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

Housing

Our son wants to build his first home. Are there tax or stamp duty implications if we deed him the land on which to build, or if we help him financially with a loan or gift?

Ms C.H., Mayo

I wish to build my first home on a site adjoining the family home of my parents and myself in Dublin. The site is worth about £60,000. What stamp duty, if any, would I pay? Since the site is being given to me free by my parents, are there any tax obligations? Are there any complications if I have been studying abroad for the past four years?

Ms T.C., Dublin

In the ever-tighter scenario for the housing market, it is little surprise the families are looking at different ways to provide for their children. The questions above are just some of many Q&A is receiving on the subject in recent times.

The good news for both individuals is that there is no longer any stamp duty applicable in their situation. Under a provision of the last Budget, a site given by a parent or parents to a child to allow that child build their home - their "principal private residence" - is no longer liable for stamp duty. The measure became applicable on Budget day, December 6th last.

Of course, the Budget's provisions have yet to be legally signed and sealed in the Finance Act 2001. The Bill that will lead to the Act will be published early next month. However, there is no talk of this particular provision being withdrawn or amended, even in the light of pressure from our euro-zone partners. Given the generally accepted difficulties in the housing market, it is difficult to see how any government could U-turn on such a provision.

However, as always, there is a proviso. In this case, the stipulation is that the site signed over to the child must not be worth more than £200,000 (€254,000). Anything above this and the stamp duty provisions apply. Further, only one such transfer can take place per child.

That takes care of stamp duty. However, there is another consideration that may affect both the parent and the child - capital acquisitions tax (CAT), better known as inheritance or gift tax. While the land transfer may not attract stamp duty, it will be included for the purposes of assessing the child's liability to CAT. This, in turn, may affect the estate planning of the parents.

Each child, under current CAT provisions, can receive a maximum of £300,000 from their parents free of tax. When assessing the threshold, any previous gift or inheritance is taken into account, subject to the £1,000 per calendar year from any individual that is free of tax in any case.

Gifts and inheritances received before a certain date fall out of the aggregation equation, but there is great confusion as to when this date is. Following a recent query on this particular subject, I have received three contradictory answers from three professionals in the financial services industry, which only goes to show how difficult it is for individuals to get clear and accurate advice on personal finance. It appears that any gift or inheritance received before December 2nd, 1988, will no longer be included for CAT purposes.

Getting back to the issue in hand, if the signing over of the site of, say, £60,000 as per the situation of one of the queries above takes the cumulative total of gifts and inheritances received above £300,000, the recipient will be charged CAT on the portion in excess of £300,000 at a rate of 20 per cent. Until recently the rate of tax varied, depending on whether the asset received was a gift or an inheritance, but that is no longer the case and the 20 per cent rate applies across the board.

If the value of the site does not bring you over the £300,000 threshold, you will have no tax to pay but must include the value of the site in any future assessment of liability to CAT following subsequent gifts/ inheritances.

Of course, if, as in the case of Ms C.H., the parents assist by way of a loan, there would be no CAT implications, provided the loan was repaid. Otherwise, the loan effectively becomes a gift and the above rules apply.

Finally, the fact that Ms T.C. has been studying abroad has no bearing on the issue.

Honorarium

My club allows an annual honorarium of £500 to our secretary in appreciation of her voluntary work.

Following the recent action by the Revenue Commissioners regarding soccer referees, a member has questioned the legality of our paying this money. Could you please explain if these are tax implications, for us or the recipients, where honoraria are paid and if there is an upper limit on the amount that may be paid?

Mr T.F., Dublin

As you say, the whole question of token payments has been thrown into doubt by the furore over the payments of local soccer referees, even if the Revenue was quick to deny that it had a policy of chasing such referees for income tax on the small sums involved.

The truth is that there seems to be a wide gulf between the letter of the law and the spirit. The strict interpretation - and the one given to me this week by the Revenue Commissioners - is that honoraria are income and should be treated as such.

That means that the recipient should be returning the sums for income tax in their end-year declaration. This is the case even when their income level is such that they would not be paying tax at all - as is often the case with club stalwarts who contribute a huge amount of their time voluntarily to help their organisations and who may be in a position to do so because they are retired or do not work full-time.

It is the same broad rule that applies in the case of credit union dividends and other generally insignificant sums that one occasionally receives, even though the cost of collecting the tax often far outweighs the original payment itself.

For this reason, the Revenue tends not to pursue individuals over such honoraria payments. In fact, I am not aware of a single case in which it has happened. Like the rest of us, the officers of the Revenue Commissioners are busy people who have to prioritise their work. There is little return in spending valuable work hours chasing pennies. As I say, there is a gulf between the rule and the reality, but the rule is still there that says the recipient should pay.

There does not appear to be an upper limit and, as far as the Revenue was able to apprise me, there should be no tax implication for those paying the honoraria.