Paul Gosling: It's no laughing matter for Carphone Warehouse
Questions of Cash
Saturday 13 December 2008
Q. I upgraded my mobile phone with a new 18-month Carphone Warehouse contract for a Sony Ericsson 250i handset. I didn't like the new phone and arranged with Carphone Warehouse to replace it with a Nokia 6500. But then I was given a different contract on inferior terms. When I then tried to go back to the Sony Ericsson, I was told I could no longer do so and the staff laughed at me. I felt humiliated. PM, London.
A. Carphone Warehouse accepts that your upgrade "was not processed as requested and was accidentally placed on an incorrect contract". It has agreed to pay £15 compensation, though you have yet to receive it nearly three months after initially complaining. Carphone Warehouse says you are "happy with the resolution" – but you say that while you will accept the payment, you are definitely not satisfied, and say that the stress of this incident has caused you considerable health problems.
Q. My grandad was offered the chance to buy his council house 15 years ago. He was not in a financial position to do this, but my mum took out a mortgage in her name and purchased it in my grandad's name. It is specified in my grandad's will that the property actually belongs to my mum, but I thought it would be better and less complicated if the house was put into mum's name now. I am also worried about the situation if my grandad dies or has to go into a nursing home while the house is still in his name. I believe that the property will have to be in mum's name for several years for its value not to be taken into consideration when calculating whether he has to pay anything towards any nursing home fees, should he have to go into one. He is 85 years old. AC, Perth.
A. Philip Spiers, who is the acting chief executive at First Stop Advice, specialist advisers to the elderly, says: "You have two issues to consider if you were to transfer the property into your mother's name. Assuming she does not live there, it would become a chargeable asset for capital gains tax purposes. Any increase in the value from the date the transfer was made to the date your mother sold the property would form a chargeable gain.
"Regarding care home fees: yes, the property would be considered, but in doing so the council must look at who is the beneficial owner as well as the legal owner. Your grandfather probably benefited from a discount when the property was purchased and arguably this percentage could be deemed to be his beneficial interest, with the remaining percentage belonging to your mother because she paid for it. There is no time limit as to how far the council can go back in looking whether a property was transferred to avoid paying for care. They would normally ask whether a person ever owned a property and, if so, what happened to it.
"If deprivation of assets was decided, then they would treat the value of the property as notional capital and refuse to fund the care fees. Most people who need care receive it in their own homes. If your father did need to move into a care home, it may be a case of 'horse dealing' with the council in deciding what, if any, of the value of the property should be counted." More details are available from First Stop Advice's factsheet, 'Treatment of Property', which is available by calling 0800 377 7070.
Q. I receive a Danish state pension in respect of 16 years I spent working there in the 1970s and 1980s. The Danish authorities state an agreement exists between the UK and Denmark which means that tax will be calculated and deducted according to Danish rules. The Danish tax office has sent me their tax estimate which, because my Danish tax-free allowance is higher than the annual pension, brings me into their zero-rate band. I have thus effectively been taxed there according to the regulation but without any actual deduction. What is my taxable position in the UK regarding the Danish state pension? Do I need to declare it and if so how will it be taxed? Other income in UK uses up my UK tax-free allowance. RK, Harrogate.
A. Antonio Risorto, senior tax manager at accountants Grant Thornton, says: "An individual's liability to UK income tax is determined by their residence and domicile status. A UK-domiciled and UK-resident individual is taxable on their worldwide income on an arising basis. A non-UK domiciled but UK resident individual may be eligible to be taxed on their income on a remittance basis – ie, income arising outside of the UK is taxable in the UK only if it is brought into the UK. There are new rules affecting the taxation of non-UK domiciled individuals post-6 April 2008.
"In addition, where income may be taxed in more than one jurisdiction, there are different ways in which relief can be provided from double taxation, such as 'unilateral relief' or by way of a double taxation agreement. So, assuming you are liable to tax on your worldwide income on an arising basis, the UK-Danish Treaty states in Article 18, paragraph 3 that payments received by a resident of the UK, under the social security legislation of Denmark, shall only be taxable in Denmark. It is perhaps this paragraph to which you refer in your correspondence from the Danish authorities. This is an unusual scenario, where this pension income is 'exempted' by the double taxation agreement from UK taxation.
"Where overseas pensions are taxable in the UK – so not in this case – individuals who are not taxed on the remittance basis, a deduction of 10 per cent of the overseas pension can be claimed so that only 90 per cent of the pension is subject to UK income tax. You would need to complete the foreign pages of your self-assessment tax return to declare your overseas social security pension and to claim the exemption under the terms of the double tax agreement. As this scenario is unusual, a disclosure in the 'white space' on the tax return form is recommended. Guidance can be found at www.hmrc.gov.uk and professional advice should be sought, particularly given the complexities of your affairs."
Questions of Cash cannot give individual advice. But if you have a financial dilemma, we'll do our best to help. Please email us at email@example.com
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