter people's pockets.
Until that time, the situation with the Irish Stock Exchange - and also with stocks traded in Germany, France, Italy, Spain, Portugal, Netherlands, Finland, Belgium, Austria and Luxembourg - remains the same. The shares will be quoted in euros and contracts will be denominated in euros, although there is generally a local conversion to pounds or whatever on the form somewhere.
However, most investors will continue to pay their brokers in pounds or whatever unless they are among the minority using euro accounts. Given the fixed rate of exchange between the local denominations and the euro currency, this is no problem.
If and when other members of the European Union - Britain, Sweden, Denmark and Greece - join the new currency union, their stock markets will operate in the same way. Until then, prices on these are quoted in the local currency.
Tax on selling a business
As capital gains tax (CGT) is not payable on disposal of a business or farm up to the value of £250,000 (€317,435), what is the position where the businessman or farmer dies and the inheritor disposes of the business? Is the disposal liable to capital gains tax? Furthermore, in the case of a partnership where the partner dies, does the inheritor have to pay CGT on disposal of the partnership?
J.P.L., Meath
There are a couple of issues here. The first is that the figures you quote relate to an exemption from capital gains tax, known as retirement relief. This applies where the business owner or farmer is aged over 55 and has owned the asset for 10 years or more. In such circumstances, disposals valued below £250,000 do not come into the capital gains tax net. Disposals above that figure do attract a certain portion of capital gains tax.
Indeed, if the business or farm were passed over to a child or a nephew or niece who works within the operation, the transfer may be exempt regardless of the figures. However, the person receiving the asset must hold onto it for a further six years at least or a capital gains tax liability on the original transfer will emerge.
This is, of course, entirely separate to the situation with inheritances. In the latter case, the situation is simple: assets transferred upon death are considered exempt for the purposes of capital gains tax, regardless of the value of the asset. Of course, there may be some exposure under capital acquisitions tax (inheritance tax). However, reliefs on the inheritance of farmland or businesses exist and may well reduce or eliminate any CAT liability.
Moving on, the subsequent disposal of a farm or business received as an inheritance may well attract a liability to capital gains. There is a provision for rollover relief under which capital gains tax can be deferred if the proceeds of selling certain types of business are reinvested in business. As with all the provisions outlined here, there are particular conditions attaching to such rollover relief.
The situation with respect to partnerships is more complex and would depend in part on the terms of any partnership agreement.
In any case, anyone planning to get rid of a farm or business or dissolve a partnership should obtain specialist advice from tax consultants.
Scrip dividends
What are the tax implications of accepting scrip dividends?
T.S., Kerry
Scrip dividends are shares received in lieu of a cash dividend from a company. There is no real difference between scrip dividends and cash dividends in that both are considered income by the Revenue commissioners and treated accordingly for tax. Both come under schedule F of the income tax code, which applies to dividends and other distributions from Irish resident companies.
For the purposes of income tax, a scrip dividend will be assessed at the value at which it is issued. So if, in place of a dividend of, say, €100, you receive five shares by way of scrip dividend, each share will be valued at €20 by the Revenue.
Of course, quite often, the number of shares is not precisely dividable into the dividend. In this case it is the value of the shares issued which is used in assessing income tax liability. For instance, if the dividend due to the shareholder is €100 and the price of the shares is €19.50, the investors will receive five shares worth €97.50. The balance of the dividend in retained by the company and added to the following dividend.
Stamp duty on property
The correct rate of stamp duty for a house sale in excess of £350,000 and less than £500,000 is 7 per cent and not 9 per cent as stated in your reply to the query on tax and domicile last week.
R.L., e-mail
You are quite right. The most recent changes to rates of duty on the purchase of residential property did indeed rate property valued at between £350,000 and £500,000 at 7 per cent. The 9 per cent figure I quoted does refer to properties in excess of this. For information, property below £350,000 is taxed at 6 per cent stamp duty, until you get to the very lower reaches. Sorry for any confusion.
