Dominic Coyleanswers readers' taxing questions.
Q WHEN MY father died in late 2003, he left me just under €200,000. I telephoned the tax office at the time and was told that this was well below the threshold allowed, and that I did not need to make any further declaration.
As the money was released by the solicitor dealing with his probate, I banked it in deposit accounts, where it has been Dirt taxed. In addition, I also saved the maximum permitted in the SSIA scheme, and when that ended I lodged the payout to a deposit account.
Since the SSIA scheme ended, I have been saving €1,000 a month in a high- interest regular savers account.
All in all, I have over €250,000 on deposit, spread over a number of different accounts.
The press reports recently on the disclosure scheme for deposit accounts have been very confusing, as they talk about "hot money" and "tax evasion" and I am sure that I do not fit this category.
Do I need to make any further disclosure on where all this money came from? I have made annual tax returns online every year and will be doing so again this year before the October 31st deadline for last year.
Mr T.O'N., Dublin
AThis is always a problem when the Revenue announces new lines of investigation. The disclosure scheme to which you refer relates to deposits held in banks where deposit interest retention tax (Dirt) in either 2005 and 2006 amounted to more than €635.
In effect, that involves accounts holding more than €20,000 and, as a result, would certainly include yours. The scheme is being extended for subsequent years and, eventually, details in relation to any deposit account held in a bank, credit union or other financial institution.
The bank is obliged to return your details to the Revenue. Revenue has suggested they inform customers when they do this but they are not obliged to do so.
The important thing to note is that this trawl is designed to unearth tax evasion - ie people who put on deposit money on which they were due to pay tax but didn't. This does not apply to you. As you say, your inheritance back in 2003 was not sufficiently high to trigger capital acquisitions tax (inheritance tax) and your SSIA savings were taxed at maturity.
The only issue, then, surrounds the €1,000 a month you have been saving subsequently.
From what you say, all your savings have come from sources that were either properly taxed or not liable to tax. That does not mean that you will not receive a letter from the Revenue asking you to break down where the money came from and attest that it is "clean" but, on the basis of the information you outlined above, I cannot see you receiving any further attention. Don't worry.
Q The gain in value of my SSIA was taxed at the maturity date. Unfortunately, I did not cash in my SSIA until recently when the gain was considerably less. The tax amount deducted at the maturity date is considerably more than the tax amount would be if tax was deducted at the time of cashing in. Am I entitled to reclaim tax?
Mr J.M., Cork
AI'm afraid not. The rules of the Special Savings Incentive Scheme accounts (SSIA) stated that, at the end of the five years, the accounts would mature. In the case of deposit account's deposit interest retention tax (Dirt) had been deducted along the way. In the case of investment accounts, such as yours, the gross roll-up provisions applying on maturity kicked in. This meant that the investment gain on the account was taxed at 23 per cent.
Given the performance of investment-based SSIAs, this was still a profitable venture for account-holders.
A large number of people kept their money in investment accounts after the end of the SSIA scheme - given the low deposit interest rates pertaining at the time, this was generally what people were advised to do.
However, the climate has changed significantly since then and your account would be unusual if it was not worth less now than when the SSIA account matured. However, that is simply an investment loss and there is no means of reclaiming any of the tax paid at the end of the five-year SSIA scheme.
Q I am familiar with the term APR in relation to interest rates on savings or loans, but what is this AER that I now see quoted all the time?
Ms F.M., Dublin
AAnnual equivalent rate is a notional rate that is generally quoted on products where interest is paid more frequently than on an annual basis. It attempts to show what your "real return" would be if the interest paid, say quarterly, was added to the investment and compounded over the balance of the year.
As a result, the AER will generally be higher than the quoted gross interest rate on the account.
However, it is a notional rate and is based on certain assumptions that may not materialise. The gross or net interest rates are better guides.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish- times.ie. This column is a reader service and is not intended to replace professional advice. All suitable queries will be answered through the columns of the newspaper.
