Personal Finance Q & A

Your queries answered

Offset a Ryanair gain against an Eircom loss?

Q

I am preparing a capital gains tax return for the sale of a small holding of Ryanair and Vodafone shares disposed of in December 2010.

In calculating the chargeable gain, if any, can I offset the loss made on the Vodafone disposal against the capital gain made on the Ryanair disposal?

What acquisition value do I impute to the Vodafone holding acquired on the sale of Eircom’s Eircell Division to Vodafone in 2001?

If there is no overall chargeable gain, do I need to make a tax return at all?

- Mr PD, e-mail

A

In assessing liability to Capital Gains Tax (CGT) in any year, you are entitled to offset losses incurred on share transactions against gains made on other share transactions. If the loss is greater than any gain, it is carried forward to a following year.

If there is no chargeable gain, I do not believe you are obliged to file. You are, in any case, entitled to make a gain of €1,270 in any given tax year before incurring any liability to capital gains tax.

I have gone through the arithmetic of the Eircell/Vodafone base price computation a number of times recently so I do not propose to do so here. The important point, for you, is that the “base cost” of each Vodafone share you hold is €5.27. In other words, anything less than that value per share on their sale constitutes a loss. The one exception is “bonus” loyalty shares received. People who remained invested in Telecom Éireann for a full year after flotation received one bonus share for every 25 Telecom shares they owned. These have a zero base cost and thus any sale price is considered a gain.

You got 0.9478 of one Vodafone share for every two Telecom/ Eircell shares. So if you held 100 Telecom Éireann shares, you would have got four bonus shares and thus 1.8956 of your Vodafone shares are “bonus” shares and attract full capital gains.

If you do have a CGT liability, the tax rate is 25 per cent. For transactions made last December, you were supposed to have reported the gain and paid any tax due by the end of January this year.

Is it a good time for a long-term punt?

Q

I was wondering would now be a good time to invest long-term in some stocks with the current downward flux in the market? With Bank of Ireland shares around 10 cent, a small investment will produce a large number of shares. This has me thinking that the stock only needs to go up a small amount to get a large return. Or what other options would you recommend?

- Mr JW, e-mail

A

As always with the stock market, it really depends on your appetite for risk. Back in the summer of 2008, when Bank of Ireland was trading at around €6, people were asking whether it was a good time to buy a stock that, as recently as 15 months previously, had been trading at around three times that figure.

You could have built a credible case that the shares would recover at least part of that difference. Of course, the collapse of Lehmann’s and the international banking crisis took care of that.

After a week when stock markets were radically priced down by investors worried about the global growth outlook, it would be a very brave person who would recommend a specific stock pick – and I’m not about to.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into. Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com