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.
SSIAs
I am an Irish citizen, living and working in Australia for the past two years. I intend to return to Ireland at some time in the future though I'm not sure when yet. Am I entitled to avail of the benefits of the Special Savings Incentive Scheme, and if so does my proposed date of return to Ireland have an impact?
Mr G.B., Sydney
It depends on whether you are ordinarily resident in Ireland right now. After three years' working in Ireland, you can be deemed ordinarily resident for three years after you leave the State as long as you pay your tax in this country. The exceptions are tax on income earned wholly abroad - which probably covers your work in Australia - and a certain small amount of other income.
The importance of ordinary residence is that it is one of the criteria acceptable for investing in the new savings scheme. However, even if you do qualify under these criteria, you would only have one year left to return to Ireland - assuming the two years you mention are two tax years - before any ordinary residence status runs out.
If you do not intend returning within that time, it is not worth looking at the scheme as anyone who no longer fulfils the eligibility requirements will be forced to close their account and pay tax on all its contents - your original post-tax investment, the Government contribution and any interest or investment gain accruing in the interim.
Vodafone I have recently received my first dividend from Vodafone shares (ex Eircell). This is denominated in sterling and is only worth a few pounds. Bank charges will eat up the bulk of this if I try to lodge it to my own Irish bank account. As the cheque is endorsed account payee, only I cannot even pass it on to a UK-based charity. Any suggestions? I am sure thousands of your readers have the same problem.
Mr. T.B. e-mail
As you say, you are likely to be one among many with this type of problem. Sterling dividends are a problem in any situation but with Vodafone, in which many former Eircom shareholders hold relatively minor stakes, the figures involved are indeed ridiculous.
As I see it, there are two solutions. You can either open up a sterling denominated account, which is hardly worth the money and the hassle for the small sums involved, or you can opt to receive what is called a scrip dividend.
This is where your dividend is translated into shares in the company issuing the dividend. Naturally, with a small holding, you are not going to receive many shares for your dividend but at least you keep the entire sum. A further advantage is that if, as is quite likely, you have an amount left over after dividing the share price into the dividend price, the company will add this amount to your next dividend for the purpose of buying more shares - a little like the major retailers do with their loyalty card schemes.
From your point of view you do not waste the money you receive in dividends, which you might otherwise throw away because of the money involved and from Vodafone's point of view, the money they pay you in dividends is being reinvested in the company.
Eircom
I was most interested in your response on the cost basis of Eircom and Vodafone shares for the calculation of capital loss/gain purposes. As the likelihood is that the sale of Eircom to Valentia or eIsland will result in a loss to shareholders, I would imagine that shareholders would be able to offset such loss against gains made on other transactions. Is this restricted to gains made on shares only and must they be in the same financial year? Also, as the timing may be important, should shareholders maybe hold back on trading in shares until the timing of the sale of Eircom becomes more definite?
Mr V.B., e-mail
As you say, the likelihood, nay the certainty, is that the sale of what is left of Eircom will result in a loss to shareholders, although, given the way the battle between the bidders has escalated the likely price, this will be somewhat less than it might have been.
You are right that shareholders will be able to offset this against gains made on other transactions. This does not have to be gains made on shares. You can offset a capital gain against any capital loss - this is good news for those many thousand Eircom shareholders who have not held shares other than Eircom before or since its flotation and therefore would not have stock market gains against which to offset the Eircom losses.
There is one exception. You cannot transfer gains or losses made on development land beyond that category.
So any gains on such land could not be offset against the eventual loss on the Eircom shareholding.
As to time, there is no rule that the loss must be offset against a gain in the same tax year. The basic premise is that the tax is levied upon gains. While any loss is outstanding, accruing gains must be offset against it before capital gains tax can come into the picture.
The only importance of timing is if you have gains in a given tax year that you wish to write off then and there rather than wait a couple of years to see if the loss will turn around.
In the Eircom case, the timing is pretty certain at this stage.
Barring any late surprises, Eircom shareholders will no longer have a stake in the company by the end of November unless they are members of the Employee Share Ownership Trust. They should receive their money and be able to calculate their losses in December, before the end of the current, truncated tax year.
Premium bonds
Please advise if Irish citizens - who are also resident and paying tax in Ireland - are allowed, under Irish law, to hold British premium bonds? If so, are any winnings chargeable to tax in Ireland and at what level?
Mr G.B., e-mail
Under Irish law, you are not allowed to invest in British premium bonds as our laws on gaming are quite tight in this respect.
We regularly receive letters on this and it seems the British premium bond authorities will generally return any application from the Republic.
