Q&A

Your personal finance questions are answered here

Using exemption in estate planning

Following recent queries about capital acquisitions tax (CAT), can you tell me where in the legislation it states that the cumulative threshold amount determined in respect of gifts and inheritances does not and would not include the €3,000 annual exemption that you refer to.

For example, for the purposes of estate planning, a married couple with six children wants to begin planning the division of their estate to avoid as much CAT as possible.

Would it be possible for each parent to gift €3,000 to each of their six children annually without there being any CAT implications? Mr N.C., email

The reference you are looking for is section 69 of the 2003 Capital Acquisitions Tax Consolidation Act. It tackles exemptions from capital acquisitions tax for small gifts.

It sets down that, in any tax year, the first €3,000 in value of gifts from any one person to a particular beneficiary is disregarded for the purposes of tax.

The 2005 guidance notes to the legislation, which are available on the Revenue website, state specifically that this amount "is not aggregated with subsequent gifts or inheritances for the purpose of calculating tax on the latter gift or inheritance".

That makes clear that the €3,000 per head from any source in any year does not come into the equation on aggregation.

I would caution that if you look at the original legislation, the figure given will be €1,270, but this has since been updated by the Government as made clear in those 2005 guidance notes.

Getting down to practicalities, this means that there is nothing to stop parents giving €3,000 to each child each year without leaving either party open to current or future tax bills.

The one point that does need to be clarified is that the €3,000 exemption relates only to gifts and not to inheritances.

Forgotten shares

I have another of those "whatever happened to" cases. In the 1970s, I owned 100 shares in a group called Weston Pharmaceuticals Ltd. When the company's price doubled to £1.30 a share, I split my holding and retained 50 shares.

The most recent document I have from the company dates back to July 13th, 1973 and I have enclosed it. At the time, I lived at home on the address given on the enclosed certificate. I subsequently married and moved out. That property was subsequently bought and demolished by a new owner.

Is there any way of tracing what happened to Weston Pharmaceuticals? Mr L.G., Dublin

As it happens, there is still a company called Weston Pharmaceuticals in existence. Having said that, any link between it the company in which you held shares the 1970s is dubious. It is based in Hong Kong with an address at Unit 26-7, 8/F, Tower A, Southmark 11 Yip Hing Street, Wong Chuk Hang - Hong Kong.

The company you refer to was quite a significant player in the UK pharmacies business in the 1970s. The company was founded by Ralph Weston in 1955. In 1961 the business was incorporated, and the company went public as the Stanley Weston Group Ltd in 1964, by which time it owned 70 pharmacies.

By 1972, Weston owned 220 pharmacies from Yorkshire to Hampshire, and it was the second-largest pharmacy company after Boots. In 1971, the company became Weston Pharmaceuticals, and a year later it merged with Barclay and Sons, which became Britain's third largest pharmaceutical wholesaler.

So successful was the group that it was acquired in 1974 or 1976 by Dixons - the electrical stores group. However, it was an unhappy marriage and the company was sold by Dixons in 1980.

Whether the divested company has any subsequent links with the Hong Kong group, I do not know. However, any claim you might have would arise from the initial acquisition by Dixons. You should contact that company's registrar and find out what rights, if any, you have to recompense for those 50 shares. A price of £1.30 a share for 50 shares does not sound like much, but taking inflation over the intervening period into account, it is hardly a sum to sneeze at.

Still, if there was money set aside for shareholders who did not surrender their stock, it would probably be frozen at 1976 values, leaving you with little but the novelty value of tracking it down.

SSIA start date

My SSIA was opened on May 28th, 2001. My current account was debited on June 1st, 2001. The date June 1st instead of May 28th is being used to determine the maturity date of my SSIA. Is this correct? P.F., Kerry

At first sight you might not think so but it sounds to me as though the financial institution running your special savings incentive account (SSIA) is correct and you will receive your money at the end of June this year, rather than in May.

While you may have completed the documentation for the account on May 28th, the key element is when the first contribution is made. My understanding is that the accounts were not activated until that first contribution was made. If your bank records indicate that your account was debited on June 1st, 2001, it would make sense that the account was deemed to be activated in that month.

Getting better rate

I am two years into a 30-year tracker mortgage with Ulster Bank, with €224,000 of the loan outstanding. My house has risen sharply in value and is now worth about €360,000, so my loan to value ratio is just over 62 per cent. I have just discovered that I will shortly be getting a net lump sum of around €10,000 in settlement of a long-running pay claim from a previous job.

I am aware that some lenders (including Ulster) offer lower interest rates on mortgages below 60 per cent LTV - would it be prudent to switch my mortgage and use this unexpected windfall to bring the LTV down to below 60 per cent and avail of a better rate?

I had already been considering reducing the term anyway by increasing my monthly payments when I stop paying into my SSIA later this year, but I am not sure whether the hassle of moving my mortgage would be worth it. Ms F.D., Dublin

Increasing payments to your mortgage to reduce your term and, ultimately, your interest payments is always a good idea.

It is also true that some lenders offer better rates for borrowers looking for a lower LTV (loan to property value).

It would strike me that your best bet is to approach your current lender and see if they will accommodate your move to a better mortgage rate on the basis of your new, lower LTV. If they demur, look around for the lender offering the most competitive rate for your loan and offer your business there.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-16 D'Olier Street, Dublin 2 or by 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 questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.