Q&A Dominic Coyle

Should I be paying USC on bank interest?

Tue, Aug 20, 2013, 01:00

My balancing statement for 2013 shows USC deductions from bank interest and a share option plan dividend. I am surprised at the deduction of the USC from the bank interest as I am exempt from Dirt. Is the USC deducted from the interest on savings certs and savings bonds? If so, when? These are free from income tax.

Mr B O’M, Kerry


My understanding is that Deposit Interest Retention Tax is full and final settlement of tax liability on bank interest, and that is backed up by a call I made to Revenue. Even if you are liable for Dirt, you would not be paying the universal social charge on bank interest – your exemption from Dirt does not change this position.

Of course, your entitlement to bank interest free of Dirt is assessed on your total income – including any income from bank interest – being below the income threshold of €18,000 for an individual over the age of 65 (or €36,000) for a couple.

However, USC will kick in at a much earlier stage. Leaving aside income from interest, the USC threshold on income from other sources is just €10,036 and, if your income is above this, you pay USC on the lot (apart from bank interest).

There are other exclusions in assessing USC income, notably welfare payments, including state pensions.

While it should be clear in any balancing statement, I am wondering if the USC charge relates to the share option plan dividend. The best advice I can give – and Revenue concurs – on the basis of the skeletal information you have provided is that you should contact your local tax branch and go through the form. It is either a misunderstanding, poor layout or a mistake, but there is no USC on bank interest.

In relation to An Post products, interest on tax-free savings certificates is specifically exempted and I believe the same is true of savings bonds.


Threshold covers gifts and inheritance
In relation to recent correspondence about tax on gifts between parents and children, as a parent in Ireland I believe I can gift my son/daughter a maximum of €225,000 tax free while I am alive.

Will that son/daughter have to pay inheritance tax on all of any inheritance they may be entitled to when the parents die, or is there a further tax-free allowance at that stage?

If that son/daughter is living and working in England when that gift is made and where the gift threshold is higher, does he/she come under the jurisdiction of the the Revenue in England and therefore be entitled to the greater amount there?

Furthermore, if that child decides to return to Ireland at a later date what impact might that have?

Mr WM, email


Capital acquisitions tax is the tax at issue here and it covers both gifts and inheritances. The important point is that the tax liability relates to the beneficiary not the person giving the gift or inheritance. This is a crucial difference with the UK where inheritance tax is generally levied on the deceased estate rather than on the beneficiaries.

In Ireland, a son or daughter can, in 2013, receive a maximum in gifts and inheritances of €225,000 from a parent before becoming liable for the tax. Bear in mind that if a person has already received a gift from one parent – beyond the €3,000 annual small gift exemption threshold – this must be aggregated with any sum received from the other parent in order to assess liability to tax.

In relation to your specific questions, the tax is both cumulative and covers gifts and inheritances. So, if you have used up the full threshold in lifetime gifts, a child will be liable to CAT on the full amount of the inheritance (unless the threshold rises). There is no further tax free allowance at that stage.

In relation to beneficiaries living abroad, there is a double taxation agreement between Ireland and the UK governing inheritance to ensure that people do not get caught twice.

However, it is not a case of simply choosing which jurisdictions to operate under in order to benefit financially. In general, if the property being gifted, or bequeathed in a will, is in Ireland, Irish CAT will apply . A credit will gen- erally be allowed against any tax that might be levied in the UK on the same bequest or gift.

If after settlement of tax affairs on an estate, a child returns from the UK to Ireland, that will not impact them in terms of liability – which will already have been discharged on one side or the other in the settlement of the estate.


This column is a reader service and is not intended to replace professional advice. Please send your questions to Q&A, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com