Q&A

Dominic Coyle answers some of your questions.

Stamp duty

In March 2001 I purchased a new house in Dublin which, as I was a first-time buyer, did not incur any stamp duty. My job is based about 60 miles south of Dublin, and after two years I found that I had enough of the daily commute and decided to buy a property closer to my workplace.

However, as I enjoyed the nightlife in Dublin and was fortunate enough to be able to afford to do so, I decided that I would also retain my other property for use at the weekend.

Since then my circumstances have changed and I am now considering selling the second property that I purchased in 2003.

Given that I use both properties regularly, I did not think that any stamp duty was due on the purchase of the second property, but it now appears that I should have paid stamp duty on this second property at the time of purchase.

Can you confirm if this is correct, and if so, whether I am likely to incur any penalties or interest? Do I have any option to pay stamp duty on the first property instead, as this was actually cheaper than the second one? I have continued to use this first property for all correspondence, and have also claimed mortgage interest relief on it, but not on the second property.

Mr G.O'C., email

The first thing to say is that you definitely owe stamp duty on the second property purchased in 2003. I'm not sure how anyone could have advised you to the contrary.

The exemption on stamp duty applies only to first-time buyers, and, in your case, you clearly were a first-time buyer only at the time you purchased the Dublin property.

The fact that you use both properties regularly is irrelevant. Quite honestly, if you used them on a daily basis, it would have no bearing. You can have only one principal private residence.

So you will owe the Revenue money, and you will certainly find yourself paying interest on that, which will add significantly to the bill. If you approach the Revenue, you are unlikely to face additional penalties, but if they catch you, you certainly will face further financial penalties.

You cannot choose which property you pay stamp duty on - for precisely the reason you outline. If people could choose, they would naturally choose to pay duty on the less expensive property, and the Exchequer would lose out. You'll never find a tax authority sanctioning that sort of idea. The stamp duty will be liable on the second property at the relevant rate prevailing at the time you bought it in 2003.

A further consideration is that you will face tax at 20 per cent on the capital gain you make on the second property when you sell it - the difference between your original purchase price and the sale price minus expenses and a €1,270 annual capital gains exemption. As it cannot be your principal private residence, it is defined as an investment property. Whether you rent it out or not is irrelevant from a capital gains tax point of view - though, obviously, rental income would raise a separate income tax liability.

There is one small plus in that you should be entitled to claim mortgage relief on any mortgage taken out on the second property, and this can be done retrospectively, giving you at least some credit to offset against the tax bill you are going to face.

Savings Certificates

I have an 11th issue An Post Savings Certificate taken out in 1989. The rate of interest was 40 per cent over five years. I understood that while I left the money in the post office the interest rate would remain the same.

I know the rules were changed for the 12th issue. The interest rate is revised after the term.

I have received a letter from An Post stating that it had decided to discontinue the 11th issue, and I could reinvest in the current 16th issue, invest in Savings Bonds or cash in the certificate.

I do not have a copy of the terms and conditions from 1989. I am writing to enquire if it is in order for An Post to discontinue the 11th issue of Savings Certificates.

Ms D.B., Westmeath

My understanding of An Post Savings Certificates is that the interest rate offered on a particular issue is valid only for the term of that issue. In your case, that would mean that it is guaranteed only for the five-year, six-month length of the investment.

A footnote on the savings certificate element of the An Post website, and presumably on the literature available at An Post offices, states: "On maturity, investments may or may not be extended. If extensions are offered they shall be on such terms and conditions as may be determined by the National Treasury Management Agency at the appropriate time."

However, An Post can decide to close out a historic investment offering - in this case the 11th issue. In this event, it can, as it has done, offer you the chance to transfer your investment to its current product range - in this case the 16th issue of savings certificates, which offer just 16 per cent over the five-year, six-month period or a savings bond currently offering 8 per cent over three years.

The third option is for you to redeem your cash.

I'm not too sure what your concern is here. An Post has done everything by the book.

If you are looking for An Post to continue to pay the rate of interest prevailing under the 11th issue - a time when interest rates in general were much higher - that is an unrealistic expectation.

I think you will find you have not been getting that rate of interest since the 11th issue was superseded by the 12th.

Irish Nationwide

Given that the indications are that legislation will be passed before the summer, when would this filter down the line to an actual announcement of sale by Irish Nationwide? Would it have to be agreed by members or would it be an internal decision by the company? What would be the likely time span before a sale could be completed? I understand that payments would not be made until a sale is finalised.

Ms H.N., Wicklow

First up, there is no indication that the legislation necessary for a demutualisation by Irish Nationwide will be in place by the summer. If anything, the most recent indications from the Government are that the new Building Societies Bill has fallen down the priority list and may not now be in place until the very end of the year, and it could be later.

The members will vote on whether to demutualise. This is separate from any sale issue. Assuming that vote succeeds, the board will judge the merits of any approach and the members, now simply shareholders, will decide whether they want to avail of any offer.

The likely timescale to a sale? It's impossible to say. I've no doubt several potential buyers have already run the rule over the society but it is out of the hands of Michael Fingleton, the Irish Nationwide board and the members as to when a suitor decides to pounce. Best guess is that the whole thing could take between one and two years, but that is purely a guess.

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.