Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 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.

Residence

In 1998, I took up residence in the Republic after an absence of nearly 40 years. While living abroad, I took out two endowment assurance policies with a South African life assurance company, one of which becomes payable next November. I would like to know if I am liable to Irish tax on the proceeds?

Mr K.K., Roscommon

The key point in deciding the liability to tax is residence in most instances. The state in which you are resident will generally be the one which will levy tax on your income. In the Republic's case, Irish tax residents are liable to pay tax on all their income wherever in the world that income may be generated or held.

Applying this to your case, it means that, having taken up residence in the Republic, the income from your maturing endowment policy will be liable to tax here regardless of where and when it was taken out.

Inheritance

My father died towards the end of last year, although his estate is still being sorted out. I have heard that there were a number of changes in the last Budget affecting inheritance tax. What I want to know is whether my father's estate will be affected by the changes, and if so how?

Ms A.B., e-mail

The first thing I would advise is to get a solicitor to help sort out the estate unless it is a very basic one. The very fact you would ask the question you have would indicate it may not be. Inheritance and probate are tricky procedures with legal responsibilities and should not be embarked upon lightly.

Turning to the core of your question, it is true that a number of changes have been announced in the Budget regarding capital acquisitions tax, as inheritance tax is more formally known. Chief among these are the introduction of a flat 20 per cent tax rate rather than the sliding scale from 20 per cent to 40 per cent with which we dealt with up until now and a widening of the tax-free elements of the inheritance tax code.

The main justification for these was to allow benefactors hold on to the family home, a situation which, with the current high value of homes and low tax-free thresholds was rapidly becoming a distant memory in cases where the home was passing other than to a surviving spouse. Even nonmarried couples lose out, regardless of the length of time they had been together and had lived as such in the property of the deceased.

The provisions of the Budget are currently going through the Dail, so they have not passed into law yet. The phrasing of the relevant section refers to the time the inheritance is "taken" and the key date for the purposes of the changes about which you have heard is December 1st, 1999.

However, looking back at the Capital Acquisitions Tax Act of 1976, which remains the core piece of legislation in this area, it appears the date taken means the date of death, not the date the estate is cleared for passing to the inheritors. This is so despite the confusion of colloquial English inherent in the phrasing of the Finance Bill.

What this means in practice is fairly simple. If your father died before December 1st last, his estate will be treated under the old rules; if he died since that date, the new rules will apply. . . once they are properly passed into law. If he died before December 1st, it means you will almost certainly face a higher tax bill on the estate, if it is not passing to your mother.

Equities

I was very interested in buying shares in Riverdeep, the educational software company, which floated on the Irish and US markets last week. I have previously owned only Eircom shares and was trying to find out how to get involved in the Riverdeep flotation. The newspapers said it would be quite difficult to get shares in the company. This was because the equity would be quite scarce in relation to the number of institutions and fund managers interested in buying, and also because stockbrokers would be more inclined to do business with existing clients. Is this so and if so, how does the small investor go about investing in shares in the technology area?

Mr B.F., e-mail

Despite the wonders of e-mail, your question arrived too late for inclusion last week, the day that Riverdeep became the most successful Irish company flotation. That alone is evidence of some of the enthusiasm for the stock which you mention. In the circumstances, I have slightly reworded the question to relate more to other flotations that may occur in the future.

The simple truth is that an "initial public flotation" is often public in name only. The prospectus tends to set the parameters on who can apply for shares. In a company such as Eircom, where the Government sought the widest possible ownership the eligibility is wide, but in most cases companies prefer institutional money as it is seen as more stable. It also comes in larger holdings.

Small investors are the bane of many company secretaries despite what these companies may say in public. Often they have less understanding of equity investment and therefore the benchmarks by which to measure performance. Also, the cost of providing shareholder services to an army of small investors is obviously higher than to a smaller group of large stockholders. It means too, that the company can get its message across in investor briefing meetings more easily.

The result is that it is all too rare for investors to get in on the ground floor of these flotations. While they can buy on the open market at a later date, they may well find either that: (a) the initial investors have already taken whatever profit is to be gained in the short term or; (b) the price has risen so prohibitively since flotation that there is little sense in buying in.

The other factor to note, and one of which you will be aware from the Eircom flotation, is that even where you can get in on the ground floor, you will not be allowed to trade your shares without the share certificate, unless you are an existing client in good standing of a stockbroker. This certificate takes some time to arrive and again, the chance to lock in early gains is gone.