Q&A

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.

Rental income

I've been renting out a room in my house for the last year. If the person renting claims his rental allowance in April this year, will I be liable for tax? In other words, is the £6,000 rental income threshold applicable from April 2000 to March 2001, or is it only from April 2001 onwards?

H.C., e-mail

This measure is still going through the Oireachtas with the rest of the Finance Bill 2001, but you can rest assured that it will not be retrospective. In other words, the tax relief will apply only from April 2001, regardless of when your tenant submits his rental allowance claim. Remember that in its first year, you will only be allowed to claim exemption on rent of £4,440, as this tax year will run only for nine months until December 30th, 2001.

Contrary to information given last week, I am now told that the exemption from tax applies only if the total income from such letting falls below £6,000 in a full year - £4,440 this year. If the rental income is above this figure, the whole sum is taxable. My thanks to Mr B.B. for bringing this to my notice.

If the owner of a city property wishes to take a career break and move to a different part of the country and rent a property for a six-month to two-years period, can they rent a room in their own city property and avail of this relief?

Ms D.M.R., e-mail

As the legislation is not yet complete, no-one is prepared to state categorically what is going to happen in the scenario you outline. It is a matter of reading the small print and that will not be finalised until the Finance Bill 2001 is passed into law with whatever amendments are made.

Looking at the original Bill, it refers to "residential premises . . . occupied by the individual as his or her sole or main residence during the year of assessment". That might well be read to exclude you if you are not using the property as your sole residence during the year. If, however, the property is still titularly your principal private residence for the period you are renting elsewhere, you may well be able to persuade the tax authorities of your eligibility for the relief.

Property taxes

In one of your answers today you mention the 2 per cent anti-speculative tax. My understanding from reading your newspaper is that this proposed measure is not now being implemented?

Ms G.V., e-mail

You are quite right. Unfortunately, the deadline for this page is early in the week with the result that the Minister for Finance's U-turn on anti-speculation property tax caught us on the hop, especially as it had not been indicated in the Finance Bill published only a couple of weeks earlier.

Property investors will no longer need to consider the effects of the 2 per cent anti-speculation tax for the first three years of ownership.

Savings

Your article of last week stated that the new Government savings scheme was only available for residents of the State. I am planning to emigrate to Australia for a period of two to three years in the next six months or so. I was hoping to avail of this new scheme before I go and continue to pay into it from abroad. Would it be possible to do this, as I would be resident in the State when the scheme starts and should be back in the State before the scheme expires in five years? Also would any other tax implications arise from investing in this scheme while abroad?

Mr C.C., Clare

Like a lot of the issues interesting readers at the moment, this is one that is still at the germination stage. The Minister has not yet produced the detail of how the scheme will operate and has said only that he will do so at the Committee Stage of the Bill. However, even in the outline he has given, certain things are clear. One is that the scheme will be open only to those people who are resident in the State for tax purposes. Savers seeking to avail of the scheme will have to sign a declaration to that effect.

It is possible for taxpayers who have been ordinarily resident here to retain tax residency while abroad, but it would mean that you would be taxed here on your global income and that could present administrative difficulties with foreign tax authorities. We do have a double-taxation agreement with Australia and you should look into that.

In any case, it would be possible to open an account while you are still tax resident here and to pay into it until you leave. You could resume monthly payments when you return, assuming it is within the five-year period of the scheme. You might not benefit fully from the scheme but you would not lose out totally either.

You can see why the Minister looking to take heat out of the Irish economy and encourage personal savings among Irish residents would be reluctant to allow anyone to open up an account here and avail of the 25 per cent State top-up on savings. That could get very expensive. For definitive answers, we will all have to wait until we have the full details to hand - when the Finance Bill 2001 is finally passed.

I am currently receiving a dependant's allowance in respect of my wife, who did not have enough stamps to qualify for a PRSI pension in her own right. The new Special Savings Incentive Scheme sounds very attractive. If my wife subscribes to this scheme, could we be penalised by losing some, or all, of this dependant's allowance? My wife does not have any property or other savings in her own name.

Mr. J.F.C., e-mail

As I have said above, we will all have to wait a while for the full details of the scheme but, insofar as we are aware of his plans, the Minister will not be penalising your wife or anyone in her situation for taking out such a savings account. The idea is to open it to everyone who is a tax resident in Ireland over the age of 18. That fact that your wife does not pay tax does not preclude her from being a tax resident and she is certainly above 18.

No-one can start one of these schemes until May 1st and by then we will all be well aware of the rules. Given the current uncertainty, no-one should sign up for one of the plethora of schemes the various institutions will be trying hard to sell from now onwards. Remember, you can only hold one account per person. It is worth waiting and ascertaining both the rules and the full range of account options before choosing a particular scheme.