Questions of Cash: Rumours highlight confusion over Treasury plan

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Q. I have heard that the Inland Revenue is planning to tax owners of overseas property on rental income, regardless of whether the property is rented out.

Q. I have heard that the Inland Revenue is planning to tax owners of overseas property on rental income, regardless of whether the property is rented out. Apparently a notional rental income will be applied on the basis that everyone rents out his property and it will be up to the owner to prove rental has not taken place. I can find no mention of this on Budget and Revenue websites, yet two people have mentioned it. How can I prove I earn no rental income?
PM, by e-mail

A. You don't need to. You have been misinformed, which underlines the level of confusion about the Treasury's various proposals to reduce tax avoidance. The comments made to you may relate to existing provisions whereby an overseas home owned by a company is treated as a taxable perk for an individual allowed to use it, or new measures which will charge income tax on the notional benefit of continued use of a home (either in the UK or abroad), by the previous owner, which has been given away and so potentially avoids inheritance tax.

Roger Williams, tax partner at accountants Wilkins Kennedy, says: "In general, the Inland Revenue have no power to 'deem' income to be received by a person where no income has been received. Deeming provisions normally only apply in anti-avoidance legislation, or where the income can be manipulated between related persons in different countries to take advantage of different tax rates in those countries."

Q. In June last year I took out a contents insurance policy with esure. In August, having let my spare room out to a friend, I phoned esure to notify them. But esure said it did not cover that risk and gave me seven days to arrange alternative insurance, after which my policy would be terminated. Yet esure continued to deduct premiums by direct debit. At the end of last year I received a letter demanding payment of £101.40 - esure said that as I had made a claim on my policy I had to pay the full year's premium. esure says that if I do not pay its bill it will take me to court.
MS, Edinburgh

A. esure accepts that it has made a series of errors in dealing with you and "apologises profusely". It is refunding your premiums to September and sending you £50 in compensation for its mistakes.

Q.In January we transferred debt of £10,000 to the Cahoot credit card, with a fixed minimum monthly repayment of £49 - 4.9 per cent of the debt. Our intention was to repay this in full after two years, on receipt of a lump sum due under a pension scheme. We are disgusted that Cahoot has told us we must now pay a minimum of 9.2 per cent, almost double what we paid before.
DD, Paisley

A. You have misunderstood the effect of the change. Cahoot had offered to service balance transfers on either a "fee-only" or an "interest-only basis", but since April the "fee-only" option has been withdrawn leaving you dependent on the "interest-only" arrangement. However, the effect is not as great as you calculated. Your new monthly payment should be around £76. If the increased payment causes you what Cahoot calls "severe personal difficulties" it is willing to discuss special arrangements which are more affordable.

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