Q & A

I sold a property in Dublin in September 1991. The purchaser's solicitors paid £30,000 to the tax office for capital gains. It took the tax office until July 1997 to make a capital gains assessment of £6,500. In October 1997, I got a refund of £23,500. Am I entitled to claim interest on this sum for nearly six years?

Mr A.O'B., England

On the face of it, six years does seem to be an unacceptably long time for the Revenue Commissioners to take to assess capital gains on a straightforward property sale, but it is impossible to determine from your short letter what, if any, mitigating factors may exist.

If the payment was, in effect, a withholding payment in the absence of tax clearance papers, no interest would be payable because the delay would be attributable to you or your advisers. If, on the other hand, all the relevant information and paperwork was submitted in good time to the Revenue, I would imagine you would have a good case for claiming interest.

After all, £23,500 is a considerable sum, had it been available for investment elsewhere over a similar period in a bull market. The least you could expect, if you complied with all the documentation required to process the capital gains assessment is that interest would be forthcoming. It would be worth getting professional advice, possibly from a solicitor in this instance before deciding whether there are grounds for proceeding with a claim.

My parents, both of whom are in receipt of a non-contributory State pension have a total of 430 Norwich Union shares which were issued free to them at the time of the flotation. I now wish to purchase these shares from them, at market value, and wonder how this could be organised. Can they simply be transferred into my name? What are the tax implications, if any, both for my parents and for myself?

Mr D.F., Dublin

Unfortunately, while certain stock transactions between spouses do not attract a tax liability, there is no such provision for stock transactions between parents and children. As such, the transfer of the shares would be considered by the Revenue as a sale of the stock in exactly the same way as if your parents sold the shares to any third party through a stockbroker. They will be deemed to have made a capital gain which, given the shares were free, will be the full value of the shares.

Assuming the ownership of the shares is spilt evenly between your parents, or indeed that they are held jointly, they will each be holding about £1,100 worth of Norwich Union stock. As they are each entitled to make £1,000 capital gains in a given year free of tax, they will only face a tax bill of about £20 each at present prices, given the capital gains tax rate of 20 per cent.

From your point of view there are no tax implications as long as the shares are bought by you. If, on the other hand, they were gifted to you by your parents, there could be a capital acquisitions tax liability on your part. You are entitled to a cumulative gift or inheritance allowance of almost £190,000 from your parents; anything in excess is subject to capital acquisitions tax, although this will be at a lower rate in the case of a gift rather than an inheritance.

Turning to the technical details of a share transfer from parent to child, I understand you would need to apply to the registrar of the Norwich Union. The company itself, through its shareholder helpline or office, will be able to tell you who that is. The registrar will ask you to fill out a stock transfer form and return it. There is a fee involved but it can be cheaper than going through a stockbroker, especially in small deals. As I understand it, in a simple transfer like this, you do not need to use a stockbroker.

I am coming off a two-year fixed mortgage rate this month. With large interest rate falls about to occur, should I take up another fixed rate or go variable for a while first? Do you think fixed rates may fall again?

Mr D.F., Dublin

There are a considerable number of people in the investment business who make their living by guessing the future direction of interest rates among other things. I am not one of them. Strictly from a layman's point of view, it seems clear that interest rates, at least in the Republic will fall dramatically in the coming months. Commentators seem to think it unlikely that rates will rise within the first year of Economic and Monetary Union for a variety of economic and political reasons. Beyond that, we are all in the realm of guesswork.

Just a year ago, it seemed unthinkable that the US would be looking to reduce interest rates at this time. All the experts were then betting on, if anything, a rise in rates. As experience has shown in the US and elsewhere these recent months, a year is an awful long time in economic forecasting.

On the subject of fixed rates, these are set at levels which the banks and building societies believe will be appropriate for two, five or even 10 years ahead. These rates are already competitive at the moment because they have been priced in the falls we know are coming in the next few months. Whether they will fall again, I just don't know.

The decision to opt for either a fixed or a variable rate will inevitably be a gamble. The one sure thing is that the fixed rate will provide the added security of knowing precisely what your payments will be on a monthly basis. If this is important to you, it would strengthen the case for taking a fixed rate.

On the other hand, if you do go for a fixed rate and variable rates become more attractive, you will find yourself tied into a less competitive rate with no way out except by paying penalties. The choice rests between flexibility and security, together with a gamble on the unknown.

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