Q&A

Dominic Coyleanswers your questions.

Children's losses on Eircom shares

Can you advise whether losses on Eircom shares purchased by me in the name of my children can be combined with my loss to offset against other capital gains?

Mr D D, e-mail

The key to this is determining who owns the shares. The Revenue is quite clear that capital losses can only be offset against capital gains where the assets in question are "beneficially owned" by the same person.

In this case, you acquired Eircom shares on behalf of your children. Assuming they were minors at the time, both their name and yours would appear on the share certificate.

However, it would appear from your question that, on any fair reading, the beneficial owners of these shares are your children and not you.

That being the case, the capital losses on those shares could only be used by your children to offset exiting or future capital gains. It would not be open to you to use these losses against your capital gains.

In the circumstances, I think you would find it difficult to argue that you were the beneficial owner of these shares - it might also raise issues about exceeding quotas in the original share allocation by using the name of your children.

PRSA queries

You did great work to ensure that Revenue did not close the poor pensioners' entitlement to €2,500 payment on a PRSA as outlined by the Minister.

Two questions I would like you to answer:

1. Is my wife, who is 60 and did not work outside the home, entitled to open a PRSA and get this payment?

2. Which PRSAs are better for short-term pension investment of the €7,500?

Mr D O'B, Kildare

One of the big selling points for Personal Retirement Savings Accounts (PRSAs) was that they were open to anybody. That means that your wife is fully entitled to open one, regardless of the fact that she has not worked outside the home.

In terms of which PRSAs are better suited to a relatively short-term pension investment, I would suggest that you should stick with the standard PRSA model, where charges, though not cheap, are less than for other more sophisticated products.

You can expect to pay 5 per cent of your contribution in commission along with a 1 per cent annual management fee.

As your wife is 60, I would hope she would not fall foul of the excessive caution being shown by a number of PRSA providers in opening accounts for certain people.

For those people, mostly elder individuals already on a pension, who find themselves illegally refused a PRSA, I strongly suggest they write now to the company or companies that have refused them.

The Revenue has imposed a deadline of end-December on transfers from SSIAs that matured between May and September to PRSAs. People in this situation need to have a written record of your application. They should also copy their correspondence to the Pensions Ombudsman.

Dirt exemption

In his budget speech, Brian Cowen said: ". . . credit institutions will be enabled to operate Dirt-free accounts for those aged 65 and over and for those who are permanently incapacitated, where their income falls below the relevant income tax limits".

My questions are:

a) Does the last clause about income tax limits apply to those aged 65 and over as well as to the incapacitated?

b) Does this Dirt exemption extend to SSIA accounts?

c) What are the Dirt-free income tax limits?

d) Is there no Dirt exemption for others whose income is below those limits?

e) What are "credit institutions"? Does it include all banks?

Mr D W, e-mail

The part of the speech to which you refer was the element where the Minister was outlining plans to automate crediting of reliefs to taxpayers. The reason for this is that a considerable amount of relief goes unclaimed every year either because people are unaware of their entitlement or unwilling to go to the trouble of pursuing it.

In relation to your specific questions, the reference to income tax limits applies to both the elderly and the incapacitated. The Dirt exemption does not extend to SSIA accounts because such accounts charge an exit tax and not Dirt, for which no such relief is available. In any case, even if exit tax on investment funds was subject to relief, the last SSIAs are likely to mature before automation is in place.

There are no specific Dirt-free income tax limits - just income tax limits. For 2006, these were €17,000 for a single person aged 65 and over and €34,000 for a married couple in the same situation. In the Budget, Mr Cowen announced that these limits would rise to €19,000 and €38,000 respectively.

No, there is no Dirt exemption available to people unless they are aged 65 and over or they are permanently incapacitated.

The term credit institution refers to all banks, building societies and other financial institutions which currently levy Dirt, such as credit unions.

• 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.