Q&A

Dominic Coyle answers some of you queries on financial matters. This week House Taxes and Credit Card Refunds.

House taxes

The issue I have is on the purchase of a new house versus aold house, and tax liabilities attaching thereto.

The house I'm buying is partially complete and indeed a "schedule of outstanding works to complete" was attached to the standard Law Society contract on exchange of contracts. This schedule is substantial and covers aspects such as a kitchen and tiling allowance to the purchaser (as no kitchen was fitted, etc).

The house was first marketed by the estate agent as having no stamp duty liability attached, as it was clearly a new house with exemption from stamp duty by virtue of its floor area. Indeed, my own solicitor indicated that he felt it was a new property/ property under construction.

Earlier this year, I was informed by the vendor that the house would be sold to me as second-hand (not new). I find this hard to accept. However, I did enter into contract as I want to purchase the property.

The vendor continues to construct the house and make the property available for snagging, using sub-contractors with himself as foreman. I can only guess that the vendor wanted to avoid opening up a tax liability to himself and transfer the tax liability instead to the purchaser in the form of stamp duty. The stamp duty liability is substantial.

Can you help explain the way forward?

Ms G.M., e-mail

You have a problem, all right, the most significant part of which is that you have actually signed a contract that, as far as I understand it, states that this house is a second-hand property.

It seems clear to you, to me and to anyone I have contacted that, on the basis of the limited information supplied, this is indeed a new house and should be treated as such.

One leading legal firm to which I have spoken suggests, as you suspect, that the redesignation of the property from new to second-hand might have something to do with the vendor looking to avoid exposure to capital gains tax.

This may well create a problem for the vendor because, if he is claiming that the house is second-hand and that he has been living there, the question remains about the status of his home - presuming he has another property.

After all, you can only have one principal private residence and it would appear that the vendor in this case may well have two.

This is a point in which I am sure the Revenue would be interested.

Still, as the legal firm to which I have spoken make clear, you have signed a contract and therefore you would be assumed to have accepted the basis on which the property was being sold at that stage.

I am fully conscious of the pressure put on people looking to get on the property ladder these days and this is by no means the first instance of a developer using their power of supply to rip off the customer. In too many instances, unscrupulous developers seem to work on the basis of "take it on our terms, or we'll find someone else who will".

It is not acceptable but the truth is that they are right. Your's is a particularly blatant case, which, while saving the vendor a considerable sum in capital gains, will unfairly cost you a substantial sum in stamp duty.

You say you thought things might get sorted out before the deal was completed, but my experience is that while a developer will at times refuse to honour their side of contracts, they are scrupulous in ensuring that the customer does.

The advice is never to sign unless you are fully happy with what is being offered. As for now, I suggest you get your solicitor to approach the vendor to press the case that the property is new and possibly to raise the spectre of the Revenue on any capital gains tax scam. But be aware that such a move may well see the vendor refusing to sell you the property, or he may hold firm, leaving you with the prospect of walking away and starting your search for a home again.

That would leave you only with the somewhat dubious pleasure of following through on a threat to report this vendor's activities to the Revenue.

It's a tough call either way and one that only you can make.

Credit card refunds

Over the years I have noticed that if you return an item which was purchased with a credit card, the shop will issue a credit card refund, which they ask the customer to sign.

In my opinion it is the shopkeeper who should sign the chit, as the refund will come out of his account. His signature would authorise his account to be debited by the credit card company. I cannot authorise debits to someone else's account.

I have raised this with retailers and invariably they tell me that these are the instructions for handling a refund. However, one shopkeeper told me that I must sign the docket to authorise my account to be credited.

As far as I'm concerned, I gladly accept any credits, whether they bear my signature or not, whereas I will not allow any debits to go through without my authorisation.

I would be grateful if you would investigate and explain what is the correct procedure, i.e. does the customer or the shopkeeper sign the refund?

A.M., Dublin

The one retailer who explained the reason for this practice is, in fact, correct.

The Irish Payments Service Organisation (IPSO), which represents the financial institutions in this area, confirms that the reason the retailer has to get you to sign a refund chit when you are returning goods bought by credit card is that they require your authorisation to activate any transaction regarding your account - even a credit.

As you say, most customers would be only too happy to have money paid into their credit card accounts but it is possible to imagine circumstances when someone - hardly a retailer - might seek to put money into your account in a way that might later compromise you.

It is hardly common practice but the rules such as the one requiring the card account holder to authorise in writing - i.e. by signing such a chit - are there to ensure such issues never arise.

Odd it may be but it is merely a security feature.

No doubt the retailer will have to sign off on any such returns when they settle their accounts with the card companies.

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.