Questions of Cash: When the bark of the FOS won't bite
Q. I want to warn readers about the Financial Ombudsman Service and its lack of power to resolve problems. Its booklet states that its judgments are binding upon firms. I complained because my insurer failed for over a year to settle my claim for household goods damaged by a removal company. The insurer admitted its liability for the loss and did not dispute the amount, but would not settle my claim. Yet the FOS says it has no power to enforce an equitable judgment on the insurer, and can only pass the file back to the insurer. I could take court action, but that is expensive as I am a pensioner, and my only income is a reduced state pension. I can't make a claim in the small claims court because the amount involved is £17,500. RF, by email.
A. Unfortunately, the situation is much more complex than you stated in your initial email to us. What you state here is correct – as far as it goes. Your insurer argues that it did not initially settle your claim because its files contain a record of a conversation with you in which you allegedly said that any settlement of your claim must not affect your future premiums. You dispute the authenticity of this record – pointing out that you have changed insurers, so have no reason to try to protect a no claims bonus – and the FOS has accepted that this is the case. As there is a record of this alleged conversation, your insurer will not meet the costs of your claim until the removal company's insurer meets the loss and pays your insurer. The removal company's insurer will not now meet the claim because it says that you will not allow its loss adjuster to re-inspect the damaged goods. You do not see why you should have to undergo the inconvenience of a further inspection. As a result we now have an impasse. The FOS believes that your insurer, RIAS, and its Lloyds underwriter have not been as helpful as they could in resolving the problems, but the FOS has not upheld your complaint. RIAS argues that it has done all it could to settle the claim and that you have been unreasonable. We can understand that you find further visits by a loss adjuster to be a serious nuisance, but you have to ask yourself how much you want to settle the £17,500 claim. Unless you allow further access to the damaged goods it seems unlikely your claim will be met. As a result of our contact with the FOS it is now reviewing its decision, but we would be surprised if it comes to a different decision – just as we would be surprised if the courts reached a different decision if you took up the case with a legal action.
Q. Last month, I went overdrawn by £6 for 12 hours, until my wages were credited to my account. I was charged £50 by Abbey for this. I am furious; I have a perfect bank record with two Abbey accounts – never having gone overdrawn before, and had no control over when the cheque was cashed which put me overdrawn. RW, London.
A. Abbey has now credited your account with the £50 charge.
Q. I have had a credit card with Alliance & Leicester for several years. In February, I had a balance of £3,692.61, which I cleared on 20 February by transferring £3,664.17, with the balance being a credit to my account for £28.44. The payment was required by 25 February. But I was charged a late payment fee of £12, plus interest of £57.70. When I complained I was told the maximum refund was £20. CS, by email.
A. Since 2002, Alliance & Leicester's credit card business has been handled by MBNA. This may have increased the time it takes to transfer funds from A&L bank accounts into credit card accounts. MBNA has agreed to a full refund of your fees and interest.
Q. My wife and I wish to live in Malaysia for two or three years, renting out our home in this country. We have a home there which was self-built, with cost of land and building being about £150,000. It is now valued at approximately £530,000. What would be our Capital Gains Tax (CGT) position if we sold on our return, or if one of us died while away? GW, Clifford.
A. Leonie Kerswill, a tax partner at accountants PricewaterhouseCoopers, says: "Where a property has been an individual's only or main residence throughout the period of ownership then any capital gain on sale is exempt from CGT. In addition, certain periods of absence can be treated as if they were periods of occupation – provided that certain conditions are met."In this case, she says, provided that the UK home has been the reader's main residence to date, and he returns to the UK within three years and reoccupies the property as his main residence, then the period of absence in Malaysia will be treated as if it were a period of occupation for the purposes of calculating the availability of the principle private residence relief.
"Any gain on a disposal of the property will be exempt from CGT," she says. " If the reader and his wife occupy another property in Malaysia that could be regarded as a main residence then they should make an election that their UK property be treated as such. "
She points out that if they don't reoccupy the property on their return then, provided any sale is within three years of moving out, there should still be a full exemption from CGT.
"Even if the reader doesn't fall within this exemption and some of the gain is chargeable, further relief is available because the property will have been let as residential accommodation. This can provide up to £40,000 of exemption per individual."
She adds that if the reader or his wife dies while owning the house then for UK tax purposes there is a CGT-free uplift in the value of the property to market value. "There may also be inheritance tax issues to consider depending on who the half share in the house is left to. While it is unlikely that CGT will be an issue in these circumstances, the reader should remember that he will need to pay UK income tax on any rental income, less allowable expenses. He should register under the non-resident landlord scheme to make sure rental payments can be made to him without the deduction of UK tax at source."
Questions of Cash cannot give individual advice. Please do not send original documents. Write to: Questions of Cash, The Independent, 191 Marsh Wall, London E14 9RS; email@example.com.
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