Q&A Dominic Coyle

We are a returned emigrant couple in our seventies and our whole income from pensions is UK-taxed at source. Income tax of £1,100 was paid last year to the Inland Revenue. We have found that we would be below the pensioner threshold for last year in Ireland by about €1,500.

Is there any route to reclaiming tax already paid? I registered us with Revenue as permanently resident from January 1st last year.

Mr J.M., Leitrim

The good news is that you can reclaim the tax paid in the UK – provided you are tax resident in Ireland. Your communication with the Revenue would indicate that you are.

You will need to ask Revenue (in the UK or here) for a form to reclaim the tax paid last year. Bearing in mind that the UK tax year still runs from April 1st to March 30th of the following year, you will probably need to reclaim tax in respect of both the 2012-13 tax year and the current 2013-14 one.

There is no need to wait until the end of the UK tax year to make the application. When it is processed, the UK Inland Revenue will repay tax deducted at source on your pensions in the UK and will also adjust the tax coding on those pensions so that no further tax is deducted in the UK.

When you receive and fill out the form, note that you do not return it directly to the UK Revenue but route it instead through your new Irish tax office, which will, in turn, deal with the UK authorities.

The one thing to bear in mind is that the pensions will then be paid to you gross – with no tax deducted – and it will be up to you to make an annual tax return to the Irish Revenue on your tax position.

Gift tax and
stipulations

You have written on several occasions about the gift tax exemption of €3,000 a person a year – or €6,000 if, for example, parents give the money from a joint account. I take the view that we can give €6,000 tax free jointly to the parents of a child with the stipulation that it be spent on childcare, health and education purposes for the child and that this is tax free. Is this correct?

Mr J. McK., Wicklow

You are talking here about two different things – gift tax exemptions and dictating how any money gifted be used.

On the gift tax side, it is straightforward, as you have noted. Any person can gift €3,000 a year to another. Thus you and your wife can each gift €3,000 to you child (one of the parents in this case) or to the child itself – or both – and there will be no tax liability on any of the parties involved.

The small gift exemption is that straightforward. It makes no provision for such a gift to be constrained in the way you have outlined. That would be subject to a separate but obviously related agreement between you and the parents of the child. Clearly, this would best be done informally. If you were obliged to go down a formal route, with a specific legal agreement drawn up covering the use of any monies gifted by you to the parents of the child, you will seriously dissipate the value of the gift – or both parties will face considerable extra legal costs.
Reducing
mortgage term

My query relates to capital payments made by me to reduce the term of my mortgage – a 15-year mortgage with EBS.

Some years ago, I made a series of repayments over a nine-month period of between €1,000 and €2,000 and was told that each reduced my mortgage term by between two and five months.

A couple of years later I made another repayment of €900 and was told it had reduced the term by a month. I was surprised that this payments had such little effect. Surely as a mortgage reduces, the effects of capital payments are more significant?

My mortgage provider was unable to explain it to me. A letter of "explanation" simply repeated the information I already have. Am I to be dissuaded from making capital repayments?

Ms U.D., Leitrim

This query dates some time back and I am not sure if the mortgage is still active. However, you are still entitled to query the actions of your financial services provider.

Like you, instinct tells me that payment of similar scale on a reducing mortgage should have a greater rather than lesser impact the later they are paid as the capital sum outstanding is lower. It may be that the EBS was entirely correct in how it calculated the benefit of your payment, but it clearly either had no interest in explaining the matter to you or was incapable of doing so. Either is a cause for concern.

It is incumbent on financial service providers – the same as anyone else with whom we transact business – to be able to explain charging structures. I would argue it is even more important with financial services businesses because there is so little understanding or transparency of how charging operates in this area.

It is probably too late now to proceed to the financial services ombudsman who has a strict six-year limit laid down by law on what it can investigate. However, I would continue to pursue the EBS, which presumably is somewhat chastened and less arrogant now, having lost its independence as a result of the reckless lending by all banks and building societies during the property bubble, for an answer in clear English.

You might even get a refund after all this time, although I imagine that is unlikely.

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