Q&A

My mother currently holds 1,300 shares in AIB which she wishes to gift to me. Can you advise how she can go about this and also if this will incur a capital gains tax liability?

Mr S.C., email

Transferring shares is somewhat easier than many people imagine but there are certainly tax issues - and not just on capital gains.

Most significantly, given the increasing regularity with which I hear tales of people's unsatisfactory dealings with mainstream stockbrokers, there is no requirement to use their services for such a transaction.

It appears to be a depressing illustration of Ireland's recently-acquired wealth that brokers are increasingly indifferent about dealing with individual retail investors with relatively small holdings or one-off transactions. However, the fact that you can bypass the brokers will save your mother some money on the transaction.

You need to get a form from the Dublin Stamping Office in Dublin Castle, fill it in and return it to the stamping office of the Revenue at Dublin Castle.

While avoiding brokers' fees, you will still face stamp duty, which is currently levied at 1 per cent of the value of the transaction. Apart from stamp duty, when the shares are transferred, your mother will have to assess any capital gain she has made on the shares up to that point. At the current price of around €17.70, her holding is worth about €23,000. Depending on when the shares were acquired, there is likely to be liability to capital gains.

Your mother will have to work out the purchase price, converting from pounds to euro, if necessary, and deducting any costs she incurred in their acquisition or sale. If acquired before 2003, she should also multiply the net purchase price by an indexation factor set down by the Revenue.

Finally, your mother should note that she has a capital gains tax exemption this year amounting to the first €1,270 of any gain. Any liability she does ultimately have will be taxed at 20 per cent. The fact that you are transferring the shares at no cost does not interest the capital gains section of the Revenue - although it will certainly interest the gift/inheritance tax section of the tax authorities.

This transaction in itself will not lead to a liability to capital acquisition tax, the formal name for gift or inheritance tax, as the threshold for such transfers between a parent and a child currently stands at €466,725.

AVCs access

I am a member of my company's occupational pension scheme. I also contribute AVCs through the company to boost my pension. The company is considering a redundancy programme and I was interested. However, I am now told that the money I have in AVCs cannot be accessed until I retire at 65. In my situation, that is the difference between being able to avail of the redundancy offer and not. Is there any way around this?

Mr B.T., Dublin

It depends on your future plans, your age and the rules of your pension scheme. It's worth remembering that the whole point of Additional Voluntary Contributions (AVCs) is to boost your income in retirement. They are a form of pension saving and, as such, it is entirely logical that they should be locked in until you retire.

After all, that is why they benefit from the same generous tax relief that pension contributions to your occupational scheme attract.

For most of us, AVCs allow people who have not started to invest in a pension early enough in life to increase the basic pension they will receive through an occupational scheme. They can also be used to increase the tax-free lump sum you can draw down at retirement.

For those lucky few, who might have started a pension early enough to maximise their benefits in these areas, AVCs can still allow you fill the financial gaps left by the non-pensionable elements of pay that many people enjoy.

Significantly, AVCs can help to offset the sharp reduction in pension that can be triggered by a decision to take early retirement.

And that is of particular importance in your situation. Your normal retirement age is 65 and your employer, or more properly the trustees of the occupational pension scheme, are quite right when they say your AVCs can only be accessed at that point.

The key here is that your AVCs and your pension are accessed at the same time.

There is nothing in the rules set down by the Revenue Commissioners, however, to state that this has to be at 65. In fact, the Revenue recognises early retirement by individuals once they are over 50. While you don't say what age you are, I get the impression you are comfortably above that threshold. Of course, that presumes you intend to retire at this point.

Beyond that, it is down to the rules of the occupational pension scheme to which the AVCs are tied. The employer and trustees of the scheme can invoke scheme rules to allow people to take early retirement and access their pension. This is a discretionary power and not necessarily an obligation on them to facilitate individual employees.

However, if your company is looking for redundancies, it would seem a little churlish of them to refuse you access to your pension by way of early retirement.

In any case, the first thing you need to do is request a copy of the rules of your pension scheme. The scheme trustees are obliged to provide these. Then get advice on how the rules could operate in your case. Don't be put off by the initial response you have received.

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.