Can bank delay giving mortgage interest relief?
Revenue tells me that the technology workout has been ongoing and that lenders do have until the end of the year to pass it on.
What taxes are due on my distribution bond policy gain?
In October 2000, I took out a distribution bond policy with New Ireland Assurance. The investment was for £5,000 (€6,349). The number of units allocated was 2,323, £2.15 (€2.73).
In the Irish Domestic Funds Net list published in Monday’s Irish Times, the New Ireland Deferred Dist.1 is priced at €317.30. That equals a €7,372.21 value of my investment, a gain of €1,023. What taxes are payable on this gain if I cash in now. I am aged 77 and am exempt from DIRT.
Mr B.O’M., email
It’s a pleasant change in what has been a torrid time for investments to see someone who has good news to report. Mind you, you have been very patient – leaving your money untouched for the past 12 years.
I don’t believe you will have any tax liability on your investment if you cash it in.
There are two tax regimes for unit funds – “net” and “gross roll-up”. The latter was introduced in 2001.
Under gross roll-up, no tax is deducted from the fund as it is invested – i.e. any investment gain stays in the fund and “rolls up”, with tax eventually being paid when you withdraw the money.
Back in 2006, the government decided to adjust this slightly to stop people locking money away in unit funds to avoid tax by introducing the notion of “deemed disposal” under which gains in a fund were taxed every eight years – regardless of whether they were withdrawn from the fund or not.
However, back in 2000, when you invested, gross roll-up was not an option. At that time, all funds were “net”, which means tax was deducted from the fund each year and paid over to the Revenue.
As Revenue has received their tax cut annually, you should have no tax liability.
DIRT does not apply to unit fund gains, and nor does capital gains tax. Instead, gains on “net” funds are treated as income and subject to income tax.
The good news is that, since you wrote, the value of your fund has risen again and last Friday stood at a unit price of €3.21, giving your investment a worth of €7,456.83 and a gain of €1,107.83.
This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.
