Will stamp duty relief be applied to property tax?
While there has been, as you say, little talk about relief for those who paid exorbitant sums of stamp duty, it has not been ruled out.
In fact, the latest soundings indicate that some provision is likely to be made for people in this position. Whether that is the five-year exemption originally suggested remains to be seen. As you rightly point out, even that would leave purchasers from that era out of pocket and “overtaxed”. However, with austerity hitting home, it will be difficult for the Government to be seen to be overly generous with relief.
The hope is that they do not do what they did with enhanced mortgage relief last year – when only first-time buyers were provided for. On the basis of election promises, many had hoped for a broader measure for people struggling with mortgage payments.
Differences in tax liability for gains on funds
Regarding your answer last week on the tax liability question for gains on funds, can you clarify what you mean by saying all taxes paid by the fund (“net” type) but further state that such receipts are subjected to income tax. Also clarify PRSI, levies etc.
Mr MO’S, email
The question last week was in relation to “net” funds. These are older funds that were no longer marketed after 2001, although they do still exist.
In a net fund, tax was deducted at the standard rate of income tax each year. Thus in year two of a fund, an investor would have the capital invested plus any gain made in year one, minus the standard rate of income tax on that gain.
That is the only tax deducted. This continued each year of the investment; hence the investment proceeds on the basis that it is “netted” for tax each year.
Under gross roll-up, introduced in 2001, no tax is deducted each year; instead the money rolls up gross (ie, not net of tax) with the full gain being reinvested annually.
At the point the investment was drawn down by the investor, tax was applied. To compensate revenue for having forgone this money each year, the “exit tax” was levied at the standard rate of income tax applicable at the exit date, plus three percentage points.
In 2006, it was decided that too many people were using gross roll-up as a tax avoidance measure and the government decided to introduce the concept of “deemed disposal” where it is assumed that money is withdrawn after eight years and tax applied accordingly at that date. Appropriate offsets are made when a disposal is eventually made.
No PRSI or levies apply to unit fund investment.
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.
