Q&A

Dominic Coyleanswers your questions.

Taxing bank payments

Recently my bank has introduced an arrangement whereby they credit me with interest payments on my monthly credit balance, under certain conditions.

The payments are very small, almost derisory after Dirt tax is charged. Can you tell me if the net payment I get is also liable to ordinary income tax and must be included in my annual tax return?

J W G, e-mail

I can imagine that monthly interest after Dirt would not be making a huge difference to your bank balance. The good news, however, is that you are not liable to further income tax on this soupçon.

Deposit interest retention tax (Dirt) covers in full any liability to income tax, regardless of the tax band in which you ordinarily fall.

Deducting Dirt

In your reply on non-resident banking on November 30th, you said non-resident deposit accounts are not subject to any Dirt. My experience has been different.

I live in Co Down and have had a deposit a/c with Anglo Irish Bank in Dublin for almost five years. Having completed a non-resident declaration, I always received interest gross - ie before Dirt.

However last December, Dirt was deducted and the bank told me that this resulted from a new directive from the Revenue Commissioners to deduct Dirt on all accounts under €50,000.

This seems a daft idea to me - red tape and leaving the big depositors outside the net. Are they right?

Ms C M, Down

You are certainly correct that this sounds a daft idea. It also sounds incorrect. There would be no logic to accounts under a certain threshold being liable for deposit interest retention tax (Dirt) while others would not be.

I have contacted the Revenue and they tell me the relevant legislation is section i of the taxes Consolidation Act of 1997. They also point out it would require a change to this section of the legislation in order to subject the deposit interest of a non-resident account holder in your position to Dirt and state that "this has not taken place".

It is also worth pointing out that only the Revenue can instruct an Irish bank to deduct Dirt at source.

That leaves no confusion about any instruction from, say, the UK Inland Revenue to whom you also presumably answer.

I would contact your bank in writing and ask it to justify its decision, pointing out the Revenue position. I would also ask it to forward on the Revenue "directive" they quoted in their correspondence with you. It seems to be news to the Revenue.

Financial adviser

Could you please advise me as to where to find an independent financial/tax adviser.

P N, e-mail

I suppose it's no harm to wind up the year with this hardy perennial. To hear the advertisements, you could easily assume that all financial advisers are offering independent advice. The formulaic guidance to the contrary is only ever heard hurriedly in jargon at the end.

The truth is that your best guarantee of independent financial advice is to pay for it. If your adviser is relying on fee income rather than commission, the temptation to direct custom where he is better rewarded disappears.

The practice, of course, is that fee-based financial advice is almost as scarce in Ireland as hens' teeth.

To be fair, this is largely due to the fact that Irish financial services consumers are reluctant to pay for such advice. They appear to believe that they should be directed, "for free", in making what are often significant investment decisions.

Naturally, financial advisers - who need income like the rest of us - will rely on commissions where fees are not forthcoming and different companies will offer different levels of commission, depending on the type of business and the amount of it transacted by a given broker.

After that, then, you have three types of adviser regulated by the Irish Financial Services Regulatory Authority. Tied agents, as the name suggests, are tied to one firm.

A "multi-agency intermediary" can offer advice on the products of a number of firms but not on the full range available.

Then you have an "authorised adviser", who is required to be able to advise on the full range of products available in Ireland in any given category and should therefore be "independent".

The financial regulator has a list of authorised advisers - and indeed practitioners in the other categories - on its website www.ifsra.ie.

• Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish-times.ie.

This column is a reader service and is not intended to 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.